Post by LanceI don't really want to argue about how claims about the invisible
hand or market forces are used to disguise greed, or to impose an
ideology. I am just wondering whether there really is an invisible
hand process that can determine the prices in a market, given
certain conditions such as an absence of collusion between sellers,
and the like.
Fair enough... let's not argue. But please allow me to unpack two
unstated premises or assumptions that seem to be lurking in your quandary.
First, it seems that you are assuming that all economic activity is
homogeneous. That is to say, regardless of whether we are talking
about macro-economics or microeconomics, regardless of the product
that is produced and distributed, regardless of how much scope there
is for profit, regardless of how many people are impacted, and
regardless of how essential a product is for survival or for
developing the potential of human beings - that aspect of the economy
can only be handled in the same way as the rest of the economy -
planned or unplanned, command or laissez-faire. This assumption is not
logical.
Second, it seems that you are assuming that unplanned economy=good and
planned economy=bad. Of course, even Adam Smith did not go quite that
far, and neither do you. Adam Smith recognized the dangers of
monopolies, and you mention "an absence of collusion". The problem is
that in practice (and as seen in your final paragraph), planning an
economy is considered to be generally bad and therefore to be avoided
as far as possible. This point of view might also be a corollary of
the first assumption that I mention above. If only one approach is
possible for an entire economy, then that approach would be good on
the whole, whereas any other approach would be bad on the whole.
Post by LanceI once read a book on catastrophe theory where the author asserted
that the beautiful hexagons of the cells in a honeycomb were the
result not of the bees carefull constructing hexagons but rather
the result of many bee bodies simultaneously working the wax to
make cells. The hexagons are, the writer asserted, the form wax
takes when pressed from the sides and from the top and bottom, by
lots of bee bodies. I don't know whether this is true, but it
sounds plausible to me. Just so paths on lawns emerge because of
the passage of many feet seeking a shorter path to some frequently
visited spot. Adam Smith's invisible hand seems to me to be
something similar.
Let me interrupt your train of thought there. Adam Smith's invisible
hand is not similar, because Adam Smith was talking about an invisible
hand of "Providence". Providence (with a capital P) is just
another name for God, specifically God in the role of "sustaining and
guiding human destiny" (Merriam Webster's 11th Collegiate Dictionary).
Hence we have a largely anthropomorphic God with a "hand" that is
"invisible".
For reference, Adam Smith introduced his concept of the "invisible
hand" in 1759, in Paragraph 10 of Part IV Chapter 1 of the book, "The
Theory of Moral Sentiments". Below, I reproduce that paragraph:
______________________________________________________________________
Part IV
Of the Effect of Utility upon the Sentiment of Approbation
Consisting of One Section
Chap. I Of the beauty which the appearance of Utility bestows upon all
the productions of art, and of the extensive influence of this species
of Beauty
IV.I.10
And it is well that nature imposes upon us in this manner. It is this
deception which rouses and keeps in continual motion the industry of
mankind. It is this which first prompted them to cultivate the ground,
to build houses, to found cities and commonwealths, and to invent and
improve all the sciences and arts, which ennoble and embellish human
life; which have entirely changed the whole face of the globe, have
turned the rude forests of nature into agreeable and fertile plains,
and made the trackless and barren ocean a new fund of subsistence, and
the great high road of communication to the different nations of the
earth. The earth by these labours of mankind has been obliged to
redouble her natural fertility, and to maintain a greater multitude of
inhabitants. It is to no purpose, that the proud and unfeeling
landlord views his extensive fields, and without a thought for the
wants of his brethren, in imagination consumes himself the whole
harvest that grows upon them. The homely and vulgar proverb, that the
eye is larger than the belly, never was more fully verified than with
regard to him. The capacity of his stomach bears no proportion to the
immensity of his desires, and will receive no more than that of the
meanest peasant. The rest he is obliged to distribute among those, who
prepare, in the nicest manner, that little which he himself makes use
of, among those who fit up the palace in which this little is to be
consumed, among those who provide and keep in order all the different
baubles and trinkets, which are employed in the oeconomy of greatness;
all of whom thus derive from his luxury and caprice, that share of the
necessaries of life, which they would in vain have expected from his
humanity or his justice. The produce of the soil maintains at all
times nearly that number of inhabitants which it is capable of
maintaining. The rich only select from the heap what is most precious
and agreeable. They consume little more than the poor, and in spite of
their natural selfishness and rapacity, though they mean only their
own conveniency, though the sole end which they propose from the
labours of all the thousands whom they employ, be the gratification of
their own vain and insatiable desires, they divide with the poor the
produce of all their improvements. They are led by an invisible hand
to make nearly the same distribution of the necessaries of life, which
would have been made, had the earth been divided into equal portions
among all its inhabitants, and thus without intending it, without
knowing it, advance the interest of the society, and afford means to
the multiplication of the species. When Providence divided the earth
among a few lordly masters, it neither forgot nor abandoned those who
seemed to have been left out in the partition. These last too enjoy
their share of all that it produces. In what constitutes the real
happiness of human life, they are in no respect inferior to those who
would seem so much above them. In ease of body and peace of mind, all
the different ranks of life are nearly upon a level, and the beggar,
who suns himself by the side of the highway, possesses that security
which kings are fighting for.
http://tinyurl.com/3n2myt
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Even though you explicitly stated that you do not want to argue about
whether the "invisible hand" or "market forces" is used to disguise
greed, I would point out that in the above paragraph Adam Smith is
quite clear that greed is at work on the human level. He merely
asserts that despite the greed, there is an "invisible hand" (of God)
that transforms rampant greed ("natural selfishness and rapacity")
into social welfare. ("They are led by an invisible hand to make
nearly the same distribution of the necessaries of life, which would
have been made, had the earth been divided into equal portions among
all its inhabitants, and thus without intending it, without knowing
it, advance the interest of the society, and afford means to the
multiplication of the species... In ease of body and peace of mind,
all the different ranks of life are nearly upon a level, and the
beggar, who suns himself by the side of the highway, possesses that
security which kings are fighting for.")
