Look Ma: Invisible Hands

in #anarchism7 years ago (edited)

Brink Lindsey of the Cato Institute once wrote:

"The invisible hand of spontaneous order works its wonders only because it rests on a foundation of rules coercively enforced by government. If that foundation is missing, there's no spontaneous order--just chaos. And in that situation, the libertarian maxim of "Don't just do something, stand there!" no longer reliably applies."

This assertion lies at the heart of the argument many libertarians make for limited government and against market anarchism. What is the "invisible hand" Lindsey refers to? This invisible hand was described by Adam Smith in The Wealth of Nations:

"Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it [...] 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 society that it was no part of his intention. 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."

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Markets spontaneously produce order. Self-interested action in a free market produce general benefits which need not be intended by the individuals doing business in that market. The individual consumer desires a quality product at a low price. The businessman desires profit. In a free market, the invisible hand requires that the businessman must provide quality goods at low prices in order to profit. If the goods he produces are of insufficient quality, another businessman will intercept the profit he seeks by offering goods of better quality at the same price. If he asks too high a price for the goods he produces, another businessman will intercept the profit he seeks by offering goods of the same quality at a lower price. The businessman need only be fundamentally concerned with his own benefit, but in the free market, the invisible hand constrains him to produce value for others at the lowest price he can manage in order to achieve his own benefit. Whether he cares to benefit others or not, in a free market he must benefit others to benefit himself.

We say the free market spontaneously produces value because it facilitates the production of value by requiring one to produce value for others in order to acquire value for oneself.

In this sense, the market also spontaneously produces order. It's terribly convenient for me to be able to drive to a single building, a grocery store, and find meat, bread, milk, cereal, spices, vegetables and thousands of other products at affordable prices. The meat, fruit and coffee I buy there may come from different parts of the world, but my grocer has taken the trouble to bring them together and make them available a few miles from my home. It's astonishing because I didn't even have to ask him to do it. I certainly didn't make him do it; he was free to do anything he wanted with his life, but he freely chose to collect foods from around the world and make them easily available to me. That's the spontaneous order of the invisible hand. As David Friedman illustrates in a horrible but insightful poem, anarchy is not chaos.

Mr. Lindsey says this can't happen without "a foundation of rules coercively enforced by government." This is really the heart of one of the key arguments for government and against market anarchy. The argument is that free markets only exist in the context of a government that has the authority to settle disputes between parties. The argument is that without government, there is no market, only the Hobbesian state of nature, the war of all against all. And without the market, there is no invisible hand, no spontaneous order. Thus, the advocates of limited government argue, we must first impose order by establishing government.

This argument is flat wrong, and easily refuted.

I live in America. Suppose I want to do business with Joe, who lives in Canada. Let's say he wants to sell me beer and I want to buy beer. Does anyone doubt that there is a market here? If Joe wants to sell me beer, he is constrained by the invisible hand of that market. He can't sell me lousy beer, not much anyway, because I'll simply stop buying it and buy better beer from someone else. He can't sell me beer at exorbitant prices because again, I will simply buy beer from someone else. Or do without.

Clearly, there is a market here. And the invisible hand of spontaneous order is at work.

But there is no government.

What do I mean when I say there is no government? Don't Canada and America both have governments? Sure, but the point is that there is no government that has authority over the market that Joe and I are doing business in. America's government has no authority over Joe and Canada's government has no authority over me, and no agency whatsoever has authority over both of us. The market between us is ungoverned. Canada can govern Joe, but it can't govern me. America can govern me, but it can't govern Joe. Neither government can govern the market. America and Canada exist in a state of anarchy relative to one another. America and Canada can agree to a treaty by which they seek to define the market, a sort of contract, but this doesn't govern the market; it's no different in principle from any contract between independent agencies in the absence of government. If a dispute arises between parties to the treaty or contract, there is no higher authority that either party can appeal to.

Since there is no "foundation of rules coercively enforced by government" that has authority over Canada and America, do we therefore have "no spontaneous order--just chaos"?

Hardly. We have a thriving market. The invisible hand of spontaneous order is working just fine. Even though they are not under common authority, America and Canada are in nothing like a state of perpetual war with each other.

Lindsey was wrong. The market does not exist because of government, it exists in spite of government. The invisible hand of spontaneous order does not operate because of government, it operates in spite of government.

John T. Kennedy

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Well written post buddy, keep going.

Oh, I will - Thanks!

"The market does not exist because of government, it exists in spite of government."

Brilliant. Sorry I wasn't here to add value during the payout period! Please keep writing good stuff... ;)

😄😇😄

@creatr