

There Is No Invisible Hand - gruseom
http://blogs.hbr.org/cs/2012/04/there_is_no_invisible_hand.html

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tgrass
Paul Ormerod makes a similar argument in Why Most Things Things Fail: that the
economy is a dynamic system, therefore any theory that rests on an assumption
of a static equilibrium will not reasonably approximate reality.

It seems though that most economists rarely talk about the invisible hand.

There seems to be more talk of 'emergence'.

Personally, the use of the term 'invisible hand' seems to be increasing, but
it seems, in my opinion, to be coming from those who oppose free(r) markets.
And it seems to muddy the waters as it is based in metaphor.

Classic liberal economists seem to agree that yes the system is dynamic, that
it can rarely be predicted with the tools we have now, and that the best way
to communicate the needs of the market on both the supply side and consumption
side is through an unfettered price signal.

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tgrass
"Believing far too credulously in an invisible hand, the Federal Reserve
failed to see the subprime crisis coming."

I assume he is stating the Fed believes in a stable state.But the Federal Open
Market Committee meets 8 times a year to evaluate the interest rate, which is
in constant flux at their hand:
<http://www.moneycafe.com/library/fedfundsratehistory.htm> That seems hardly
like the activity of an actor who believes they are in a stable environment.

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dm73
The absence of an invisible hand is caused only when it is wiped away by the
punching fist of the government. Whether it is by artificial money out-of-
nothing, by regulations or by expropriations and controls. Mr Schliefer is an
excellent example of the "intellectual class"
([http://www.caseyresearch.com/cdd/doug-casey-pseudo-
intellect...](http://www.caseyresearch.com/cdd/doug-casey-pseudo-
intellectuals))

~~~
freshhawk
"The absence of an invisible hand is caused only when it is wiped away by the
punching fist of the government"

I assume you have some evidence of this and it's not just based on ideology
since that would make you a pseudo intellectual. You should pass that evidence
on to economists, they've been looking for it everywhere.

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dm73
Well, I think my view is pretty rational, I don't see it based on ideology as
such. It's more the other way around: because by studying economic history,
and economy in general, I became convinced of the values of (personal)
freedom. But, to give some evidence that a stable equilibrium can occur: In
the times of history when the free market determined what money was (precious
metals), prices remained stable, sometimes for centuries. But once a
government starts to interfere with debasing the money by law until it has no
intrinsic value anymore, and keep printing it (so the same amount of goods &
services are chased by more and more currency units), you can't have actual
price information anymore. It's like measuring a distance with a yard stick
whose units increases logarithmically in time.

~~~
freshhawk
Sure, but there were a lot of other things that remained stable/stagnant as
well as prices. Like most measurements of progress or quality of life.

Your view isn't irrational, but if it's not based on ideology and it's not
based on evidence then what is it based on? (hint: its actually ideology, it
just doesn't feel that way because it's not an insane belief and it's a
popular one)

