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Who is the Invisible Hand?

In 1776 Adam Smith wrote what remains the most popular treatise on free market economics ever penned, The Wealth of Nations. Though its language is dated, and it’s sometimes tedious reading, the pages of Smith’s work reveal the inherent genius of free market capitalism. Not only is free market capitalism ingenious, it is inherently moral for it cannot function in any other environment but one of justice and equal opportunity.  That’s why Smith referred to such an economic system as a system of “rational self-interest.” Rational self-interest means that a person pursues his or her own needs and wants by meeting the needs of others. Smith referred to this concept as the “Invisible Hand” that guides human economies, but I’d argue that it’s truly the Hand of God, for the free-market takes that which is most base about human nature, our inherent self-centeredness, and captures it for the greater good. Inasmuch, an others-centeredness, which is core to the Gospel, is necessary for individuals and enterprises to succeed under such a system.

An example of rational self-interest at work would be the baker at the bakery. This fellow will only have his needs met by meeting the needs of others. In other words, he may need to buy shoes for his children, but he can only buy shoes for his children if he provides bread for the children of others. Such a system of rational self-interest creates a system of harmony and unforced, private-sector economic interdependence. In short, it fosters human creativity and cooperation, which leads to a society of prosperity and peace. In a world in which man is fallen, I’d say that this sort of economic system is about as close as we’re going to get to Heaven on Earth.

The socialist, however, would take exception with Smith’s and my notion, as he believes that man is perfectible and that a society that honors individualism has corrupted him. Inasmuch, the socialist will seek to redistribute wealth from the productive to those less so, all in the name of “economic justice” and the “general welfare.” The problem with such a system of socialism is that, in diametrical opposition to the free-market system, it is a system of irrational self-interest. Think of it this way, in free market capitalism individuals must meet the needs of others to have their needs met; in socialism, one seeks only after his or her well-being regardless of what that means for others. So, the system that emphasizes the individual (free-market capitalism) is actually better for the collective than the system that focuses on the collective (socialism) at the expense of the individual. Perhaps the socialist fails to see that the collective is made up of the individual, and that his ignorance of the individual is akin to missing the forest for the trees.

One can only imagine the utter chaos that must emerge from a truly socialist system wherein everyone is looking after only his or her self-interest. Whereas free market capitalism fosters economic and cultural cooperation between free individuals, socialism fosters isolation that leads to economic and societal disintegration.  That’s because socialism fails to truly consider the human condition; it is truly a failure of worldview. Man has an inherent bent toward self-centeredness; therefore, this bent must be taken into account in any economic and / or political system. This is why free-market capitalism is the best economic system for the current state of human affairs: it addresses the issue of self-centeredness in a way that captures it for greater good, instead of applying centralizing force that is the forerunner of fascism.

As America grapples with the great issues of economic and political liberty in this second decade of the twenty-first century, it is absolutely critical that we restore a cultural ethic. Absent assent to absolutes, the only unifying factor in American life will be ever-bigger government. Neither economic nor political freedom can survive in such a climate of centralization. As such, I believe Americans must once again apply free-market economics that recognizes the reality of human nature and counters it with human freedom. In so doing, I believe we will reap the rewards of what Smith called the “Invisible Hand,” which I would argue is the Hand of God.

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One Response to "Who is the Invisible Hand?"

  1. Dan says:

    Thank you, Josh. It is so refreshing to hear someone unapologeticsally express a worldview that reflects reality. God is good to make things work despite our sinfulness.

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