THE INVISIBLE HAND METAPHOR HAS NOTHING TO DO WITH CORRUPTION
Obadiah Mailafia posts (16January) on Business Day Online HERE
Economic crime and the rule of law (part 2)
There is empirical evidence that corruption undermines the efficiency of the free market economy. In an ideal world, markets working with undistorted price signals enable individuals to choose the products and services that best satisfy their needs. This is the working of Adam Smith’s ‘invisible hand’. Corruption is a disease that cripples the free workings of the invisible hand. Those who believe that corruption is to be accepted in developing countries if it oils an otherwise creaking system will have to think again.
A well-written discussion of the role and consequences of widespread corruption in Nigeria, and by extention in much of Africa elsewhere too. For that Obadiah is to be congratulated.
Tis a pity that the author links the problems and consequences of corruption to the perversion of Adam Smith’s ‘invisible hand’. That is mistaken on two counts: first Smith did not link his use of the now infamous metaphor to a “free market economy”, that is a modern myth.
In fact, Smith’s sole example of the ‘invisible hand’ in his Wealth of Nations, linked the metaphor to the generality of human motives and their intended consequences, which actions also had unintended consequences that could be benign for the public good (by raising ‘domestic product and employment’), or they could be detrimental to the ‘public good’ ‘ (by raising prices and narrowing competition).
Corruption has the social consequences identified by so eloquently by Obadiah Mailafia.
Smith’s ‘metaphor’ of an ‘invisible hand’ has nothing to do with the social consequences of corruption.