Emma Rothschild has argued that Smith probably intended his Invisible Hand
comment as a kind of ironic joke ("The Bloody and Invisible Hand" in
_Economic sentiments : Adam Smith, Condorcet, and the Enlightenment_,
Harvard University Press, 2001). Although that interpretation cannot be
proven, it seems more plausible to me than the dominant interpretation that
the market magically transforms a plethora of self-interested transactions
into an unintended, socially-beneficial outcome. Reading Smith, I get the
impression he is saying an unintended aggregate outcome *can* happen.
Getting from can to must is a logical leap that 1. is not supported by what
Adam Smith wrote and 2. is not supported by empirical evidence, but 3. is
asserted repeatedly by market utopians AS IF it was an irrefutable argument.
In a way -- ironically -- the argument is "irrefutable" in that it doesn't
contain enough substance to hang a refutation on. If the utopian conditions
posited for the invisible hand workings of a free market to function
actually existed, prices would not be necessary. A pure gift economy could
equally function under such ideal, omniscient conditions. In other words,
prices could only ever be "true" if they were also superfluous. In the real
world, price ALWAYS conceals externalities, monopolistic pricing power,
government subsidies and favours, etc.
The myth of the free market has this in common with Sorel's "myth of the
general strike": it could only occur if the conditions already existed that
made it unnecessary. Competition is fundamentally about trying to gain
market advantage through non-price means.Think about it. If I can achieve
greater sales through some other means than simply lowering my price, I will
make a bigger profit. Those other means may enable me to nominally lower my
price, so I can point to that nominally lower price (rather than, say, a
subsidy) as the reason for increased market share. All the invisible hand
does in this case is shuffle the shells that conceal the pea.
Selma Singer wrote,
> I haven't been reading too many of these very carefully so just delete
this
> if it has been mentioned before, but has anyone mentioned (in the context
of
> this invisible hand and free competition, etc.)corporate price-fixing,
> government bail-outs of failing corporations,etc.etc.? How do these things
> fit in this'free', 'competitive' market'? do these things and the myriad
of
> other dynamics like them not interfere with the 'free', 'competitive' part
> that is supposed to control this invisible hand?
>
> Selma
>
Tom Walker
604 255 4812
