HANDOUT

#3 - THE INVISIBLE HAND - ""

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- "There is nothing new under the sun" (Kohelet 1:9)

Although Adam Smith (1723 1790) is widely credited with discovering the
economy's 'invisible hand' (the automatic adjustment of the market to arrive at a
product distribution and prices that are beneficial to all the individual members of a
community), the role of competition in regulating prices was known hundreds of
years before his time:

You shall not have in your bag a weight and a weight, large and small
You shall not have in your house a measure and a measure, large and small
True and just weights shall you have
True and just measures shall you have
So that your days may be long on the land
That Hashem your Lord gives you
Devarim 25:13-15

Shall you have: This teaches that commissioners should be

appointed for weights & measures, but not for prices. The
governors oce appointed commissioners both for weights &
measures and for prices; so Shmuel said to Horn, go, tell them
that commissioners should be appointed for weights &
measures, but not for prices. He went and told them,
commissioners should be appointed both for weights &
measures nd for prices. So Shmuel said to him, whats your
name? Horn? May a horn grow between your eyes! Thereupon, a
horn grew between his eyes.
Talmud Bavli, Baba Bathra 89a

But not for prices: in order that they should not sell at a high
price. This is common sense; price control is not needed. For if one seller
sells at a high price, then someone who needs money will sell cheaply, and
the buyers will go to him; and then the first one will also sell cheaply.
Rashbam (R. Shmuel ben Meier, 1085-1174) - grandson of Rashi

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1) How does the commentary of the Rashbam augur later economic theory?

2) Does it matter if the rabbis of earlier periods were aware of such things? Explain.