The Invisible Handjob of the Market

The Invisible Handjob of the MarketIn his seminal economic treatise Wealth of Nations, Adam Smith laid the philosophical groundwork for the concept of “an invisible hand,” which was co-opted into “the invisible hand of the market” by later neoclassical economists.  Smith believed that an individual rationally pursuing his own self-interest, as if led by an invisible hand, would unintentionally promote the greater good of society.  The neoclassicists thought that the invisible hand of the market forces of supply and demand, and self-interested maximization of profit were the most efficient regulators and allocators of resources.  However, the idea that markets could best regulate themselves was never propounded by Smith, who in fact advocated government intervention in the economy insofar that it could prevent abuse and spur competition.

Unfettered markets do not always lead to efficient outcomes because information is asymmetric; markets are imperfect; and financial actors can be irrational.  According to Nobel Prize-winning economist and former Chief Economist of the World Bank Joseph Stiglitz, “I don’t think today anybody would claim that the pursuit of self-interest by the bankers, which is sometimes called greed, has led to the well-being of all of society.”

Economists like Alan Greenspan who have hi-jacked Adam Smith to advocate deregulation of the financial markets have committed a great laissez-fraud.  Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke are aiding and abetting the banking industry in massive corruption.  Why is there no return of Glass Steagall?  Why is America privatizing profits and subsidizing losses? Where are the prosecutions of Wall Street financiers and government officials responsible for the mess?

Chase CEO Jamie Dimon and Goldman Sachs CEO Lloyd Blankfein have benefitted enormously from the havoc of the 2008 banking crisis, both personally and professionally, but neither has been penalized for their roles in causing it.  The banks that were deemed “too big to fail” are now bigger, and their profits, too.  De-regulating the market has certainly proved to be profitable… for the circle jerks.

http://www.businessdictionary.com/definition/neoclassical-economics.html

Inside Job documentary, dir. Charles Ferguson

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