There was a young lady of Niger
Who smiled as she rode on a tiger;They returned from the rideWith the lady inside,And the smile on the face of the tiger.
Pretty much everyone agrees that the driving principle behind private enterprise is profit. Financial profit measured in the coin of the realm, is the common denominator that unifies entrepreneur, executive, and shareholder into a cold and heartless logic of avarice. What economists call the “efficiency of the marketplace” is the same as the efficiency of the jungle predator that stalks and kills its prey unhindered by reflection, compassion, or loyalty. We have come to believe that private enterprise is the perfect killing machine that, when put to some purpose, will do what it does in the most efficient and profitable manner possible.
Born only 150 years ago, the oil hunting-killing beast has grown larger and more efficient at an exponentially increasing rate. Today, BP and other “supermajors” are the largest and most voracious beasts in the jungle. In the quest for more oil, they alone possess the means to hunt and kill oil in the most remote and inaccessible regions of the planet “down there”. In their single minded quest for more, all other concerns are superfluous. Sucking up oil is their nature and we have become powerless to rein them in, even when their depredations threaten to destroy the southern coast of the United States and possibly, much more.
The public enterprise of space travel began about 60 yeas ago. Now President Obama is ceding space exploration to private enterprise. He wants to create a single-mindedly, efficient beast to serve us in the business of exploring and exploiting the heavens. As we become increasingly dependent on space travel technology for crucial activities such as communications, navigation, defense, and as yet unimagined projects, that technology will be the property of the beasts of private enterprise, and as with BP “down there”, when we need most to go “out there”, we will be forced to turn to these single-minded and heatless beasts.
The information highway was born only about 35 years ago. . The Internet is fast becoming the neural-network of a global mind. The bastard child of public and private enterprise, its fate is in the balance. If we cede our minds “in here” to the beasts of private enterprise, they will hold the keys to our global mind, and it will be to them that we will have to turn when the challenges before us demand that we apply our minds “in here” most keenly.
The fanciful idea behind unfettered free markets and private enterprise — Adam Smith’s “invisible hand” — is the law of the jungle, in which we imagine that we can ride on the back of perfect predators, unchained from public regulation and common purpose. Before giving away the keys to “down there”, “up there”, and “in here”, be sure and check to see who’s smiling.
Update
My cyber-friend and colleague, John Hunter, proprietor and author of the “Curious Cat” Blog and commenter on this post, led me to one of his earlier posts that cited an article addressing the problem of riding tigers quite well.
In 2002, Joseph Stiglitz, a Nobel Prize laureate, wrote about Adam Smith’s “Invisible Hand” in is article “There is no invisible hand“. The title says it all. In an amusing twist, Stiglitz opines about the rise ideology of free-market fundamentalism in graduate schools:
“Is it because economics as a discipline attracts individuals who are, by nature, more selfish, or is it because economics helps shape individuals, making them more selfish?”
The answer of course, is that clockwork models of human behavior are attractive to even the most clever of minds. The meshing of gears provides a great substitute for responsible thought and action. Such nonsense was pioneered and exploited by Astrologists and Numerologists. Today we call it “Economics”. Same scam, different name.
Thanks to Hunter and Stiglitz for trying to wipe the smile off the tiger’s face.
Adam Smith did have great ideas on economics. However, those quoting him now often do him grave injustice. Including those that think he argued for an unregulated market. He was first a moral philosopher who looked at emerging capitalism to document how it markets work and detail that direct intervention was often not the ideal solution. Basically taking a systemic view that markets can react better at meeting some societal needs than individuals making decision. http://investing.curiouscatblog.net/2009/01/23/myths-about-adam-smith-ideas-v-his-ideas/
Adam Smith completely understood businesses would seek unfair advantage in the market. For capitalism to work the market must be regulated. In addition, the externalities (pollution, risks…) are failing in the market – and must somehow be addressed for markets to work.
Adam Smith did not believe free markets we the end. He believed the greatest good to society would come when the market was allowed to operate efficiently but that those players in the market would attempt to subvert societal good for their own good and that needed to be managed.
John,
It’s great to get a note from you. I am very aware of what Adam Smith really said and meant and I agree with your regarding his caveats. But his idea of the “invisible hand” is problematic and has been adopted to disastrous effect as ideology and mythology.
From the Wiki: “For Smith, the invisible hand was created by the conjunction of the forces of self-interest, competition, and supply and demand, which he noted as being capable of allocating resources in society. This is the founding justification for the laissez-faire economic philosophy.”
These “economic” forces do not constitute a bounded and therefore predictable system. The factors that undermine the self-regulation implied in the “invisible hand” thesis are confounded by relations of power that result in opaque and/or false informational inputs created by intentional actors.
This is different from rational “self-interest” as implied by Smith, which implies that the rational actor will seek to make an exchange that is most favorable given complete information. Once disproportionate power comes into play, the manipulation of inputs to subvert predictability on the part of one player vs. another breaks the model. Power, in terms of wealth and influence, assures that some will always be able to subvert the system and invalidate the “invisible hand” thesis. Scarcity, competition, and rational action are all undermined by intentional actors with the means to manipulate the nature and flow of information.
When does disproportionate wealth and influence occur?
By any measure, at some point in time half will be above average and half will be below average. Numerous studies demonstrate that this simple fact of variation alone, can and will be, exploited by those who by purpose or by chance, find themselves above average with respect to the determinates of power.
The bottom line is that the idea of efficient markets governed by an “invisible hand” that reflects, on the whole, true value at any given time and place, is simply false. The solution is to reduce variation of wealth with the aim to create a system that is predictable. This condition is necessary for human beings to move on to deal with the real rather than self-created and self enforced problems of survival and quality of life.
Riding on the back of the smiling tiger is an unwise approach to addressing the real challenges confronting the human enterprise.