by Thomas R. Wells
“[B]y directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention….By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.” (Adam Smith, The Wealth of Nations, IV.2.9)
Invisible hand ethics has long since conquered economics. We no longer worry, as theologians did (they still do – but we don’t listen anymore), about whether it is ethical for businesspeople to make a profit beyond what they deserve for their work; whether prices should be proportionate to people’s ability to pay; whether a life of money making is a good one. The duty of the businessperson – as taught in every business degree, magazine, and TV gameshow – is to help her company win the game and take home the profit prize.
The idea of moral desert is still there. But now merit is decided by economic outcomes (price and demand), not by the moral inputs (the character or intentions of those concerned). Economic ethics has been outsourced to the markets. It is now a property of the system rather than of individuals.
Invisible hand ethics has spread. It can now be found far beyond the economic domain, especially in the professions organised around antagonistic competition, such as politics, science, sport, academia, law, and journalism. Lawyers strive to tell the story that best suits their client’s interest; scientists race to make discoveries first; politicians compete for votes so as to gain power; etc. The invisible hand is supposed to transmute this aggressive pursuit of self-interest by individual players into values like truth and justice and prosperity. For example, competition between politicians keeps them subservient to the people and encourages a vigorous public debate about where our society should go. Thus, democracy.
Before explaining my worries about invisible hand ethics I should acknowledge the power of a system approach to the practise of ethics. If everyone had to do due diligence beforehand about the nature and effects of every action much less would get done. We are not very good at figuring out the extended effects of our actions. Nor are we very good at investigating the facts behind the choices presented to us. Even very religious people who organise their lives around moral prohibitions must rely on systems (such as kosher/halal certification agencies) to navigate all the choices thrown up by modern life. When properly set up and understood, invisible hand ethics can dramatically enhance ethical performance. Unfortunately those conditions are increasingly absent.
Smith’s original invisible hand simply describes the phenomenon that in some kinds of cases, such as under certain kinds of competition, our actions can result in unintended (but foreseeable) benefits for others. As Smith was well aware, however, there are also plenty of mechanisms by which people can generate unintended but foreseeable harms on others. For example, individuals leaving their litter behind them on the beach, or over-using antibiotics, or borrowing more money than they can afford to pay back, can all generate a net cost to society.
Whether one ends up with social benefits rather than social costs thus depends on the mechanisms at work in any particular case. If one wants to ensure social benefits then one has to make sure that the system is set up so that positive mechanisms dominate negative mechanisms, and maintain the system to make sure that it doesn’t degrade over time. This is why Adam Smith made his deistic reference to a providential ‘invisible hand’ that had so arranged things that they turned out for the best. In mainstream economics this role is played by an independent regulator with (direct or delegated) governmental powers.
Such a regulator is necessary because the system cannot govern itself and is fundamentally unstable. This follows from the direct contradiction between the motives of the economic actors (corporate profit) and the goals of the system (net social gains to the ordinary people). Rules are needed and must be continually recalibrated to promote social benefits and discourage social harms. For example, companies can make profits by creating new better products or by finding new ways to make the same things cheaper. That creates value for society as a whole. Or they can make profits by eliminating their competition, taking shortcuts with safety, or abusing tax loopholes. That kind of competitive behaviour creates extra problems for society – but from the point of view of a self-interested player of the game, it looks the same.
The first problem is that in the economy and elsewhere we don’t have the regulators we need to make the system work, or else they are too partisan or weak to do much good. The result is that we cannot rely on the invisible hand to convert the personal ethics of winning into a better world for everyone. Often we will end up worse off. This is the underlying cause of the financial crisis that brought about the Great Recession. But also problems as various as mass incarceration in America (prosecutors measure success by sentences); populists’ political innovations of targeting Muslims and truth; the crisis of replicability and triviality in science; the ubiquity of doping in sport; and clickbait journalism.
The second problem is related to the first. Even though the invisible hand works poorly if at all across all these different areas of modern life, we still act as if it does. When I teach business students I am astonished by their faith in the market to fix all problems and turn corporate self-interest into gold. (I am also astonished by the selfless loyalty they aspire to show to their future corporate overlords. Milton Friedman has a lot to answer for.) But they are not alone in their naiveté. Many academics still believe – or at least, they believe that they believe – that a journal publication is in itself a contribution to human knowledge and civilisation. They seem to have avoided thinking through the hard statistical fact that most published articles will never be read by anyone (or at least, no one who considers them worth citing).
No wonder the invisible hand has broken down everywhere. We have forgotten how it works, and how much care and effort it takes to keep it going. It has become taken for granted, like the internet or indoor plumbing. In keeping with its own principle, we have outsourced our understanding of how invisible hand ethics works. We assume that we can just get on with doing the things that suit us best – like seeing if we can make the H5N1 virus airborne to achieve a high prestige publication or selling people’s personal browsing histories to advertisers – and the system will somehow turn it all into gold.
The third problem is related to the second. The kinds of work where ethics has been outsourced to the invisible hand used to be called vocations – something one feels inwardly called upon to do. Now the ethical character they model increasingly resembles that of the businessperson. Winning is all. Good lawyers are the ones who win cases; good academics win prestigious positions at places like Harvard; good politicians win elections; good athletes win medals. Other values – such as personal honesty, or curiosity – are squeezed out by the relentless competition that powers the system. The slogan of our time is the rationalisation: If I don’t do it, someone else will! The proliferation of codes of conduct in recent decades demonstrates this enormous failure, and how far we have fallen.
The system we have created does not ensure ethical outcomes because it has replaced ethical motivations with incentives – and has failed to keep those incentives lined up with good outcomes for society. Training individuals to be interested only in what it takes to win is removing our ability to recognise and act on our moral responsibilities to each other. This is a recipe for personal corruption and social disaster.
Thomas R. Wells is a philosopher at Tilburg University in the Netherlands. He blogs on philosophy, politics, and economics at The Philosopher’s Beard.