Formal and Computational Model for A. Smith’s Invisible Hand Paradigm

Abstract

This paper presents a formal theory of what A. Smith’s Invisible Hand is. We are convinced that the Free Market as a system of intelligent, interacting, selfish agents creating a powerful and universal computational mechanism. The model of computations for this mechanism is based on three concepts: molecular computations, implied computations and value labeling logic expressions representing business objects. This runs threads of computations in the background of agents’ consciousness. The threads are chaotic, parallel, distributed computations of inference nature. The information stored and processed by threads is labeled with “value”, assigned and changed in subjective way by agents - to control the inference process. The results of inferences, affect the Free Market, and are perceived as A. Smith’s Invisible Hand, or Free Market Collective Intelligence. Research suggests that this phenomenon is wider than A. Smith expected and more aspects of the Free Market can probably be explained. This paper is the first presentation of our research. The simulation model along with results obtained will be demonstrated during the conference.