Pry Loose the Cold, Hard Fingers of the Market's ‘Invisible Hand’

By Frederick H. Borsch, Lost Angeles Times, 5 February 2001

More than 200 years ago, Adam Smith, the Scottish philosopher and founder of economic theory, fashioned the image of the “invisible hand” to explain how myriad individual choices within a free enterprise system could lead to maximum production.

While Smith held that the competitive system must be embedded in appropriate legal and institutional frameworks and valued the roles of government and taxation, the popular idea later took on a life of its own, suggesting that there were few if any areas of human endeavor in which the hand should not profitably have free rein. The theory has even developed mystical and quasi-religious undertones.

A deistic god sets the proper principles of the world's economy in motion and now needs to do little else than observe the invisible handiwork. A natural theology provides an economic and political creed: This is the way things are and are meant to be. Social Darwinism buttresses the faith, at least as far as markets, if not people, are concerned: Only the most competitive and efficient survive.

Utilitarianism joins the chorus, with the praise that this brings the greatest good to the greatest number of people. Ideologies and religions need their theologians. Arguments in favor of free competition and the most unregulated possible markets point out the failures of communism and state-sponsored socialism. Capitalism, in contrast, has proved to be universally successful. Indeed, almost all government is evil to the extent that it does not keep hands off the hand. Markets based on self-interest, and that take into account and even sanction natural human greed, are the only way to sort out economies and people. Blind faith in an invisible hand becomes a form of piety.

Competing evidence can be explained away. Questions may well be treated as heresy. This is serious business. On the lips of eloquent spokesmen, the gospel becomes deeply personal and moving, not least in witness to the ways individual initiative is everywhere rewarded. Certain activities, such as policing, sewage disposal, garbage collecting and fire-fighting, may for now need to be managed by the community.

Even here, however, other possibilities could be considered, and the wealthy, who so often lead the way in worship of the hand, are already developing markets of their own in some of these areas. Meanwhile, not only is higher education best left to the invisible hand, but private schools and vouchers may well be the wave of the future, from preschool through high school. Transportation can be given over to the hand, as happened with Amtrak and the railroads in Britain. Deregulation of the airlines has been a blessing.

Eventually, all public transportation will likely be seen as a failed social experiment. Certainly the free hand will be terrific for electricity, once supply and demand are allowed to kick in fully and the environmentalists are put in their place.

Speaking of which, the hand will eventually take care of the environment too. One of the wonderful things about faith in the hand is that it absolves humans of the responsibility of doing the work of hard thinking and cooperative planning. If the public sector isn’t doing things well, just turn them over to the hand. One must believe that resultant tax cuts will benefit everyone.

There is no need to develop common goods with respect to the necessities of life because competition will provide them at the proper price. Look at what this has done for health care in the United States. Water, too, might one day be metered out in a similar manner. Since everything works out for the best without common efforts, untrammeled free enterprise, even if it must sometimes administer pain, is the most compassionate way to do business. Such a faith can get rid of the very idea of welfare.

It also can be used to encourage the taking up of a collection to help elect politicians who will end any governmental interference with the work of the hand. All praise to the hand.