Even though the metaphor is only touched on lightly here, in Wealth of Nations, Adam Smith says, in a chapter on tariffs -
"By restraining, either by high duties, or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home market is more or less secured to the domestic industry employed in producing them...By preferring the support of domestic to that of foreign industry, he intends only his own security; and by 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."
In Smith's example, the invisible hand is something that is working in the market against free trade between countries.
Yes. The "invisible hand" reference in Wealth of Nations is probably the most egregiously misused term in history. It's only mentioned once in the entire work, and as you point out, the context is completely different from that to which it is usually (and incorrectly) applied.
The phrase is commonly used to promote the idea that markets are self-regulating, requiring no state oversight, because they supposedly trend toward some form of equilibrium. In reality they do no such thing, for there is no equilibrium to trend towards.
Smith's specific example is somewhat dubious given the tendency of corporations to off shore work to cheap foreign locales or purchase from foreign suppliers. It actually winds up being governments and not individuals who acknowledge the necessities of protecting domestic industry from foreign competition. For market actors (individual consumers to big business) the short term price advantage winds up dominating the self interest calculus rather than consideration of potential long term ramifications of being dependent on foreign producers.
Regardless, this passage (if you expand it a bit) most concisely sums up one of the main themes of the book, which is why it's so often cited. The main takeaway here being that intentions don't always match outcomes. Governments often intend to improve society by intervention but make things worse. Free actors don't intend to improve society but often do so anyway (as an aside, despite this, Smith is actually LESS laissez faire than many expect).
Shortly after where your quote ends he makes this clear, "By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." This is reiterated in various ways as I recall and he's merely trying to apply it to this specific topic of importation here, though in hindsight what he considers the outcome of the self interest calculus is a bit wrong.
Still, market actors acting in their own self interest of foreign trade do indeed produce the unintended consequence of enriching those trading partners.
The self-interest is probably the wrong focus. If you took a million prople in a society and asked that what was in their best interest then you'd likely get similar policies to many modern democractic socialist states, since that's effectively what they do in elections.
If you asked a King or CEO or aristocracy or other small concentrated power what was in their own selfish best interests then you'd end up with slavery/fascism/exploitation like we have through history.
So really its more about distribution of power, since peoples ability to bargain and/or resist co-oercion is reflected in their power/wealth and most of the market power theories rely on distributed wealth while proponents actually work against this.
Attempting to derive moral prescriptions from an interpretation of evolutionary behavior is bizarre, and I doubt the author would be willing to be internally consistent in such a practice. For example, the universal subjection of species to parasitism and predation have driven many advantageous genetic modifications, but I hardly think the author would make a public claim in support of enshrining parasitism and predation as moral principles.
I find that advocates for these kinds of socially-based moral systems have never offered a way by which they, personally, will suffer for my benefit. Rather, it's always posed as a justification for why I, personally, or some illusory other, will be made to suffer for the author's benefit. It's tiresome.
The author believes that if we act unfettered, in pure self-interest the whole of society will suffer. But his cure seems to be to set commissars and mandarins above us to regulate and modulate our behavior. Luckily for us these high priests will not suffer from the same foibles of ambition, greed and self-interest that the rest of us do.
I don't believe things are anywhere near ok, and I think most people would agree with that. But the article in question is a high-minded discussion of ideals.
I would personally consider the definition of cooperation to be explicitly voluntary.
The Aztecs believed that by ritually sacrificing their fellow people that the needs of the many would be met at the expense of the few. Because this was belief universally understood to be true, anyone who did not want themselves to be sacrificed would be considered selfish and anti-social.
A socially-minded morality would insist that people to be sacrificed had a social duty to do so.
An individually-minded morality would insist that people should only be sacrificed by their own choice.
I don't believe either description to have much to say about the morality of human sacrifice or the practicalities of cooperation.
I think that the evolutionary-psychology from whence human sacrifice was born (I can save food for the winter -> sacrificing things in the present can improve my future -> sacrificing is a good strategy in general) has not left the human psyche. You can remove human sacrifice from the religious idols on the mountain, but you can't remove the impetus to sacrifice other people for a perceived gain.
I honestly can't provide you with a perfect moral or economic system. I just don't believe anyone else can either, so it's best not to force other people to go along with anything.
You know, I just imagined someone being held in custody by the police. Such a person would be described as 'cooperating' if they were not actively resisting. So, perhaps the understanding of cooperation must also include subjugation. English can be odd.
Another example: conscripted soldiers routinely cooperate with one another. Without the conscription and ongoing threats of punishment for desertion, most of them would, presumably, choose not be there at all.
