View source for Invisible Hand

[[Category:Libertarian Propaganda Terms]]
[[Category:Common Fallacies Of Economics|100]]
[[Category:Market Fundamentalism|200]]
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{{DES | des = One analogy used by [[Adam Smith]] has been inflated into a full-blown economic mythology.  If there is an "invisible hand", it drives concentration of wealth and power instead of economic equilibrium. There is also a corresponding "[[Invisible Foot|invisible foot]]" that leads to production of harmful externalities. | show=}}
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<!--The invisible hand mythology is allegorical.  What actually constrains markets to be mostly beneficial is the very visible and coercive hand of government.  Government stays the hands of profit-seekering capitalists, limiting their actions to consensual exchanges rather than the coercive or monopolistic exchanges that would otherwise predominate.  Government stays the hands of non-owners from making peaceful use of owner's goods.  Government does this through the institutions of law, property, personal rights, courts, etc.  As consumers, we cannot walk down the street without the knowledge that all the property of others that we view is denied to us by government.  As business people, we cannot threaten nor cheat lest government punish us.  That is why we are constrained to capitalism: no invisible hand, but a very real, public and omnipresent threat if we stray from the institutional norms of capitalism. -->

Why do people prattle about "as if an invisible hand" when it is government alone that visibly constrains the businessmen to mere economic competition rather than the violence, monopoly and theft of mafias?  It is government that visibly constrains the consumer to mere purchase rather than ignoring the system of property and anarchistically using whatever is desired, either peacefully or forcefully.  It is that government coercion that redistributes from the businessman to the consumer a large part of the consumer surplus.  It is that government coercion that allows the accumulation of property that permits civilization.

Incredible, pervasive coercion is necessary to create markets.  Coercive threats are necessary to property: they limit the power and freedom of individuals to use the wealth that surrounds us that belongs to others.  Coercive threats limit the power and freedom of businesses to become mafias.  If this seems like an "invisible hand", it is only because it is all-pervasive like the air we breathe at all times.

An apt analogy for the invisible hand of capitalism is the cattle chute.  Cows are prodded from a truck into the cattle chute and they exit at the slaughterhouse.  There is no prodding in the cattle chute, so you might say that it is as if "an invisible hand" is guiding the cattle.  Yet the cattle's behavior is controlled by the walls of the chute, which are too close together to allow the cattle to turn around, and by the continual entrance of other cattle behind them that forces them to go forward.  This institution brings about the desired social benefit of getting the cattle into the slaughter house.  Our government-created capitalist institutions are similarly restrictive of choices, and there are continual new entrants forcing those ahead of them to keep moving.  Why is it that we think the cattle chute is visible, while capitalist institutions are invisible hands?

According to [http://ngrams.googlelabs.com/graph?content=invisible+hand&year_start=1800&year_end=2000&corpus=0&smoothing=3 Google Books Ngram Viewer], usage of this term has increased threefold since 1960.  This might have to do with increasing promotion of capitalism as neoliberal propaganda.

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