Invisible Hand Or Invisible Gun

Two hundred and forty years ago, Adam Smith wrote in “The Wealth of Nations,”: “He [the individual]… neither intends to promote the public interest, nor knows how much he is promoting it…. 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.”

This metaphor for the results of markets was later described by F. A. Hayek as spontaneous order, many examples of which exist in nature and society. The more recent science of complex adaptive systems give it a more rigorous foundation. That science studies the host of self-regulating systems where a significant order emerges from the interactions of participants without the benefit of a planner. In those cases, there are certain simple rules that govern the interactions of millions of actors and, while the actions are independent, they are not random. A recognizable order develops over time. Smith understood so long ago that people operating in free exchange gave better results than those who were burdened by political interventions.

Detractors of a free, market-based economy, which some call capitalism, say that the invisible hand fails, with bad results as evidence. Some harmful products get sold, fraud is not uncommon, some people are poor, pollution exists, and so on. When something happens that they don’t like, they say that markets and free exchange do not work, that the invisible hand is not effective. They suggest that order in society requires some central planners directing the action and telling people what to do so problems are avoided.

They also, however, compare what they claim as failures of real markets in the real world with results in their fantasy world where everything is perfect under honest, benevolent, omniscient, and well-meaning rulers and planners. The comparison never takes real-world politics into account, with all of its ugliness and malevolence. They ignore the poverty, fraud, bad products, pollution, and all other human failings that still happen, often to a greater extent.

Inherent in all of politics is the underlying fact that, ultimately, government is the use of force and the threat of violence to do the things that rulers desire. Many people never experience that violence first-hand, but they know that if they resist the dictates, they face fines, jail time, violent force, or even death, depending on the extent of resistance. Even though most people never acknowledge it or think about it, government is the invisible gun.

The question is, then, which is more effective for cooperation, prosperity, innovation, and progress: a voluntary market guided by the invisible hand or a planned, directed, regulated economy under threat of the invisible gun? I think that historical evidence is clearly in favor of the former.

The problem that we face is that it is often not clear-cut. The United States, for example, is certainly not a free-market society governed entirely by the invisible hand. While it has been generally free, there are thousands of economic and social interventions at federal, state, and local levels that distort voluntary commerce, yet the results over the last couple of centuries has been pretty good. There are also, clearly, some simple rules needed to govern the interactions, guidelines which enable the unplanned order of individual interactions.

What scope and size of government, then, what burden of bureaucracy, and what level of intervention and interference in the economy is tolerable? We are where we are, but which direction we choose from here will make a difference. Do we want more of the invisible hand or more of the invisible gun?

Dan McLaughlin is the author of “Compassion and Truth-Why Good Intentions Don’t Equal Good Results”. Follow him at