As an economist, I strongly believe this is a strawman argument. Economists have studied cooperation for decades. Methodological individualism that the article mentions is not an assumption that everyone is waging war against each other, and the war against each other does not follow from methodological individualism. Game theory was interested in cooperation, especially across many time periods, for as long as it existed. Avner Greif has done amazing work on the rise of cooperative institutions. These things are a part of standard curriculum for any economics major (although maybe not a 101 class). This is not to say that economics is free of issues, but the claims of the article reveal that the author has no idea about what economists care about and have cared about for decades now.
Two thirds of the way through this all I could think of was “strawman”. He talks about the invisible hand but doesn’t even namecheck Smith or his central thesis.
If he understood that, he might understand that Jeff Bezos got rich not by exploiting people but rather by improving people’s lives
More effective exploitation of labor is a competitive advantage that lowers costs and thereby increases profits and/or allows for lower prices. Exploitation of workers and value delivered to consumers are entirely compatible.
Also, Amazon uses (used? it might have stopped) its influence to prevent sellers from selling things cheaper off Amazon, meaning the Amazon tax gets applied to the product everywhere – reducing consumer incentives to buy things without Amazon. This is neither exploitation of labour nor delivering value to consumers.
If Amazon were uniquely exploitative, why would anyone work there? In the US, the number of available jobs has regularly outstripped the number of unemployed, which is to say that there is no shortage of jobs--and yet folks are choosing to work at Amazon rather than any other alternative. The most straightforward explanation for this would seem to be that working at Amazon is the best option available to people who work at Amazon, which doesn't seem to be compatible with the idea that Amazon is somehow uniquely exploitative. .
So Amazon is exploitative, even if they're the best option available to workers... because all employers are exploitative? This isn't an argument against Amazon at all--you're just bellyaching about "the system".
> If he understood that, he might understand that Jeff Bezos got rich not by exploiting people but rather by improving people’s lives
The catch here is that it was a marginal improvement for some people, not everyone. Before e-commerce took off, there was a lovely amount of serendipity going out to pick up an album or even a new graphics card. I'd run across buskers, parades, protests, weird little shops I had no idea existed, and had great conversations with perfect strangers. Now the whole experience is so efficient that it has disappeared entirely. Something of value is being lost when tens of thousands of small business are shuttered and replaced by a single corporate entity with enormous power and leverage over their competitors.
A web page is never going to compare with the amount of information and variety I can experience in person. Their "recommendations" are simply not as good as the advice of a small business owner who used to help me pick out what I was looking for. I spend so much time researching before I buy, because I can't judge the quality of a product by looking at an image of it. Instead of the old model of trusting a local expert, I have to now become the expert for every single category of thing I buy.
(Also, Amazon's employees are definitely exploited, and that's absolutely one reason why he is wealthy. The first thing they did when they bought Whole Foods was cut pay and benefits.)
Small businesses and serendipity were largely crushed before Amazon became dominant.
Albums were bought at Best Buy, graphics cards were bought at Fry's, books were bought at Borders, tools were bought at Home Depot, groceries were bought at Kroger... (or sometimes they were almost all bought at Walmart or Target instead of any of those!)
Bezos was rich before the next-day-everything-fulfill-as-fast-as-possible push of the last decade. What did the warehouse environment look like back then? It won by doing better, but unforunately that alone isn't good enough, you have to FOREVER get more and more efficient, so the market demands exploitation at some point.
How much do you think his salary and stock grants would do for the employees if it was distributed? Less than a dollar a year. He could sell all his equity and give a one time bonus of 10k and then they would be in the same boat. He could give all of his stock to the company, and they could get $1,000 a year in profit sharing. Less than half of the profit is in retail, but maybe that's closer to $500 a year
it's very much a trade off. I too remember going to independent record stores when I was younger. every once in a while, I got into a cool conversation with someone who worked there and discovered a new band. much more often, I left empty handed because they didn't have the specific album I wanted. I didn't have particularly obscure taste; it's just not practical for a small shop to stock every single album that exists.
if you want someone to pick a reasonably good example of X for you or if you actually enjoy the experience of shopping, then yeah, amazon sucks. if you want a specific thing, amazon is pretty much the best store ever; if it's out of stock on amazon, it's probably out of stock everywhere else too.
It goes beyond that. Did everyone forget mail-order catalogs? Even up into my early teens, we would regularly receive them. One could mail-in (or phone-in) orders for a similar variety of goods as is available on Amazon (relative to the number of goods generally available in the American market). I understand that they're still common for enterprise, if for little else as marketing. Amazon's advantage over those is not so large, and the caveats involved in using it make me wonder about the net utility - especially now, as the politicians whose Amazon's success has enabled have badly damaged our postal system and drastically slowed the delivery of goods not available at a local distribution center.
