The Invisible Contract: Agreement and Convention in Social Life

Abstract

The metaphors of the “social contract” and the “indivisible hand” loom large in the history of political economy and political philosophy. Nevertheless, the two ideas are typically held to be in conflict. Social contracts are based on rational agreement, while invisible hand processes are not. The tension between these two ideas, I argue, creates a disequilibrium between politics and economics in modern thought: either the market or the political order must be supreme. I argue that this tension can be dissolved if we understand social contracts as dynamic processes of micro-agreement that are explained as macro emergent or spontaneous orders. This understanding of a social contract is more consistent with political economy and better suited for the open society. This approach also helps to clarify some puzzles about invisible hand processes. In so doing, I argue, that the insights of Adam Smith, Hayek, and the social contract theorists are best understood as different aspects of a unified approach to social theory.