the visible hand

it is the theory which decides what can be observed – einstein

the invisible hand disappears

Posted by ecoshift on June 2, 2008

The concept of the invisible hand comes from a discussion of comparative advantage in foreign trade in Adam Smith’s Wealth of Nations:

As every individual, therefore, endeavors as much he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

The idea was that an individual would prefer to invest his profits close to home — somewhere he felt confident he understood the rules, where he could get fair treatment under the law, where he understood the language. Therefore, due to investor fear of uncertainty, free trade would result in a net gain for all participants.

Seems quaint today:

More U.S. Venture Capital Firms Investing Abroad: Survey
2008-06-02 21:45:26.0
By Anupreeta Das

SAN FRANCISCO (Reuters) – Taiwan, Japan and Israel are just some of the emerging hotspots for innovation outside the United States, as venture capitalists continue to pour more dollars into global investments, a new survey said on Monday.

Nearly three out of every five of U.S. venture capitalists, or 57 percent, are now investing outside the country, compared with 46 percent last year, the 2008 Global Venture Capital Survey found.

The survey measured the opinions of nearly 400 venture capitalists from around the world, including 163 U.S.-based firms, and was conducted by Deloitte LLP and the National Venture Capital Association, a U.S. trade group.

Although the United States maintains its preeminent position as global leader in innovation, National Venture Capital Association President Mark Heesen said there will be more venture activity in those destinations ranked No. 2 and No.3 in the survey.

“The secondary trends are more interesting because it shows the up-and-coming locations,” Heesen said.

The United States held the top spot in each of the sectors measured — semiconductors, software, biopharmaceuticals, medical devices, and alternative, or clean, technology.

But Germany ranked second for innovation in alternative energy and medical devices. Fifteen percent of venture capitalists said Taiwan had the best semiconductor technology, after the United States. India ranked No. 2 for software innovation, followed by the U.K., Israel and Germany.

“While the U.S. isn’t losing ground, the globalization of innovation is underway,” said Mark Jensen, national managing partner of Deloitte’s venture capital services.

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