The Invisible hand

What is the invisible hand?

The invisible hand is a concept that explains what force drives market to operate. The invisible hand is the way markets naturally distribute resources based on self-interest of the economic agent.

According to Adam Smith, there is an invisible hand that directs our self and public interests to specific economic destinations in the markets. The kernel force of this process is : the free market. Adam Smith was against restriction of trade. Adam Smith wanted people to compete with one another based on their self-interests. The Invisible hand naturally separates the will and will not of individuals of the society.

Self-interest can also be described in a way where it is not from the benevolence of the butcher, brewer and the baker to slaughter the animal to give us the meat, serve us drinks and serve us the bread out of love and affection for us people. Rather, they slaughter the animals, brew the drink and bake the bread in order to earn their money, feed their families and live a good life in their own way.

The intentions

Adam Smith also argued that when a human being is acting to serve others as part of their self-interest, because say it is part of their life-plan to serve others , could actually be interpreted as being motivated by selfish interests, if ‘real’ motives behind serving or sacrificial acts are ascribed as being selfish – e.g. the assertion that the only reason why a person saves another at risk of harm to themselves is because they want praise and adulation.

Adam Smith wanted us to scrutinize our intentions and ask ourselves the questions such as: Do I go to work for the money? Do I go to work due to the love of others? Do I go to work due to my love for the work or my own self-interests?

The invisible hands lead to the benefits of society without the individuals perceiving that they are benefiting the society. I as a person don’t go and buy eggs due to the intentions of benefiting society. I go and buy eggs because I want to cook my breakfast. The one who breeds the eggs does so to live and earn his money. In this way, both the buyer and the seller provide benefits for themselves and for the society, since they contribute to society in different ways.

According to Adam Smith, Self-interest means that you are seeking your goals and should not always be associated with greed and stinginess.

The perception of self-hood and freedom within the marketplace

We all have the freedom to act in the marketplace. Negative Freedom in the eyes of Immanuel Kant is the freedom from harming the self. Positive freedom in the eyes of Immanuel Kant is the freedom to perfect the self from impurity, positive freedom is willing the good of all, the perfection of humanity.

In the eyes of Immanuel Kant in the marketplace, he could focus on the ‘will’ (conscious, rational reflection and cognitive or mental capacities) and that the will is very separate to ‘experience’ (desires, emotions and the physical or empirical world). BUT both make up a human being.

For Kant, freedom and will is reflected in our reason and morality; whereas, for existentialists freedom and will is expressed in our capacity to go beyond reason and morality.

According to Kant, we must make rational and moral decisions in the marketplace. We must think many steps further in order to reflect upon our choices within the marketplace, which will affect the society and the world we live in, whether they are social, economic or environmental consequences.

A central part of Kant’s claims is that our ‘free and rational self’ must exist metaphysically – i.e. as a unitary whole ‘behind’ our experiences of our ‘physical self’. These experiences include our desires, memories, personalities – i.e. our ‘empirical’ self. If there is no metaphysical free and rational self, then for Kant we would be determined by the ‘laws of nature’ (found in our empirical selves) and therefore would not be free.

According to Friedrich Nietzsche, Selfhood and in individual uniqueness is within our own control. The self is a moving engagement with the world through action and critical reflection.

We as human beings are unique creatures with a unique selfhood. We are unique in our individuality.

According to Isaiah Berlin, we should use and support the negative notion of freedom, where we as human beings are free from external restrictions which can affect our choices. We should be so free in a way, where we must make our own decisions within the for-example marketplace. It is also important to know that there are economic agents in the marketplace which can influence our decisions. Here, it is important not to fall for the invisible hand that can influence you to different social and economic destinations.

According to Hayek, he tends to see freedom as the primary value, but Liberty does not mean all good things or the absence of evils. So, to be free may mean freedom to starve, to make costly mistakes. Instead, Liberty describes the absence of coercion by other people. A slave will not become free if s/he obtains merely the right to vote, any degree of ‘inner freedom’, any degree of luxury or comfort, or any power that he may wield over other people. According to Hayek, choices can be very bad, even though we have the freedom of choice to make our own decisions within the marketplace. A person may have turned eighteen years old and has the freedom to take a driving license and drink until he gets drunk. What freedom will you have / lose if you crash with your car while you are drunk? you will be convicted of drunk driving…

For Utilitarians, they argue that actions are right if they are useful or for the benefit of a majority. They argue that an action is right insofar as it promotes happiness, and that the greatest happiness of the greatest number should be the guiding principle of conduct.

John Rawls criticized utilitarianism, and for him, it undermines the value of social justice as an ‘end in itself’ or as a ‘right’ or ‘duty’ we must perform whether we like it or not.

Utilitarianism also falls into the majority trap, where a majority can be oppressive against a minority. The majority may enjoy oppressing the minority, while the minority suffers much from the majority’s decision. The majority must be rich in the labour market, while the minority is starving to death, and here we have another problem. Continue to reflect on the invisible hand in these different lenses to see how other people would make their decision in the marketplace.

| Amir Zabidi

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