That is not to say you can't get rich without improving lives, or that that you can't get rich explicitly by harming people's quality of life.
There are countless cognitive exploits such as short term thinking that people can take advantage of, in addition to outright fraud and abuse.
These are valid questions to ask, but my personal view is most of those making the claims aren't showing their work, just positing they are true.
When the claim is that a millions amazon workers and contractors plus hundreds of millions of customers are acting against their best interests, you need strong evidence.
Or, all the people who did the work to make it possible to sell things over the internet made peoples lives better, and then a Hedge Fund manager figured out how he could take a 200 Billion dollar cut as a middleman.
Homelessness? Yes, sort of. I have family who work at a distribution center. They work under conditions that I couldn't contend with at a similar facility and which quickly drove me out. I don't know how they manage psychologically with late nights and stringent scheduling; they only manage economically with help from other family.
Amazon is, without a doubt, exploitative. And it's quite annoying to have someone, whose only contact with them is as a consumer and quasi-client, to be so adamant that they aren't.
> ...the author has no idea about what economists care about and have cared about for decades now.
While scientific progress may advance one funeral at a time, some "zombie" ideas are rather more tenacious.
To your point, a nod to more contemporary behavioral economic schools of thought would be useful. As would pointing out how rhetorical economics has not kept apace.
If an entity needs to cooperate to survive, it is selfish to cooperate. I feel like the author, like many other critics of economic theory, have not fully understood economics.
Also, the selfish gene metaphor was misleading in the sense that it is of course nonsense to ascribe any kind of motivation to genes. I think it was useful to break a common misconception, that evolution would work for the benefit of the individual.
If I were to list a dozen behaviours, such as "gives to charity", "moves all income to offshore accounts to save taxes", etc, you would probably be able to sort them into "cooperative" and "selfish".
So those are well-defined categories. That one might just be a detour to the other doesn't seem to be relevant.
And, of course, the problem is that, far too often, fans of economic theory make the opposite mistake, and consider cooperative behaviour as a failure of rationality, when in reality they are just not thinking it through to the end.
This misses the point, as does the original article.
In the economic framework, "selfishness" just whatever personal objective a person is optimizing for.
Cooperation is tactic for achieving "selfish" goals, and not necessarily at odds.
People donate to charity in the pursuit of what they personally value.
I agree that some "fans of economics" make the mistake of viewing outcomes that don't increase a personal bank account as irrational. Well respected economic thinkers clearly understand that people have other goals in life. On the flip side, "critics of economics" make the opposite mistake, thinking that values in life besides maximizing your bank account are at odds with economic theory.
It depends on what level you look at. Cooperation between individuals in a company could be for the selfish gain of the company. Cooperation between entities like companies can be for the selfish gain of even larger entities like nation states. Cooperation between nation states, e.g. members in the EU, can be for the selfish gain of the group, at the expense of states outside the group that get second class treatment.
If an entity is made out of smaller constituents, it needs cooperation in order to be selfish.
My formulation is just as correct as the standard economics one, but not as misleading, because it rightly implies that you are part of/made of larger and smaller entities, whereas the economics formulation falsely implies that you are an independent entity, capable of pure selfishness. If one cell in your body is selfish, that's called cancer and you die.
Somatic cells are clearly exploited by their reproductive cell masters and the collaborator brain cells. They are worked to death and expendable. If they step out of line, they are relentlessly hunted down by the boot-licking immune cells. The labors of their work are taken from them, and they are given the bare minimum to survive, until they are no longer of use and they all die.
Yeah it totally lost its way by the end where the analogy to biology is thrown out the window:
> [...] And we need coop-cop regulations of selfishness at every level to avoid parts harming their needed wholes. Otherwise, harsh karma awaits as our co-fate for allowing a plague of parasitic plutocratic plundering.
One of the examples given in the article is the prisoner's dilemma.
They present it as a celebration of "rational" yet self-defeating selfishness.
There's a lot of crazy things said in and by economists, but I dont think I've ever heard anyone actually claim that.
What it is useful for, what it "predicts", is that even perfectly, better than humanly-possible, smart people can still find themselves in situations where they can't get the best outcome for themselves by doing whatever is best for them alone.
The general conclusion and recommendation that arises is to implement some kind of meta-regulatory framework to ensure that the more desired outcome arises.
And indeed, we see exactly that in situations like criminal gangs, that co-operate to punish those that "snitch" and so solve the dilemma. The evolutionary coop-cop things mentioned are other examples.
