Wednesday, January 06, 2016


John Feffer posts 6 january 2016) on Foreign Policy In Focus HERE 
“The market was supposed to save the planet.
That, at least, was the argument of many economists grappling with the problem of climate change. As fossil fuels became scarcer, they pointed out, the price of oil and natural gas would go up. And then other options, like solar and wind, would become cheaper, particularly as investment flowed into that sector and drove down the cost of new technologies.
And voila: The invisible hand would gradually turn down the global thermostat.”
The above argument fails on its own grounds. It is based on the illusion that “an invisible hand” refers to markets. It does not and Adam Smith never asserted that it did. 
Markets depend on prices and there is no role or need for “an invisible hand”.  
Ask yourself: what does an “invisible hand” supposedly do that prices themselves cannot do? It is not a metaphor for price systems that operate in markets. For what then is it a metaphor? Adam Smith defined the role of metaphors in his “Lectures on Rhetoric and Belles Lettres” (1762-63) as describing its "object" in “a more interesting and striking manner” (p.29). 
In Wealth of Nations ,he uses the metaphor to describe how a merchant is motivated by his feeling of insecurity to avoid sending his capital abroad and to invest it locally instead. His conscious intentional act also has unintentional consequences, specifically in this case that his invested capital adds to “domestic revenue and employment”, which was no part of his intention. This unintentional consequences was a public benefit.

Prices are visible and always must be. In fact, markets cannot work except by visible prices. Nothing more is needed. There is nothing ‘mystical’ or ‘miraculous’ about visible prices. Nor is there anything theological about the price system.


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