“Disrupting the Invisible Hand”

Thoughts on a Free Market Economy…

“Disrupting the Invisible Hand”

By Phyllis Hunsinger

June 1, 2020

            Adam Smith identified and named the concept “the invisible hand” in his book, “The Wealth of Nations.”  The “invisible hand” that is the driving force in a market economy is each individual promoting his or her self-interest.  Consumers aim to get the greatest satisfaction from their budgets; entrepreneurs try to achieve the highest profits for their firms; workers want the highest possible wages and salaries; and, owners of property resources attempt to get the highest possible prices from the rent and sale of their resources.

            Another way to envision the invisible hand process is one in which the outcome to be explained is produced in a decentralized way, with no explicit agreements between the acting agents.  The second necessary component is that the process is not intentional.  Independent actions are neither coordinated nor identical with the actual outcome, which is simply a by-product of those actions.  This is why the process is called invisible. 

            One of the best descriptions of the “invisible hand” in a market economy is the classic essay, “I, Pencil” by Leonard E. Read.  Mr. Read showed that in spite of the simplicity of a wooden pencil, no single person knows how to make one.  As he traced the complexity of the division of labor and the development of resources that goes into making a simple pencil, he beautifully demonstrated the degree of cooperation necessary to produce anything. Our standard of living is a result of people producing things and coming up with new processes that are beyond the capacity of any one individual.  It is almost like the economy is guided by an invisible hand.

            In the beginning of 2020, the economy was healthy, the work of the invisible hand was evident as record numbers of people were gainfully employed and all economic indices indicated continuing prosperity.  Then COVID-19 was introduced into the lives of Americans, and the various government agencies in all 50 states began to take control of the economy in an effort to stop the spread of the deadly virus.  Travel was severely restricted, thus the airline and cruise lines were devastated, leading to a glut of oil and gas on the market, causing the price to drop precipitously.  Meat processing plants were closed; animals were slaughtered because there was no way to have the meat processed.  Grocery prices escalated because products were limited.  Millions of Americans lost their jobs.  In a manner of two months, a vibrant economy was destroyed.  The invisible hand was stopped in its tracks.

            Rebuilding a strong economy will take much longer than it took to destroy it.  Government agencies will need to relinquish their control over the economy, because central planning has demonstrated it does not have the skills to direct an economy.  Free the people to work in their own best interest, and the invisible hand of the market will return this country to a vibrant economy.

https://www.free-dom.co.us, Phyllis Hunsinger © 2020 All Rights Reserved

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