Constraints

8 March 2010

Invisible hand, just behind this curtain here

Filed under: Commentary — András Salamon @ 20:38

Adam Smith‘s Invisible Hand of the Markets has gained a hand-hold in the meme pool. Yet, something is clearly missing, summed up beautifully by kraut at Boing Boing:

people talk about the invisible hand of the market like they talk about the toe-bone of Saint Euphemia; an unverifiable source of miracles.

Maybe foot-hold would actually be more apt.

George Soros has been repeating for several decades: markets work within the rules we set up; if we don’t like how markets behave then we must change the rules.

Pretending that the rules are invisible may give a sense of comfort, like ignoring the Wizard. But look here, just behind this curtain: rules for them there markets!

Pay no attention to that set of rules behind the curtain. Peeking might reveal an uncomfortable truth, that we are actually responsible for the social outcomes wrought by markets. After all, a market is a wonderful engine, but it will only achieve what its rules allow it to do.

David Mitchell has the right idea. Corporations are

only robot tradesmen and they should know their place.

This unnecessarily Victorian attitude is of course part of Mitchell’s comic shtick. A robot tradesman would presumably exhibit greater self-awareness than most current companies (although not necessarily future corporate entities).

The chairman of the UK Financial Services Authority recently argued in favour of increasing friction in markets. So maybe there is hope that we as a society will explicitly start engaging with the rules that regulate our markets, without either getting bogged down by market fundamentalism or hankering after some kind of command economy.

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