The Visible Hand: The Managerial Revolution in American Business

by Alfred D. Chandler Jr.

Book Overview

The role of large-scale business enterprise--big business and its managers--during the formative years of modern capitalism (from the 1850s until the 1920s) is delineated in this pathmarking book.... This description may be from another edition of this product.

• Format: Paperback
• Language: English
• ISBN: 0674940520
• Release Date: January 1993
• Publisher: Belknap Press: An Imprint of Harvard University Press
• Length: 624 Pages
• Weight: 1.87 lbs.
• Dimensions: 9.2" x 1.2" x 6.3"

Customer Reviews

Excellent History, Weak on Theory

The Visible Hand is so widely used that I had it as assigned reading in three separate graduate classes, in both Economics and History classes. The fact that economists and historians find this book so useful speaks to its best attributes. The Visible Hand examines business history from an economic perspective. Many historians have so little understanding of economics that they cannot sort out the economic angles of history. Chandler focuses on the right issues (accounting methods, finance, entrepreneurship, public policy, technology) and applies enough common sense economics to do some good analysis. The main problem with The Visible Hand is that its theoretical analysis is limited to the more obvious common sense insights of economics. Chandler aims at contrasting the Invisible Hand of markets with the idea of conscious planning in organization. While there is much merit in this approach, there is more to the analysis of markets and organizations that you find in this book. Economists have discovered many subtle differences and similarities between markets and organizations, more than you find in The Visible Hand. Consequently, the quality of its analysis varies. I agree with the emphasis that Chandler places on accounting methods. However, Chandler sees finance capitalism as phase, which gave way to managerial capitalism. I disagree with Chandler on so called managerial capitalism. He underestimates the importance of financial factors both between and within `managed' organizations, and misconstrues the nature of private sector bureaucracies. There are important differences between private and public bureaucracies of which Chandler seems unaware. Furthermore, Chandler does not fully appreciate the role of public policy in shaping modern American corporate organization. While I find its theoretical analysis weak, I do not doubt the value of this book as a resource on American business history. This is a work of great breadth and, at times, meticulous detail. There is also some good analysis here. The Visible Hand is not for everyone. However, Business Historians, Economic Historians, and IO Economists should read this, even if it is not assigned in graduate school. I rate it at five stars as a history, three stars for theory, for an average of four.

Great read on history of management

This is one of the best books on the history and emergence of management. I consider this to be a follow up of Adam Smith's "The Wealth of Nations". Adam smith talks about the role of the market dynamics on business - the invisible hand. Chandler convincingly makes the case that the advancements in transportation and communication coupled with production and distribution fundamentally changed the business dynamics. Pre-1850 businesses were small, local and lacked managers. The owners and managers were the same in most cases. The post-1850 business required a new managerial class that was seperate from the owners. These were salaried full time employees who looked after sales, distribution, finance, production and other aspects of the new business model that was national in scope and dealt with more than a few products. The size and the growth was so significant that the old model stopped working. Chandler does a great job of tracing this history and putting everything in perspective. A great read if you love history of management.

Outstanding

This superb book is an exceedingly well documented and well written description and analysis of the birth of a major contemporary institution, the modern corporation. As Chandler points out, this is an American story. The modern multiunit, vertically integrated corporation run by professional managers emerges in the USA and assumes its modern form by the eve of WWI. Chandler distinguishes carefully this form of "managerial" capitalism from other forms of capitalism. A major distinction is between this (and other) form(s) of large scale capitalism and a Smithian market capitalism characterized by multiple price interactions at many levels of production and distribution. In the large, integrated enterprises Chandler describes many of the market tranactions are replaced by internal, administratively managed transactions under the direction of specialist managers and central coordination. Hence the replacement of Smith's invisible hand with "The Visible Hand" of the title. Other alternative forms of large scale capitalism discussed by Chandler include "entrepreneurial capitalism" in which even large enterprises are dominated a single figure, a small number of figures, or a family, and "finance capitalism" in which enterprises are controlled by financiers as opposed to professional managers. Both these forms appear in various industries in Chandler's descriptions, often as precursors of modern corporations. Chandler begins with a discussion of economic organization in the USA in the early 19th century, stressing that even with national expansion and improvement of waterborne transportation, the economy remained largely Smithian in nature. Chandler is something of a technological determinist. With the development of steam power, particularly steam railroads, and telegraphy, the stage is set for the evolution of the modern corporation. These technologies produce an enormous expansion of both the volume and speed of economic activity. In turn, the huge increases in economic volume and velocity made possible, perhaps even demanded, the emergence of large enterprises integrating many aspects of the transport business. The advantages of eliminating transaction costs drove the railroads into larger and larger forms with 'roads' assimilating many of the functions carried out previously by small businesses. In the process, the railroad companies developed many of the features of corporate organization and governance that characterize modern businesses. The managerial practices of the great railroad companies would subsequently be carried into other industries. Again, Chandler sees this as being driven at least partly by technological improvements. The emergence of capital intensive, continuous production technologies in many industries would favor vertical integration and bureaucratic management. The enormous increase in volume of business made possible by transport and communications industries also made possible close integration of producti

Most interesting book on America and how it works I've read

Chandler give a fascinating review of America's physical history, with emphasis on the development of the coal, railroad, steel, and telegraph industries in making the transportation and communication revolutions possible. The birth of this infrastructure made the rise of mass production and mass marketing possible. The most interesting changes which resulted were in the evolution of the managerial structure and science which became necessary, and which in turn made the transformation of our world possible. "Big business" became not only possible, but essential. That this was an evil system driven by greed is a myth. The book gives detailed descriptions of the birth and growth of many large companies including the big railroads, US Steel, Standard Oil, Singer, MacCormack, DuPont, etc. It is a fascinating narrative.