AN INVISIBLE HAND

One of the most complex philosophical questions, with regard to ethics, rises from the perennial dilemma of how it is possible that good causes may produce bad effects, and reversely, how bad causes may produce good effects. Considering the absolute nature of goodness, the answer has to be "impossible," and yet, in real life we come across the practical possibility of such theoretical impossibility all the time.

My answer is simple: look for the joker in the deck, for there must be a joker in the deck! The circus magician does not really take the rabbit out of an empty hat, the rabbit had to be there somewhere all the time, only we could not see it.

In the Section on Philosophy and Ethics, I have touched upon the ethical riddle hidden inside the notion of the free choice, the most inconvenient of all gifts of God to man, a catalyst for trouble. Free choice subsists in my view Jenseits von Gut und Böse, in this case, on the other bank of the mystical river, as an unknown quality, in-itself, not subject to moral valuation. In order to reach from cause to effect, both located on this side of the river, we have to make a mystical trip to ‘the other side’ back and forth, something comparable to the extranormal trips made by the characters in the Matrix movies. Hence, the connection between our causes and effects becomes tainted, disconnected by the trip Jenseits, and the frequent ethical disconnect between them no longer poses a rational challenge to the absolute nature of goodness. (The nature of evil, as I happened to point out elsewhere, is not absolute, in my understanding, but only temporal.)

The preceding theoretical rumination leads me now to Adam Smith and the subject of an invisible hand.

Smith uses this metaphor in Book IV of The Wealth of Nations, arguing that an individual will employ his capital in foreign trading only if the profits available by that method far exceed those available locally and that in that case it is better for society as a whole that he does so: “But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or, rather, is precisely the same thing with that exchangeable value. As every individual, therefore, endeavors as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He, generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, 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 not part of it. 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. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.” (IV .ii. 6-9)

The paradox which Adam Smith is hereby promoting is that apparently out of the totality of selfish motives of the enterprising individuals comes, as if assisted by “an invisible hand,” an end result most favorable to the public good.

In The Wealth of Nations, Smith offers the following elucidation to illustrate the simplicity of this principle:

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity, (!) but to their self-love, and never talk to them of our necessities, but of their advantages (what was the name of this little game again, please?). Nobody but a beggar chooses to depend chiefly upon the benevolence of their fellow-citizens." (I agree with the last part, except that it is incomplete. Citizens of a commonwealth, or state, if you like, are all parties to the same social contract, which is supposed to give them the assurance that, leaving aside the self-interest of their fellow-citizens, they can to an even greater extent depend upon the benevolence of the state, without feeling themselves like beggars, into the bargain.)

With this remarkable passage in mind (so remarkable that I have already used this quotation elsewhere), a fairly simple comparison can be made between the capitalist system (under which the vendor has to do his best to accommodate his customer not for some noble or sentimental reason, but for the very selfish reason of beating his competition) and the Soviet-style economic system (where the salaried vendor’s incentive is largely lacking, except for saving his neck from being branded as a saboteur, as a result of his poor service, like it was the case under the highly efficient Stalinist system), to the indisputable benefit of the capitalistic competitive system, but only if one specific factor, such as this, is taken into consideration, to the exclusion of all others. (Incidentally, a potentially unsurpassed, yet habitually unappreciated source of personal motivation can be found in the individual’s patriotic zeal, but this phenomenon is dismissed as a rare exception, rather than a collective event, thus also dismissing the historical miracle of the Stalinist society, which had transformed the USSR from relative backwardness into a global superpower in the course of a single generation.)

The situation changes dramatically, however, when we see our wonderful capitalist merchant--- offering the best customer service available for the money--- being run out of business by a giant corporation (like, say… Wal-Mart?), employing salaried, undermotivated workers like in the latter days of the Soviet Union, by offering so much cheaper prices that our small-business friend just cannot compete… Adieu to the capitalist utopia of the neighborly butcher, the smiley-faced brewer, and the self-loving baker!

Not so simple, after all, is it? But here comes the expected qualification of the self-love principle, courtesy of the Wikipedia (blue font):

“Contrary to common misconceptions, Smith did not assert that all self-interested labor necessarily benefits society, or that all public goods are produced through self-interested labor. His proposal is merely that, in a free market, people usually tend to produce goods desired by their neighbors.” (Yes, and many drugs which usually provide the cure to various diseases often have dangerous side effects, or become ineffective, as the disease-producing organisms develop an immunity to them!)

“...A very simple example of how the invisible hand is supposed to work are checkout lines in a store. Each customer getting in line “selfishly” chooses the shortest line, regardless of the other customers. Their utility maximizing choice means that eventually customers, without the slightest direction, and by following only their selfishness, form lines of the same length, which is clearly the most efficient disposition.” (A beautiful argument that cannot be beaten, except that its counterargument may be unbeatable too. This reminds me of Pantagruel’s back-and-forth with Panourge, regarding the pros and cons of marriage. To each pro-argument Pantagruel replies, “So, marry!” To each contra-argument he reacts, “So, don’t!”)

And here is the proof. Adam Smith himself frequently warns in The Wealth of Nations about how the invisible hand can lead to disastrous outcomes. Apparently, our laissez-faire providential remedy may become a killer poison just like that, unless the physician big government comes to the patient’s rescue. For instance:

“In the progress of the division of labor, the employment of the far greater part of those who live by labor, that is of the great body of people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are, perhaps, always the same, or very nearly the same, has no occasion to exert understanding or to exercise invention in finding out expedients for removing difficulties, which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment that concerns many even ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigor and perseverance in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society this is the state into which the laboring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it.”

…Bravo, Panourge! Bravo, Pantagruel!!!