Hi everyone! James Call: Expert here, to continue answering reader "Zac"'s questions. See prior posts for my expertly answer!
Standard disclosure, before I continue: I am not really an expert. I am just a cranky guy who reads the paper too often. And I am looking for proofreaders and fact checkers! I do not have the time to provide this service for this blog myself. After all, I am employed! And I have parties to go to! So if you notice any really blatantly wrong shit in my blog, please, call me on it in the "comments" section. I -will- respond, and rectify my mistakes.
Now, onwards to Zac's second question:
Is the "invisible hand" (a metaphor often invoked in arguments favoring free-market capitalism) a theological concept?
In a word, yes. At least, the concept that the "invisible hand" will perfectly allocate resources to create the most equitable and just possible scenario is patently absurd.
There are a few reasons why this is so, but the most pertinent, and one which John Maynard Keynes pointed out quite eloquently, is that information about the market is imperfect. The laws of supply and demand that Adam Smith and whatshisname Ricardo (David?) pointed out ARE laws indeed, although no one has ever really written them in equation form, mostly because both supply and especially demand are somewhat ephemeral. What people are demanding at any given moment might be driven not by personal need but on by the perception of desirability, something we're seeing in the housing bubble (R.I.P.) of today, and as far back as the Tulip Bulb bubble (I'm fucking serious) in Holland of the early 17th century.
The "invisible hand" does work perfectly if you're willing to accept human misery. For instance, a resource rich nation may not want for food or housing supplies; instead, they may want, for instance, cheap tennis shoes. But the labor market of said country may be too well organized to provide cheap enough labor, meaning some market overseas will offer cheaper labor to produce the tennis shoes, driving the domestic labor price down in competition, and producing a global race to the bottom that is very familiar to all of today (or should be).
So the total pursuit of supply and demand does not produce optimal conditions for the worker. In theory, it produces optimal conditions for the consumer, but the big problem is that the consumer is the same person as the worker. In theory, as your wages sink, so will the prices you are paying: wage and price "deflation," a term we don't use that much, but should (and not somthing I'm making up right now, by the way. This is a real fucking term).
Of course, this "invisible hand" depends not only on perfect information - knowingly exactly what people want and exactly who can supply it - but also a totally uninterrupted global trade system, uninterrupted by weather, piracy, or most important of all, politics and resource distribution. If we could wipe clean mankind and start over with a truly classless, property-less global society, we'd STILL have the problem that certain areas of the world would possess more oil than others which possessed more corn, etc.
Of course, then, we'd be trading perfectly, right? Except monopolies are naturally erected to defend select resources, and should corn be in more demand than oil, the oil-owners are a bit over the barrel, aren't they?
Besides, have we ever had a classless, de-stratified society? It was better under the hunters and gatherers I suppose, but ever since mankind introduced agricultural society, which requires the division of labor, there's been inequities within society, inequities which cannot be addressed by the invisible hand, since it will tend to favor those with monopoly power - and these people can acquire and defend their monopoly with force.
Of course, the owners of resources must pay their enforcers and they can't starve their market out of existence, lest they lose all their clout. But they certainly emerge as the winners, which is why Marxism is such a natural response to the "invisible hand". Yes, the "invisible hand" can be said to exist, but it's not a benevolent hand, it's an erratic and shaky hand that occassionally smacks people down for no morally good reason, sort of like the "Master Hand" end boss in the Super Smash Bros games.
Implicit in advocates of "unfiltered" Adam Smith and David Ricardo thought (once again I mention our anti-pal Milton Friedman) must accept a lack of basic morality in their economic programme. It's very much "the strong shall survive, the weak shall die". It's Social Darwinism.
But it ISN'T really the state of nature, and the reason should be obvious. As a species, in addition to the wheel and currency, we humans have invented MORALITY. And the social contract. It's in our genes to, on a certain level, defend the pack from the excesses of the few. Don't get me wrong, it's also in our genes to say Greed is good, Greed works, You got to Live for Yourself, Yourself and Nobody else ♫, but then again, we do have these Golden Rules and Ten Commandments and what not...
And then tends to be because, in collective action, we achieve so much more than we do on our own. Now we all tend to accept this is the case in terms of government - even modern libertarians accept the need for a federal army, for instance. But when it comes to economics, there's this strange disconnect, we must let the "invisible hand" govern indiscriminately, and it will allocate resources perfectly somehow... but note it always takes concerted government action to put true free market policies into place, and note how it's always a disaster...
Really, look to our Articles of Confederation period for a relatively clear example of lack of centralized economic order. Also look to the Gilded Age, although there certainly was governmental interference in the form of land grants to speculators and union-crushing aplenty during this time... you could say that's not an example of an unfettered free market in place. But then, we'd need no government whatsoever to let the hand go free, and that leaves us at the mercy of those who would organize, just like the agricultural societies of yore eventually wiped out the hunters and gatherers.
This is a massive question you've asked and my rambling answer is pretty insufficient. But yes, I would answer decisively that "theological" is a great term for the "invisible hand" concept, because unless there is no central government, or even local government, the market is not truly free, and when is there never any government? Even armed bands of brigands impose a government of some sort. And of course, the invisible hand cannot see what is going on globally on a supply and demand level, so even without government, it's operating in a vacuum of knowledge that's going to lead to errors of resource allocation.
Really this is a pretty insufficient answer to your question. Let's just say that I cannot think of a single example in human history when a totally unfettered market led to anything other than chaos, human suffering, the enrichment of the few at the expense of the many.
RECOMMENDED READING: Well obviously both The Wealth of Nations and Das Kapital, neither of which I've read in their entirety. Beyond that, there is a wealth of literature on this vast subject. The aforementioned Wall St by Doug Henwood goes into the assorted free market "equations" which have been put into practice by free marketers, and the resulting failure thereof; the book explicity makes the point (to which I subscribe) that you cannot separate economics from politics and governance, and the economics is not a science in the sense of chemistry or physics, as it is largely governed by human psychology.