How Does the Invisible Hand Work?

[WilliamC]

Personally I'm trying to understand it through a combination of game theory, Ramsey theory, and evolutionary dynamics, but that's just because I like making things complicated.

So long as the only coercion acting on individuals is the coercion of nature (i.e. the incessant need to fight off hunger, thirst, fatigue, ill-health, and such) and not the coercion of government, then the vast majority of folks will act more-or-less rationally and peacefully to provide for themselves and their families; only a minority would rather use violence to take from others.

But the minority tends to gain power precisely because they are willing to use preemptive violence and because too many governments restrict the rights of their citizens to defend themselves adequately. Why? because the minority of aggressors are drawn to the power of government and use it to further their own ends of course.

So I think the invisible hand always needs the backing of concealed carry, so that wanna-be thieves and muggers never know who is armed and dangerous and will therefore be much more self-restrained.

Even evil people are capable of responding to respond to rational self-interest.

 

[Xerographica]

Travlyr...can you offer an example of arriving at false conclusions with the opportunity cost concept?

Ok, so you don't understand how Hayek's partial knowledge concept is part of the invisible hand concept. Guess you didn't read the entire article that I shared with you...A Marvel of Cooperation.

You're right...maybe I should create a new topic with a poll. If you don't understand how Hayek's partial knowledge concept is part of the invisible hand concept then you're probably not alone in this regard.

 

[Travlyr]

Travlyr...can you offer an example of arriving at false conclusions with the opportunity cost concept?

The minimum wage law.

In a society that relies on sound money exchange minimum wage laws cause unemployment. That is easy to see because if an employer is forced to pay more for labor than the laborer produces then eventually the losses will drive the employer out of business.

In our controlled economy of unlimited paper/electronic tickets the minimum wage laws do not apply in the same manner. While most economists will still argue that minimum wage laws hamper employment, it doesn't have the same effect. If that was true, then the CEO's would not be making hundreds of $millions for golfing in exotic places with big shots while middle managers are tossing the producing slaves peanuts. Goldman Sachs is a perfect example. Success is all about influence not production.

Ok, so you don't understand how Hayek's partial knowledge concept is part of the invisible hand concept. Guess you didn't read the entire article that I shared with you...A Marvel of Cooperation.

You're right...maybe I should create a new topic with a poll. If you don't understand how Hayek's partial knowledge concept is part of the invisible hand concept then you're probably not alone in this regard.

I do not see how the invisible hand concept can apply to markets if the government has their hand in it.

Everyone values their time, goods, and services differently. Modern day indoctrination programs do not teach negotiation, but producers eventually learn those skills. If steady growth is natural, real money, then eventually prices are determined by supply and demand trade and they become relatively stable.

When growth is planned in secret (The Fed), fiat money controlled markets, then pricing becomes a guessing game. Producers have to rely on unreliable data.

Do you really believe that a home builder, plumber, carpenters, electricians, roofers, laborers, and all the other sub-contractors should perform hours upon hours of physical skilled hard labor to build a beautiful home while the banker steps in at the last moment, does virtually nothing, and takes twice as much money as all the workers combined? Is that what you consider to be the invisible hand?

 

[otherone]

The minimum wage law.

In a society that relies on sound money exchange minimum wage laws cause unemployment. That is easy to see because if an employer is forced to pay more for labor than the laborer produces then eventually the losses will drive the employer out of business.

One could argue that minimum wage laws are essentially price-fixing that cause inescapable under-employment. There is no competition for labor or incentive for workers increase their skills as everyone pays the same. Removing the laws would initially cause wages to decrease, but then competition for labor would result in increased wages.....kinda like the peasant revolt...

 

[Xerographica]

Travlyr, don't minimum wage laws cause unemployment completely irrespective of currency issues?

Again, if the invisible hand wasn't partially working...then it would mean that the visible hand was entirely working. Are you sure you really want to make that argument? Personally...I prefer to think that the invisible hand continues to work despite interference from the visible hand.

 

[Travlyr]

Travlyr, don't minimum wage laws cause unemployment completely irrespective of currency issues?

Again, if the invisible hand wasn't partially working...then it would mean that the visible hand was entirely working. Are you sure you really want to make that argument? Personally...I prefer to think that the invisible hand continues to work despite interference from the visible hand.

The invisible hand is non-existent in a system of unsound money. Think about it. Think about it on your own. Would a free market take Martin Luther King day off? Would a free-market close at 5:00 EST Greenwich Mean Time? Would a free-market take Christmas Day off? The fourth of July? No, free-markets don't care about men or women and their holidays. Laissez-faire free-markets don't even look at a clock.

Currency issues are not the only culprit that causes unemployment, but it is at the heart of it. Regulations play a major role. Nonetheless, please understand the difference between sound money and unsound money.

In a sound money system official regulations are virtually non-existent because people understand that the market is self-regulating. For example, if a firm is polluting the water then they get sued by water users, so pollution is abated by the potential polluter in order to stay in business. Employment remains at nearly 100% at all times because there is plenty of work that needs done in the world and plenty of people to do the work. Since nobody is telling anybody else what they need to pay for goods or services, then everybody is free to negotiate their value to others at free will. Unemployment is not even an issue. If one wants to work, then work.

In an unsound money system (which we've had since 1913) official regulations are very important. Do as you are told to do! If you don't, then go to JAIL ... Go Directly To Jail ... Do Not Pass GO ... Do Not Collect $100 Dollars ... Our money is Monopoly Money ... here are your kneepads. Minimum wage laws are needed to prop-up the Union Wage Demands and for no other reason. The free market closes at 3:00 EST and takes holidays off. Those in charge can even call a bank holiday if they like... at what appears to be random. They can qualify you based on your "history." Do you qualify for a single family home? Do you qualify for an apartment? Do you qualify for grants? Do you qualify for Section 8? Do you qualify for Social Security? Or disablement? Do you qualify for a job? Do you qualify for food stamps? Do you qualify for a credit card? Can you make the grade for College? DO YOU QUALIFY TO LIVE?

Pragmatism has NO place in a system of unsound money. Pragmatism is only valid in a system of honest sound money. Then it becomes very valuable. Very valuable indeed.