Invisible Hands, and the Market as Storytelling

Valerie Hamilton, co-author of Daniel Defoe and the Bank of England with Martin Parker from ULSB muses on the way in which Adam Smith and subsequent economists have used the famous metaphor of an ‘invisible hand’.

The invisible hand of Adam Smith turns up everywhere these days, as for example in George Monbiot’s recent article for the Guardian – ‘A Lesson from Hurricane Irma: capitalism can’t save the planet – it can only destroy it’. The hand is used to call up the idea of the free market – a now well-worn metaphor. The image assumes a godlike figure attached to the hand who will operate the market in the best interests of the participants. The pushing and pulling of the hand supposedly reflect the rules of the market. Adam Smith is often understood as a founding father of, and supposed supporter of, present day neoliberal economics.

The problem is Adam Smith never referred to the invisible hand. Such a godlike force could not have been further from his mind. He was far more concerned with the nature of accident and the uncanny in the operation of the market, and very clear about the inability of the individual to master such forces. But then he was a son of the Scottish Enlightenment and perhaps much more broadly educated than today’s economists.

The passage from ‘The Wealth of Nations’ used to support the usual interpretation of Adam Smith’s reference to the hand does not in fact refer to the hand, on the contrary it talks of an invisible hand. This is a very different image because it suggests that there could be many hands, doing many different things. Smith simply says that human selfish ends do not always turn out badly and indeed man’s self-interest often ends up arranging society ‘more effectually than when he really intends to promote it’. This is a far cry from the invisible hand of the market. On my reading, the passage suggests the frailty and limitations of individual intentions, not the theological supremacy of the market.

Smith’s use of the metaphor is generally tracked back to Shakespeare’s Macbeth, a nicely literary beginning. Smith is known to have lectured on this play, and on imagery in Shakespeare in general. Having killed Duncan and ascended the Scottish throne, Macbeth must now kill Banquo in order to cover his tracks:

“Come, sealing night,

Scarf up the tender eye of pitiful day,

And, with thy bloody and invisible hand,

Cancel and tear to pieces that great bond,

which keeps me pale.”

Smith’s later use of this rather gothic image suggests the whim and accident of fortune, not hidden laws. He is interested in the uncanny patterns that can sometimes be discerned in events when there appears to be a narrative at work. This is a process of making sense after the fact, not predictions based on a dismal science.

It seems to me that this idea has more kinship with the experience of writers rather than economists. Many creative writers describe a sense of an invisible hand that seems to take over the text as if the writer is a mere projector of the events and meanings described. They are a passage through which the story comes into being. George Eliot remarked “that in all that she considered her best writing, there was a “not herself” which took possession of her, and that she felt her own personality to be merely the instrument through which this spirit as it were, was acting”. Writers frequently refer to this invisible force. It is almost as if a hidden hand were directing their work, rendering them into puppets of other forces.

Based on my experience, I think that this is a much more realistic and interesting metaphor for the operation of the market. A market, as with any evolving narrative, operates at the whim of fortune, by accident, coincidence, benevolence and malevolence, the uncanny and the canny. It cannot be predicted. It can only be found out. What rich and imaginative possibilities could be conceived if we could approach the market in this way, as a story which produces futures? I think that it matters greatly that there is only an invisible hand in Adam Smith’s treatise. So, every time you see ‘the’, correct it and see how that changes the possibilities.