Because the ideal and reality of the "prisoner" part so often diverge, I generally prefer the example of trying to do a drug deal or spy swap. You have something they want, and they have something you want. But unless theres some guarantee you wont be ripped off, then the profitable to both trade won't happen.
As many pointed out this is flawed at the root. The author talks about examples of cooperation in nature and then says "oh too bad the economy isn't like that."
(a small heuristic I can't help but share, I looked up the author and he's one of these people that hasn't figured out how to rotate an image so his face is sideways in his twitter profile)
A little nuance or just thinking would reveal understanding and functioning of cooperation within an economy. In fact, the economy is a cooperation machine.
The classic example of the butcher, the baker and the candle-stick maker who each "happen" to product things that the other 2 need, so that the 3 of them are jointly much better off is cooperation in its purest form.
On a national level, economists "prefer" peaceful trade to war-time adversity. Good trade helps each country be better off (this is just the baker/butcher example magnified) which again is cooperation being used to benefit humanity.
Now, companies. Google as a company is "worth" what is because it creates more than the individual employees could have on their own. Google creates value by creating an opportunity for them to cooperate well and is rewarded for it. A company is a cooperation machine.
Even in relationships that are in some way zero-sum (what I pay my producer or what I charge my consumer), smart businesses are "long term greedy" meaning that they don't go for the opportunity to starve out their suppliers or consumers, instead they let them keep the margins they need to sustain the relationship long term.
Now obviously, like nature, economies deal with competition. If my town can only support one bowling alley but there are two, the alleys compete to survive, same as animals compete to survive if their environment requires it.
The author is basically disingenuous or silly because he takes two things that are basically analogous (competition for resources and survival in nature and in the economy) and contrasts the cooperation examples from one to competition examples from the other, which is as pointless as it sounds.
One instance of this misunderstanding that comes to mind is the feverish insistence of some people that "corporations must always act in the interest of shareholder value" and the idea that anything else quickly lands decision-makers in jail. That notion takes the principle that capitalism allows selfish interests to also work for the greater good, and turns it into a religion, where any attempt to directly act with non-selfish motivation is considered a moral failing.
Any actual CXO knows full well that it's rarely obvious what's in the shareholders' interest, that they have rather large discretion and, in a worst case, can always invoke some positive PR value of whatever altruistic decisions they take. As for criminal or civil liability, there has been like one case concerning this idea in the history of US corporations.
You seem to misunderstand the point of maximizing shareholder value. If the managers of a company behave in a way that troubles the shareholders, a lawsuit is a very inefficient way to go. You simply take your capital elsewhere.
What capital is that shareholder taking elsewhere?
Once a company has sold a share, it no longer has much direct interest in the value of that share on further transactions (much like a publisher only gets value from the first sale of a book, all other sales of that same book produce no value to the publisher).
Sure, further share sales may become more difficult, but that is a distinct effect.
Saying that evolution necessitates cooperation is actually similar to saying economics 'necessitates' cooperation. Single companies (organisms) end up cooperating internally to compete with the unforgiving environment of free market. Additionally over long periods of time certain companies will form mutually beneficial symbiotic relationships to survive. In general capitalism and evolution are both much more about survival than cooperation, and when cooperation does emerge it is a means to an end rather than the end unto itself.
> Every viable bio-social contract in multi-cellular organisms must enforce this rule: The health of the whole must trump the self-interest of any part. Otherwise, the parts become parasitic, gaining at the expense of the viability of the whole. Unregulated parts can kill their wholes.
This sounds suspiciously like an argument for totalitarianism.
It's also unnecessary for all regulation to be from governments. Regulation is a the result of feedback mechanisms (monitor and respond) which can include quite a few things. There are natural feedback mechanisms like the consequences on the environment or ecology (overfishing). There are market feedback mechanisms like price pressure. There are internal to the organization feedback mechanisms like when companies skip investment into maintenance and find their factories blowing up or simply not operating for hours, days, or weeks at at time.
Even in his worst-case apocalyptic scenario, by his own definition, you'd have a world full of individuals living their best, happiest, most free lives while the poorly defined "whole" is suffering (somehow?). If "society" is faring poorly but each and every single individual member of it is doing great, then maybe that view of "society" isn't something that needs to be nurtured.
"By restraining, either by high duties, or by absolute prohibitions, the importation of such goods from foreign countries as can be produced at home, the monopoly of the home market is more or less secured to the domestic industry employed in producing them...By preferring the support of domestic to that of foreign industry, he intends only his own security; and by 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."
In Smith's example, the invisible hand is something that is working in the market against free trade between countries.