Mythical Beast: The Invisible Hand (and Foot)
Some mythical experts believe that the invisible hand and the invisible foot (IH/IF) actually belong to God Almighty, Hermself. Others believe they belong to a lesser race of Transnational Global Mega-Giants descended from an unnatural union of God and man. Yet others believe they are the severed, ghostly hand and foot of the first King of the "Great Pirates" (the first sea traders/plunderers) whose history is chronicled by Buckminster Fuller in his Operating Manual For Spaceship Earth. Other rumors include the IH/IF belonging to the Evil Wizards, the Alien Overlords, or the Lizard People.
Whatever their origin, it is thought that the invisible hand often operates with a light and ghostly touch; but not so the invisible foot, which many a working-class victim has felt pressing heavily upon his/her back or neck.
Nobel Prize economist Joseph E. Stiglitz wrote:
“Adam Smith, the father of modern economics, is often cited as arguing for the “invisible hand” and free markets: firms, in the pursuit of profits, are led, as if by an invisible hand, to do what is best for the world. But unlike his followers, Adam Smith was aware of some of the limitations of free markets, and research since then has further clarified why free markets, by themselves, often do not lead to what is best. As I put it in my new book, Making Globalization Work, the reason that the invisible hand often seems invisible is that it is often not there.
Whenever there are “externalities”—where the actions of an individual have impacts on others for which they do not pay, or for which they are not compensated—markets will not work well. Some of the important instances have long understood environmental externalities. Markets, by themselves, produce too much pollution. Markets, by themselves, also produce too little basic research. (The government was responsible for financing most of the important scientific breakthroughs, including the internet and the first telegraph line, and many bio-tech advances.)
But recent research has shown that these externalities are pervasive, whenever there is imperfect information or imperfect risk markets—that is always.
Government plays an important role in banking and securities regulation, and a host of other areas: some regulation is required to make markets work. Government is needed, almost all would agree, at a minimum to enforce contracts and property rights.
The real debate today is about finding the right balance between the market and government (and the third “sector”—non-governmental non-profit organizations.) Both are needed. They can each complement each other. This balance differs from time to time and place to place.” (Wikipedia: Invisible Hand)
Noam Chomsky, while acknowledging the intelligence of Smith’s thesis, wrote:
Throughout history, Adam Smith observed, we find the workings of “the vile maxim of the masters of mankind”: “All for ourselves, and nothing for other People.” He had few illusions about the consequences. [Presumably this is not the conservative icon Smith speaking here, but instead the liberal, wacko, conspiracy-theory Smith--PR]
The invisible hand, he wrote, destroys the possibility of a decent human existence “unless government takes pains to prevent” this outcome, as must be assured in “every improved and civilized society.” It destroys community, the environment, and human values generally—and even the masters themselves, which is why the business classes have regularly called for state intervention to protect them from market forces. (Wikipedia: Invisible Hand)
The political economist E.K. Hunt criticized markets and the externalities emerging from market exchanges as being a route for self-advancement at the expense of social good. Hunt helped contribute to the literature on heterodox economics, helping to coin the term “invisible foot” in contrast to a presumably beneficient “invisible hand”. Hunt wrote:
“If we assume the maximizing economic man of bourgeois economics, and if we assume the government establishes property rights and markets for these rights whenever an external diseconomy is discovered [the preferred "solution" of the conservative and increasingly dominant trend within the field of public finance], then each man will soon discover that through contrivance he can impose external diseconomies on other men, knowing that the bargaining within the new market that will be established will surely make him better off. The more significant the social cost imposed upon his neighbor, the greater will be his reward in the bargaining process. It follows from the orthodox assumption of maximizing man that each man will create a maximum of social costs which he can impose on others. D’Arge and I have labeled this process “the invisible foot” of the laissez faire … market place. The “invisible foot” ensures us that in a free-market … economy each person pursuing only his own good will automatically, and most efficiently, do his part in maximizing the general public misery. “(Wikipedia: Invisible Hand)
It is believed by some authorities that the invisible hand and foot were preceded in evolution by the invisible tooth and claw. However, there is still considerable controversy about the invisible fossil record.