The Invisible Hand

Whilst many will see this title and say "oooh... an invisible hand... must be some crazy conspiracy", those that have taken Economics might recognize it as something else - the Invisible Hand of the Market.

The idea of the Invisible Hand is that Markets, by their own competitive nature, will shift towards a certain equilibrium of productivity and efficiency all on their own - because business behaviours function in such a way as to stay almost right up to speed with even minute changes in the economy.

However, I think that the Invisible Hand extends not only to Economics, but also to Politics and any power-struggle in our world (be it corporations, or organizations). Further more, I think this Invisible Hand is the real culprit for most (not necessarily all) conspiracy theories involving secret organizations, the new world order, and secret government plans.

There is but one assumption, and that is that people act rationally. People respond to incentives - whether this is the incentive to succeed (rewards), or the incentive to not fail (punishments). These incentives will guide people in a power-struggle relationship along certain pre-defined courses of actions. They will not purposefully do something that will cause them harm, nor will they purposefully NOT do something that would cause them satisfaction. They are rational.

Within the organization in question, you have individuals. These individuals have their own lives, their own wants, and their own needs. Their drive is to gain more power in order to further their own ends and live a happier, more fulfiling life. To that goal, they will do whatever their ordered or prescribed to do. This may be a desk job, shuffling papers and signing documents, or it may be in the field - discussing, marketing, and other diplomacies.

By fulfilling the function of their purpose, of their job, they have the chance to recieve more power. Thus, they will do their job.

However, there are many jobs. Hundreds, thousands, tens of thousands of jobs perhaps. All of them very different from each other. Thus, since these people WILL perform their jobs with the goal of succeeding at them in order to avoid getting fired (punishment) or recieve more power (rewards), we can now take the individual and instead say that, for all intents and purposes of the organization, they ARE their job.

Jobs, though, don't tend to communicate with each other. The people behind those jobs do, but often not about things of great relevance. When they do talk about things of relavance, it is because their JOB is communicating with other JOBS. Jobs also form series, or mini-organizations. For example, MacDonald's has 4 major jobs. There is the cashier, the cook/slave, the supervisor, and the manager. The cashier communicates directly with the customer, and relays that information to the cook. The cook responds to the customer through the orders of the cashier, and sends a message (the food) back to the cashier. The supervisor watches over the two jobs to ensure that they are communicating effectively between each other.

However, the supervisor does not cook the food, or make the orders of the customers. Furthermore, the supervisor has to respond to the manager. The manager has to determine the direction in which that MacDonalds will go. Being that there are multiple shifts, there are multiple supervisors, cahsiers, and cooks. If something wrong is going on (say profits are down), the manager will request reports from the supervisors on how their shifts went. The supervisor whose shift is doing poorly will get in trouble. The supervisor then is motivated (in order to not lose his/her job) to find the element in that shift which is functioning poorly. The supervisor then fires the cashier, say, and then hires a new one.

Now, this is overly simplified, but it shows how the "head" of the organization has to make decisions based on the information it recieves - not directly from each part, but rather by relays. Job 1 communicated through Job 2 to Job 3. Job 2, fearful of Job 1, punishes Job 3.

Say a customer left a very good response for Job 3. Job 2 will relay that to Job 3, who then - given a reward - will perform better, which increases Job 2's standing in the report to Job 1.

And thus the Invisible Hand is formed.

Every organization runs like this. People fear another group of people, and will make sure to hand on down the responsibility, or do something about it.

Why does should this discourage the formation of secret agendas? Because the secret agenda is not in the job description. In the War in Iraq case, we had the public getting mad at Bush. Fearful of losing his power (punishment) he tries to do something about it by handing down responsibility to the military, his chiefs of staff, and CIA, and tells them "find out how we can stop other 9/11's from happening, and how we can keep the economy strong, and keep people voting us into power - otherwise I'll punish you". These people, fearful of losing their power, will respond with suggestions on courses of action. If some of these suggestions are similar to each other, or are in fact the same, then the head (Bush) makes a decision that will, according to what he's been told, will keep him in power.

The Invisible Hand pushed us into a war with Taliban-controlled Afganistan, and then again into a war with Iraq.

It wasn't Bush's, or anyone else's goal to keep things secret - but in order to perform these actions which Bush's staff planned to keep him (and thus themselves) in power, they had to keep things secret. This then spawns conspiracies over what really happened, and why.

Now, does this mean that the War couldn't have been averted?
Does this mean that George Bush is a good president?
Does ths mean that lying to the population is okay?

No.

