John Stossel: Usually Brilliant; This Time Wrong
“John Stossel illustrates how a series of people are coordinated by the market system in order to get beef from Iowa to New York City. This includes a propane truck, a packaging plant, workers to cut the beef, people who make knives and work coats, etc. He interviews economist Walter Williams, who explains how self-interest is the driving factor that gets the beef to New York. If the system relied on love and human kindness, he doubts New Yorkers would have any beef. This illustrates the concept explained by Adam Smith in 1776 known as the invisible hand.” (ABC News).
John Stossel is a regular contributor to market economics. He is literate and often persuasive. I agree with much of what he writes. However, I wish he would stick to explaining how markets work by price signals, from which entrepreneurs anticipate how they should arrange their affairs to take advantage of events (or avoid them where it may harm them).
Bringing in Adam Smith’s use of the IH metaphor is a distraction. He never referred to the ‘invisible hand of the market’. There is no such entity. His use of the metaphor referred to the insecurity some, but not all merchants, felt about foreign trade (hence, they avoided foreign trade and invested in “domestic industry”.
Stossel should stick to Hayek, and leave Adam Smith out of it if he insists on repeating a myth started by Paul Samuelson (1948), which even he noted the IH “had caused more harm than good”.