Mr. Toy, my junior high history teacher told us that religion has always served two main roles in society. The first is to set out a moral code. The second is to explain the unexplained. It is this second item that I wish to address. Now, I am a person of faith, a Christian, and I would agree that my faith does provide me with moral guidance and it explains that which is unanswerable with human knowledge. Now, the wonders of science have allowed us to reduce the lack of knowledge of the natural world. (This is an arguable point, for while knowledge is a key that unlocks many rooms each of those rooms contains many more doors to explore.) We can also, using the scientific method, identify those things that are answerable, and those that are not. For example, we cannot prove the Genesis narrative. We can’t prove the existence of the soul, or of God for that matter. We can’t answer what happens after death. We have to choose what we believe about those things and what we do about them.
In ancient (and not so ancient) times, there were many more things that lay beyond human knowledge. Ancient pantheons were created and filled with gods who came to personify natural processes. The sun’s journey across the sky was Apollo’s chariot. A volcano showed the forge of Vulcan. To fall in love was to be hit by Cupid’s arrow. We know these stories as the ancient mythologies that form the basis of literature.
At this point I want to acknowledge what some of my regular reader are just chomping at the bit to point out. (You know who you are.) To someone who is not religous, modern religons could be said to be mythological as well. I know that I take my faith on, well, faith. That’s not the point of this post. Stay with me and we can debate the existence of God until we’re blue in the face later.
Well, most of these mythologies have fallen by the wayside. But I’d like to talk about a myth that has survived and still has a sizable following. Though some people seem to unduly worship it, it is not a god or the God. This myth seems to crop up a lot during discussions about how government should operate. It is usually in response to the idea of having government intervene in the economy using taxes or subsidies with the intent of changing consumer behavior. And that’s when this mythical creature rears its…well, it doesn’t exactly have head to rear. That’s when this mythical creature raises…um…one of itself. Of course, you can’t actually see it doing that, so you’ll just have to imagine it, take it on faith.
Behold, I give you the Myth of the Invisible Hands!
Yes, we’ve all heard of the invisible hands that guide our economy, that move our markets and make our economy perform better and more efficiently than anything we humans could ever cook up in our conscious brains. It says that the market itself will pick winners and losers and should be allowed to do so without the heavy thumb of government on the scale. It says that we humans always behave rationally and always make the best decisions. If a product is selling, it belongs on the market. If it needs a subsidy to get on the shelves, it’s not ready to be on the shelves.
Well, I have a secret.
Just as a little more knowledge revealed that the sun was not Apollo’s chariot, we can look a little closer at the behavior of our markets and learn about what makes them behave the way they do.
There is a reason the “invisible hands” are invisible. They don’t exist. The behavior of the market is the aggregate of the decisions of producers and consumers. Those decisions are made in consideration of all sorts of factors, some tangible, some not. Factored into those decisions are things like government policy (active or passive). Just as individuals have the ability to decide whether and how to respond to a given situation, so governments make decisions about whether and how to intervene. The totality of government decisions is what makes up government policy.
It’s something to think about the next time you’re discussing government fiscal policy.