Saturday, September 21, 2013

Invisible Hand


Why do people prattle about "as if an invisible hand" when it is government alone that visibly constrains the businessmen to mere economic competition rather than the violence, monopoly and theft of mafias?  It is government that visibly constrains the consumer to mere purchase rather than ignoring the system of property and anarchistically using whatever is desired, either peacefully or forcefully.  It is that government coercion that redistributes from the businessman to the consumer a large part of the consumer surplus.  It is that government coercion that allows the accumulation of property that permits civilization.

Incredible, pervasive coercion is necessary to create markets.  Coercive threats are necessary to property: they limit the power and freedom of individuals to use the wealth that surrounds us that belongs to others.  Coercive threats limit the power and freedom of businesses to become mafias.  If this seems like an "invisible hand", it is only because it is all-pervasive like the air we breathe at all times.

An apt analogy for the invisible hand of capitalism is the cattle chute.  Cows are prodded from a truck into the cattle chute and they exit at the slaughterhouse.  There is no prodding in the cattle chute, so you might say that it is as if "an invisible hand" is guiding the cattle.  Yet the cattle's behavior is controlled by the walls of the chute, which are too close together to allow the cattle to turn around, and by the continual entrance of other cattle behind them that forces them to go forward.  This institution brings about the desired social benefit of getting the cattle into the slaughter house.  Our government-created capitalist institutions are similarly restrictive of choices, and there are continual new entrants forcing those ahead of them to keep moving.  Why is it that we think the cattle chute is visible, while capitalist institutions are invisible hands?

(From Invisible Hand at the wiki site.)

1 comment:

republicoflagrangia said...

I think this is an excellent analogy. The whole idea of an "invisible hand" stems from the time that economists were attempting to imitate the natural sciences.