Stephen Colbert and Philosophy - Aaron Allen Schiller [116]
Weird, right? What I’m thinking is that in addition to a worry over Hobbes’s paradox, Smith was aware of this strange biological phenomenon, where the only explanation he could muster at the time of writing The Wealth Of Nations was that invisible hand. Though individuals boinked out of self-interest (it’s just plain fun), the invisible hand was responsible for transforming the boinking into a good for the collective: the number of males lost in war were replaced by the increase in male babies born. The invisible hand works in translating those “exchanges” between individuals made out of self-interest and those exchanges somehow working to benefit the collective. One thing is clear: we should tell those doing the exchanging to get a room—all this exchanging in the marketplace cannot be good for the kids.
For Smith, the good of the collective is understood in terms of economics—the wealth of a nation is its good. The trouble with Smith’s solution to Hobbes’s puzzle (or even that puzzle about an increase in male babies), of course, is that it is not really a solution at all, but is a proxy for one. Nothing is explained by introducing the invisible hand. In fact, it reminds me of an episode of South Park in which gnomes are stealing the underwear of the boys. The boys follow the gnomes to an enchanted gnome city (somewhere in the woods) and ask a gnome why they are stealing their underwear. The gnome is a businessman, and presents the gnome-business plan: Step One: get underwear, Step Three: make profit. The boys ask for Step Two. The gnome draws a blank and asks the Milton Friedman of the bunch. Milty the gnome also draws a blank. There simply is no Step Two, and so how they are to get from collecting underwear to making profit is a mystery. Smith’s invisible hand is like the gnomes’s mysterious Step Two.
The absence of regulation is what Friedman emphasizes when telling Smith’s story. You simply do not need governmental regulation when you’ve got that invisible hand doing all the work. Here is where another (slightly different) definition of the “free market” arises:
The market in which a participant is not bound by regulation is a free market.
This is different from the first definition insofar as it does not have anything to say about who gets to participate in the marketplace. According to this second definition, the market is free in the sense that trade between participants (assuming we have already settled who gets to participate) is not limited by any restrictive laws. Even so, economists look at the completely unregulated market as only an ideal, and recognize that a market can be said to be “free” even if some regulation limits it. The fewer the regulations, they say, the freer the market. Competition is fostered in a market that is limited by as few regulations as possible. Increase regulation, and suppress competition. Regulation, say these free market worshippers, keeps sellers from taking risks—it keeps them from being “innovative.” How so? It imposes punitive consequences that companies understandably would rather avoid (like having to pay steep fines). So, keep regulation down (or, ideally, completely deregulate) and foster innovative competition.
Using Stephen’s way of measuring the success of President Bush’s administration (“great or greatest”), we can say of the market that it is free or freest, where “free” denotes a market with some degree of regulation. Consequently, some instances of the market will be “freer” than others. As I said, the freest (or most free) market is ideal, with no regulations. It is the Platonic form of the marketplace, if you will. So, putting this now