Other actions could have been taken, had the members of the staff, and their advisors, and the advisors below them, and the organizations below, them, and so on and so on, thought differently. However, culture voted them into power, and those in power were there because they were the best at their jobs in their boss' opinion.

And so it is that Invisible Hand is now pushing against Bush, since people think he made the wrong decision. Unforunately, Bush doesn't fear losing his power (much - minus the elections for Congress coming up at the end of the year), and so is free to do what the Invisible Hand initially guided him to do.

So, in the end the theory is this.

The government, corporations, and the world in general is just a bunch of body parts (JOBS) running around aimlessly trying to do their business, whilst the head has been chopped off (doesn't exist), and the body flails about while rapidly losing blood. There is no head, or brain, that truely guides anything - and because of that, organizations are doomed to inefficiencies and agendas that will forever be question and conspiracized.

Each JOB has its own minor agenda, which - when grouped with other JOBS - gives the illusion of a grand agenda.

I agree that the world runs off of incentives and punishments. But you should add addictions and basic needs to those two. Because that is what steers people, outside of their jobs.



[edit on 12-2-2006 by trudginup]

Conspiracies exist. What you have just written is a total explanation for why.

And trudginup, I believe Yarium's power-struggle relationship is mainly based around work, not home/family life, where addictions and basic needs come in.

Originally posted by Yarium
. . . Further more, I think this Invisible Hand is the real culprit for most (not necessarily all) conspiracy theories involving secret organizations, the new world order, and secret government plans.

Most likely. Conspiracy theories involving secret organizations, new world orders, and secret government plans all have a reason for happening. Like your McDonalds scenario, this is simplified, perhaps overly so.


But one thing gets me. You state:

The idea of the Invisible Hand is that Markets, by their own competitive nature, will shift towards a certain equilibrium of productivity and efficiency all on their own.

while at the bottom you go

There is no head, or brain, that truely guides anything - and because of that, organizations are doomed to inefficiencies and agendas that will forever be question and conspiracized

It seems to me that these comments are teh inverse of each other. One's saying that markets and such will shift towards behaviour that will increase productivity and effectiveness, while the other's stating that the exact opposite is happening.

I'm sorry, I probably just don't understand you properly. Could you clear that point up for me?

Sorry, I didn't mention a certain view I have, which perhaps was relevant here. Better efficiency does not necessarily mean better socially.

Take minimum wage.

According to economics, minimum wage is BAD. It means that some people who are willing to work for less don't - and so the company is paying more for a service then, technically, it should. This is inefficient labour.

However, socially speaking, minimum wage is a NECESSITY. It ensures that those working people can afford to some kind of a life with their basic needs intact.

Now, markets shift towards EFFICIENCY (which means more money). However, organizations, as mega-social identities, will lose efficiency at some point before best efficiency (will lose possible social support, whilst trying to gain support or minimize loss). Whilst each JOB may be efficient, the illusional overall goal of the organization isn't - since it is just an illusion.

Does that make better sense?

Yarium,

I don't want to sidetrack your thread into a discussion of minimum wage, but I must point out a flaw in your thinking. You make the assertion that minimum wage is a necessity because "It ensures those working people can afford... some kind of a life with their basic needs intact," yet this imposed minimum is directly responsible for driving up the costs of those basic needs. How is it that workers in southeast asia can survive making less than $2 per day? It is because the goods that they buy are also produced with such cheap labor.

Beyond that, I agree with your analysis that many people see a conspiracy where none exists other than market forces.

However, I do not rule out that there are a select few who have unfettered access to tremendous amounts of information. These few (who are rational beings) can make better decisions that provide money and power since they have access to "more accurate" and "more perfect" information than the average joe. Also, I do not think that these people view the power structure of the world in the same light as the average world citizen. Their information helps them know where the real sources of power are.

Yes, it does.

Thankyou very much.

Sorry informatu, but I can't resist a discussion! Inflation is caused by numerous things, but is essentially caused by people having more money to spend. In this sense, minimum wage does drive up the "average" income - but it is only a part of the equation. In fact, it would be possible for minimum wage to go up, but inflation drive prices down - it's not likely, but it is possible.

It's also important to note the change in minimum wage is not constant - it's only changed every so often. This means "catch-up" times and whatnot.

Now, I also will play devils advocate to myself here. You said "if minimum wage is a necessity, then how do some people survive on $2/day in some countries?" and you answered on how it's because the cost of living is very low.

Another arguement against Minimum Wage is that there are some people willing to work for less, but who - through other means (like a second job) - can make a successful living.

Minimum Wage is clearly not a cut and dry issue - it's VERY complex. I used a simplified version as a basic example though of social issues preventing "perfect efficiency" in a market. For that purposes, I hope it worked.