Adam Smith used the metaphor of the invisible hand to describe how markets should function: With everyone at liberty to pursue self-interest, the market omnisciently distributes goods and capital to maximize the benefits for all. Since the Reagan administration, that idea has weighed in as a veritable holy commandment, with the economist Milton Friedman cast as Moses.
As the cold war ended and Communism retreated, the invisible hand seemed to monopolize economic thinking. Even China, controlled by a nominally Communist party, has blessed private entrepreneurs and foreign investment. In Latin America, the International Monetary Fund financed governments that embraced market forces while shunning those that were resistant.
But now the invisible hand is being asked to account for what it has wrought. In this country, many economic complaints — from the widening gap between rich and poor to the expense of higher education — are being dusted for its fingerprints.
Tuesday, January 01, 2008
Dusting for the Invisible Hand's Fingerprints
A sensible, balanced piece from Peter Goodman in Sunday's New York Times: "The Free Market: A False Idol After All?" Here's a snippet: