Can we depend wholly on Adam Smith’s invisible hand? In his famous book: The Wealth of Nations, Adam Smith states: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow citizens.” Adam Smith, The Wealth of Nations
What will self-love lead to?
Will it lead sellers to deceive their customers or will it lead sellers to do the right thing that benefits both the seller and the buyer?
Many economists have argued that if we leave it to the invisible hand, sellers will deceive their customers to deceive buyers. They will take advantage of their customers’ innocence and ignorance to overcharge then and pass off on them shoddy products. They will cajole customers to buy goods they do not want.
Clearly we have seen this happening here in Kenya. If you go to Luthuli, Kirinyaga rd in search of building material of vehicle parts; you will most likely find retailers who will take advantage of your innocence by overcharging you or sell you inferior products.
So the question is: should be leave it to the invisible hand to control the conduct of both the consumer and the producer?
If left alone, the market activities may affect people other than those directly involved. It may affect the air we breathe, the water we drink, the safety of the food we eat.
Some economist have insisted that: the market must be supplemented by other arrangements in order to protect the consumer from himself and from avaricious sellers, and to protect all of us from the spillover neighbourhood effects of market transactions.
The only problem with outside interference is: it tends to overreach its mandate and sometimes becomes worse than the disease itself.
