Free market

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The Devil’s Advocate


In which the curmudgeonly old sod puts the world to rights.

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The magic of Adam Smith’s invisible hand is an articulation of The Wisdom of Crowds, where acute wisdom emerges form the collective actions of a multitude every one whom personal experience declares to be profoundly stupid.

But the wonder is not how common good arises from an aggregation of self-interested actions — game theory explains that quite neatly — but how gigantic organisations operating in that unforgiving environment can survive, scale and thrive when they are populated and managed by men and women who should be flattered to be called only mediocre.

The JC’s elaborate theory of how the entire free market system functions so effectively is this: It happens more or less by accident. This is not original, by the way. This was Adam Smith’s original point, in 1737.

“...Though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements...They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species[1]

See also

References

  1. The Theory of Moral Sentiments (1759) Part IV, Chapter 1. (Emphasis added.)