In case you are interested, Smith's later - and more often quoted -
use of the term, "invisible hand", in his 1776 book, "The Wealth of
Nations", is not any different in its thrust. Smith again talks about
humankind's selfish greed and states that somehow that greed gets
converted by an "invisible hand" into social welfare. For your
convenience, here is the relevant paragraph (Paragraph 9) from Book IV
Chapter 2 of "The Wealth of Nations":
______________________________________________________________________
But the annual revenue of every society is always precisely equal to
the exchangeable value of the whole annual produce of its industry, or
rather is precisely the same thing with that exchangeable value. As
every individual, therefore, endeavours as much as he can both to
employ his capital in the support of domestic industry, and so to
direct that industry that its produce may be of the greatest value;
every individual necessarily labours to render the annual revenue of
the society as great as he can. He generally, indeed, neither intends
to promote the public interest, nor knows how much he is promoting it.
By preferring the support of domestic to that of foreign industry, he
intends only his own security; and by directing that industry in such
a manner as its produce may be of the greatest value, he intends only
his own gain, and he is in this, as in many other cases, led by an
invisible hand to promote an end which was no part of his intention.
Nor is it always the worse for the society that it was no part of it.
By pursuing his own interest he frequently promotes that of the
society more effectually than when he really intends to promote it. I
have never known much good done by those who affected to trade for the
public good. It is an affectation, indeed, not very common among
merchants, and very few words need be employed in dissuading them from it.
http://tinyurl.com/cs532ak
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Of course, in the above paragraph there is no direct reference to
"Providence", but there is also no suggestion that the "invisible
hand" belongs to anyone or anything other than Providence. Indeed,
because Smith includes the phrase, "as in many other cases", in the
sentence where he mentions the concept of an "invisible hand", I think
it is highly unlikely that Smith was talking about "market forces",
which pertains only to a specific case (commercial economy).
Post by LanceAnd for that matter, evolution depends on a similar kind of
"invisible hand mechanism", a variation and selection mechanism.
Certainly there are other processes at play in evolution,
including blind luck, but also the activity of viruese and cosmic
rays. Nevertheless a sort of invisible hand mechanism does help
shape the variety of species inhabiting this planet. So I would be
surprised if similar mechanisms did not operate where many people,
like the many bees in the wax, act at the same time in the same
place and are dealing with the same kind of activity.
It is interesting that you choose evolution as an instance of the
"invisible hand mechanism". Darwin coined the phrase "survival of the
fittest" to describe the mechanism of natural selection. And some
capitalists would argue that starvation (especially in the Third
World) is a mechanism that could offset the supposed problem of
overpopulation on a planet where the richest 1% now possess 50% of
the world's total wealth.
Post by LanceIf the invisible hand really does exist in some markets then it
seems to me that attempts to counter ideology based on it by
denying the existence of the invisible hand, are not likely to work
well. Rather than asserting that no invisible hand exists we should
seek to clarify its limits, and point out that efforts of
governments to artificially create invisible hands may not be
compatible with invisible hand processes. It, perhaps, is rather
like trying to make workers in some field more creative by ordering
them to be creative. Anyway, just a thought.
So now let me put all of the above into context.
First, yes, there are market forces. And, yes, those market forces -
essentially supply and demand - can be studied and understood. Indeed,
that has been a major - and perhaps the main - focus of the fledgling
science of economics over the last 200 years. In that context, it is
somewhat absurd to describe market forces as an "invisible hand".
Market forces are not at all invisible (unlike God or God's "hand").
Second, and for what it's worth, we should be clear that the concept
of "market forces" is really not what Adam Smith was talking about
when he used the term, "invisible hand". Adam Smith was promoting a
laissez-faire economy (and ultimately British imperialism) by arguing
- albeit unconvincingly - that the "invisible hand" is the most
effective mechanism for achieving an equitable or just distribution of
wealth.
Third, and finally, while it is true that market forces do exist, it
is absolutely primitive and even inhumane to paint every dimension of
economics with the same brush. Economics is not unidimensional. People
and their various needs should not - and ultimately cannot - all be
addressed in terms of the marketplace. Commercial economy is just one
dimension of a multidimensional - I would argue quadridimensional -
science of economics. Unless we take into account all of those
dimensions - unless we limit commercial economy to just one of those
dimensions and impose appropriate restraints on and within that
dimension - there is no way other than a fully planned economy (and
possibly a fully commanded economy) to hold in check the type of
rapacious greed recognized by Adam Smith. The notion that an invisible
hand (the agency of Providence) or the workings of supply and demand
(market forces) will provide the distributive justice that humanity
requires - or even the amount of distributive justice that Adam Smith
falsely or foolishly alleged that humanity already receives - is a
dogma that must be rejected and exposed by all rational and
well-meaning persons.