The Butcher, the Baker, and Bain?

The Invisible Hand (courtesy of

The Invisible Hand (courtesy of

. Old adages die hard. Just consider the longevity of Adam’s Smith characterization of the self-regulating market as an invisible hand in his classic work, The Wealth of Nations. As Smith opined, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

This sentiment, a persistent trope reverberating from one generation to the next, has become a center-piece of the American ethos as well as a mainstay of the Republican party. Nowhere is this more evident than in the on-going Republican electoral campaign. Thus, it is only by invoking the mantra of the invisible hand that Romney can criticize President Obama’s economic strategy, and get away with it, without having to lay out a strategy of his own. He claims to have the magic formula! So, instead of policy ideas, we hear the old refrain, “what’s good for business is good for the country,” or as updated by Romney, “What’s good for Bain is good for the economy.”

The Tooth Fairy  (courtesy of

The Tooth Fairy (courtesy of

Call me a skeptic, but having faith in the invisible hand today seems no different to me than believing in the Tooth Fairy. After all, no one can seriously claim that bankers, investors, and equity firms, such as Bain, were not pursuing their own interests when the economy went belly up. How else to explain that big business magnates increased their wealth dramatically in the wake of the 2008 recession, while those lower on the rung experienced calamitous losses. But this begs the question: if businesses were doing what they are wont to do, why then did the market fail to regulate itself? Might this be black magic?

Perhaps is is time to forego the rhetoric of the Republican Party and take a hard look at Smith’s long-standing dictum. To date, neo-classical economists offer little hope in this regard: Try as they might, they have yet to explain how individual actions at the level of the butcher or the baker translate into macro level outcomes, whether good or bad. Fortunately, some nontraditional economists, viewing the economy from evolutionary and complexity perspectives, have provided some promising new insights.

Robert H. Frank, in his book The Darwin Economy: Liberty, Competition, and the Common Good, addresses the issue of the invisible hand head on. As he contends, Darwin’s evolutionary theory, especially as it relates to the role of competition, is far more accurate about the nature of economic life than Adam Smith’s account’s in The Wealth of Nations. In Frank’s words:

When the ability to achieve important goals depends on relative consumption, as it clearly does in a host of domains, all bets regarding the efficacy of Adam Smith’s invisible hand are off. Notwithstanding the uncritically enthusiastic pronouncements of many of Smith’s modern disciples, unbridled market forces often fail to channel the behavior of self-interested individuals for the common good. On the contrary, as the pioneering naturalist Charles Darwin saw clearly, individual incentives often lead to wasteful arms races.

Combining the wisdom of evolutionary and complexity thinking, economist, Erik Beinhocker points out that the equilibrium outcomes, associated with the invisible hand, are entirely unrealistic. As he notes in his pathbreaking book, The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics, the economy is not a static phenomena, but rather a dynamic, complex adaptive system, which is subject to oscillations, power laws, and phase transitions. Moreover, outcomes, as traditional economists would have us believe, are not the product of predictable linear processes; instead, they emerge from the bottom up as the result of the constant interactions and adaptations that take place at all levels of the system. Hence, policy interventions–be they Republican or Democratic–may play a role in determining outcomes, but they are only one factor in a myriad of influences on the economic system.

rough_seas (courtesy of

rough_seas (courtesy of

When the economy is conceived in complex, evolutionary terms, the present economic crisis makes a certain amount of sense, unpleasant though it may be. However, what makes no sense at all, given the complexity of the economy, is to blame Obama for the present state of affairs, as Romney so flagrantly does. To the contrary, in times such as these, when the seas are rough and the future uncertain, what’s needed is not someone like Romney, who flips and flops floundering with the waves in the hope that equilibrium will naturally follow, but rather a captain, such as Obama, who will be steady at the helm and stay the course.

13 thoughts on “The Butcher, the Baker, and Bain?

  1. business daily

    Elsewhere in The Theory of Moral Sentiments, Smith has described the desire of men to be respected by the members of the community in which they live, and the desire of men to feel that they are honorable beings. While Smith does not mention these social pressures in the above-cited discussion of the invisible hand, one might infer that the selfish and proud landlord hires servants in order to feel himself respected, and displays his wealth in a fine palace in order to gain the respect of others. In this sense, the invisible hand is in its first stage, a sort of system of social pressure that persuades the wealthy to do, of their own volition, what the society around them requires.


    “The Butcher, the Baker, and Bain? | Exploring Interdisciplinarity” ended up being truly pleasurable and enlightening!
    Within the present day society that’s difficult to do. Thanks a lot,

  3. unintentional weight loss after gallbladder surgery

    This is definitely a practical and convenient way to lose
    pounds for individuals that will always be for the go.
    It’s the mental picture you have of how you think that you peer to others.
    By monitoring the amount of calories you are
    consuming the whole day you will know the volume of calories you
    might have already consumed and the way a lot more you might be allowed to have at any point within the day.

  4. vacation breeze

    The Rufous-tailed Hummingbird is about four inches long and weights only one-fifth
    of an ounce. Like everything else I considered important in my life (i.
    Some people prefer a hands-on boating experience, while others enjoy the luxury feel.

  5. meilleurs lisseurs 2015

    Good post. I learn something totally new
    and challenging on sites I stumbleupon on a daily basis. It’s always useful to read articles
    from other writers and practice a little
    something from their sites.

  6. Paula

    I feel this is one of the such a lot significant info for me.

    And i am happy studying your article. But want to observation on few
    common issues, The web site style is wonderful, the articles is in point of
    fact great : D. Good activity, cheers

  7. systemkamera test 2015

    Hey there I am so excited I found your blog page, I really found you by accident,
    while I was researching on Aol for something
    else, Regardless I am here now and would just like
    to say thank you for a tremendous post and a all round interesting
    blog (I also love the theme/design), I don’t have time to read it all at the moment but I have
    book-marked it and also added your RSS feeds, so when I have time I will be back to read a great deal more,
    Please do keep up the great work.

  8. Jerome

    Hello, i feel that i saw you visited my blog thus i came to go
    back the want?.I’m attempting to in finding things
    to improve my web site!I guess its good enough to make
    use of some of your ideas!!

  9. три дня в одессе 1080 в хорошем качестве

    What i don’t understood is if truth be told how you’re not really
    a lot more well-preferred than you might be right now. You’re so
    intelligent. You already know thus considerably in relation to this topic, made me
    individually imagine it from a lot of numerous angles.
    Its like men and women don’t seem to be involved until it is something to
    accomplish with Woman gaga! Your own stuffs excellent.

    All the time maintain it up!

Leave a Reply

Your email address will not be published.