COWLES FOUNDATION FOR RESEARCH IN ECONOMICS
AT YALE UNIVERSITY

Box 208281
New Haven, CT 06520-8281

COWLES FOUNDATION DISCUSSION PAPER NO. 966

"The Invisible Hand in Modern Macroeconomics"

James Tobin

January 1991

The Invisible Hand, one of the Great Ideas of history and one of the most influential, is Adam Smith's most important legacy to macroeconomics, as to all economics. It is particularly important today as the ultimate inspiration for the New Classical Macroeconomics and for Real Business Cycle Theory. These are intellectual movements that engage many of the best brains in the profession, especially among younger cohorts and especially in the United States. They dominate the agenda even of theorists and econometricians who are skeptical or hostile to their methods and conclusions.

Keywords: Adam Smith, Invisible Hand, Keynes, macroeconomics, economic thought

JEL Classification: B22, B31