The Visible Hand

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The Visible Hand: The Managerial Revolution in American Business
The Visible Hand book cover.jpg
Author Alfred D. Chandler Jr.
CountryUnited States
LanguageEnglish
Genrehistory
Publisher Belknap Press
Publication date
1977
Pages608
Awards Pulitzer Prize for History
ISBN 9780674940529

The Visible Hand: The Managerial Revolution in American Business is a book by American business historian Alfred D. Chandler Jr., published by the Belknap Press imprint of Harvard University Press in 1977. Chandler argues that in the nineteenth century, Adam Smith's famous invisible hand of the market was supplanted by the "visible hand" of middle management, which became "the most powerful institution in the American economy". [1]

Contents

The Visible Hand was awarded the 1978 Pulitzer Prize for History and the Bancroft Prize of Columbia University. [2]

Chandler's eight propositions

Chandler uses eight propositions [3] to show how and why the visible hand of management replaced what Adam Smith referred to as invisible hand of the market forces:

  1. that the US modern multi-unit business replaced small traditional enterprise, when administrative coordination permitted better profits than the coordination by market mechanism;
  2. that a managerial hierarchy have been created for this multi-unit business enterprise;
  3. that multi-unit business enterprise appeared for the first time in history in a time when the volume of economic activities reached a level that made administrative coordination more efficient than market coordination;
  4. that once a managerial hierarchy has been created and had successfully carried out its functions of administrative coordination, the hierarchy itself became a source of power, permanence and continued growth;
  5. that the careers of the salaried managers became increasingly professional and technical;
  6. that the multi-unit business enterprise grew in size and diversity and as its managers became more professional, the management of the enterprise became separated from its ownership;
  7. that managers preferred policies that favored long term stability and growth of their enterprises to those that maximized current profits;
  8. that as the large enterprises grew and dominated major sectors of the economy they altered the basic structure of these sectors and of the economy as a whole.

See also

Related Research Articles

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Economies of scale Cost advantages obtained via scale of operation

In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced. A decrease in cost per unit of output enables an increase in scale. At the basis of economies of scale there may be technical, statistical, organizational or related factors to the degree of market control.

Management Coordinating the efforts of people

Management is the administration of an organization, whether it is a business, a non-profit organization, or a government body. It is the art and science of managing resources.

Industrialisation Period of social and economic change from agrarian to industrial society

Industrialisation is the period of social and economic change that transforms a human group from an agrarian society into an industrial society. This involves an extensive re-organisation of an economy for the purpose of manufacturing. Historically industrialization is associated with increase of polluting industries heavily dependent on fossil fuels; however, with the increasing focus on sustainable development and green industrial policy practices, industrialization increasingly includes technological leapfrogging, with direct investment in more advanced, cleaner technologies.

The invisible hand is an economic concept that describes the unintended greater social benefits and public good brought about by individuals acting in their own self-interests. The concept was first introduced by Adam Smith in The Theory of Moral Sentiments, written in 1759. According to Smith, it is literally divine providence, that is the hand of god, that works to make this happen.

Managerial economics is a branch of economics involving the application of economic methods in the managerial decision-making process. Managerial economics aims to provide a frame work for decision making which are directed to maximise the profits and outcomes of a company. Managerial economics focuses on increasing the efficiency of organizations by employing all possible business resources to increase output while decreasing unproductive activities. The two main purposes of managerial economics are:

  1. To optimize decision making when the firm is faced with problems or obstacles, with the consideration of macro and microeconomic theories and principles.
  2. To analyse the possible effects and implications of both short and long-term planning decisions on the revenue and profitability of the Business.

Departmentalization refers to the process of grouping activities into departments. Division of labour creates specialists who need coordination. This coordination is facilitated by grouping specialists together in departments.

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Alfred DuPont Chandler Jr. was a professor of business history at Harvard Business School and Johns Hopkins University, who wrote extensively about the scale and the management structures of modern corporations. His works redefined business and economic history of industrialization. He received the Pulitzer Prize for History for his work, The Visible Hand: The Managerial Revolution in American Business (1977). He has been called "the doyen of American business historians".

John Edgar Thomson

John Edgar Thomson was an American civil engineer and industrialist. An entrepreneur best known for his leadership of the Pennsylvania Railroad (PRR) from 1852 until his death in 1874, Thomson made it the largest business enterprise in the world and a world-class model for technological and managerial innovation. The railroad's first Chief Engineer became its third President.

The Efficiency Movement was a major movement in the United States, Britain and other industrial nations in the early 20th century that sought to identify and eliminate waste in all areas of the economy and society, and to develop and implement best practices. The concept covered mechanical, economic, social, and personal improvement. The quest for efficiency promised effective, dynamic management rewarded by growth.

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Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources between and within organizations contrasted with the market mechanism. As an allocation mechanism for socialism, economic planning replaces factor markets with a procedure for direct allocations of resources within an interconnected group of socially owned organizations which together comprise the productive apparatus of the economy.

The following are the Pulitzer Prizes for 1978.

Managerialism

Managerialism involves belief in the value of professional managers and of the concepts and methods they use. Contemporary writers on management such as Thomas Diefenbach associate managerialism with hierarchy. But scholars have also linked managerialism to control, to accountability and measurement, and to an ideologically determined belief in the importance of tightly-managed organizations, as opposed to individuals or to groups that do not resemble an organization.

Business history is a historiographical field which examines the history of firms, business methods, government regulation and the effects of business on society. It also includes biographies of individual firms, executives, and entrepreneurs. It is related to economic history. It is distinct from "company history" which refers to official histories, usually funded by the company itself.

Multi-divisional form refers to an organizational structure by which the firm is separated into several semi autonomous units which are guided and controlled by (financial) targets from the center.

The Vanishing Hand theory is a concept first conceived of by economist Richard Normand Langlois. The term is an intentional play on both Adam Smith's invisible hand and Alfred Chandler's Visible Hand.

American business history is a history of business, entrepreneurship, and corporations, together with responses by consumers, critics, and government, in the United States from colonial times to the present. In broader context, it is a major part of the Economic history of the United States, but focuses on specific business enterprises.

Visible hand (economics)

The "visible hand" is an economic concept describes the replacement of the regulatory function of the market mechanism by government intervention. Simply put, it refers to government intervention.

References

  1. ↑ "Harvard Business School Professor Alfred D. Chandler, Jr., Preeminent Business Historian, Dead at 88". AScribe  – via  HighBeam Research (subscription required). May 11, 2007. Archived from the original on March 25, 2016. Retrieved December 9, 2012.
  2. ↑ "Noted Economic Historian Alfred Chandler Jr., 88". The Washington Post.  – via  HighBeam Research (subscription required). May 14, 2007. Archived from the original on March 11, 2016. Retrieved December 9, 2012.
  3. ↑ Chandler, Alfred. The Visible Hand. Belknap Press, 1977. ISBN   978-0674940529. Introduction.

Further reading


The Physical Illusion.Gif

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