The Proof Is All Around Us

REVIEW: ‘Visible Hand: A Wealth of Notions on the Miracle of the Market’

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April 10, 2022

Is supporting free markets a tenet of faith or an empirical question? Matthew Hennessey, in his book Visible Hand, answers, "Yes." In doing so, he is squarely within the classical liberal tradition going back to Adam Smith.

Supporters of free markets are often accused of fundamentalism or holding a blind faith to abstract principles and concepts. Those accusations come from the left and, increasingly, the right, and they can catch supporters off guard. The idea of an "invisible hand" guiding human behavior is unavoidably metaphorical and, to a certain extent, mythical. It’s not really there, and we all know it’s not really there, yet we still talk about it, and markets still work.

Hennessey, deputy op-ed editor for the Wall Street Journal, is certainly a supporter of free markets. Visible Hand is a well-considered and easy-to-read defense of that view. He draws extensively on his personal experiences and the experiences of his family.

Hennessey writes, "The Wealth of Nations isn’t theory; it’s closer to journalism," which is, depending on how you read it, either an insult to Adam Smith or a tremendous compliment to journalists. But Hennessey’s larger point is sound: Economics is fundamentally about things that are observable—people and the choices they make. The best tools for basic economics are not mathematical models or equations but rather having a journalist’s eye and curiosity about the world.

After noting that the "invisible hand" is only mentioned once in The Wealth of Nations, Hennessey writes that Smith "never mentions nor refers to it again," which is all true. But Smith’s magnum opus was not the first time he used the expression, and looking at the other two appearances of the invisible hand in Smith’s work sheds more light on his views.

In Smith’s only other purposely written book, 1759’s The Theory of Moral Sentiments, he uses the phrase "led by an invisible hand," exactly the same as it appears in The Wealth of Nations. In both books the phrase is used to explain how individual action promotes the good of the whole. But in The Theory of Moral Sentiments, Smith is referring to "the distribution of the necessaries of life." He says that the invisible hand leads people "to make nearly the same distribution" as a hypothetical benevolent planner would have made to "advance the interest of the society, and afford means to the multiplication of the species."

Hennessey also characterizes the invisible hand as "a throwaway." That view is relatively common, but we have some reasons to believe Smith was being deliberate. In both The Wealth of Nations and The Theory of Moral Sentiments, the invisible hand appears almost perfectly in the center of the work.

Daniel Klein and Brandon Lucas argue in a 2011 paper that it wasn’t by accident. They note Smith’s deep background in rhetoric and literature and a recurring theme of the importance of centrality throughout his work. They note that when Smith taught his students about Thucydides, he emphasized that the ancient Greek historian "often expresses all that he labours so much in a word or two, sometimes placed in the middle of the narration." Smith was a very careful writer, and we shouldn’t dismiss the idea that he intentionally placed the invisible hand at the center of his only two books because he thought it was the central idea he was seeking to propagate.

Aside from his two books, Smith also wrote essays, but "invisible hand" only appears one more time in his corpus. In an essay about the history of astronomy, Smith writes of "savages" invoking the "invisible hand of Jupiter" to explain lightning and thunder. That essay was written before his two books, and the usage there is different, as Smith is not describing individual actions serving society, but rather a purely mythical force to which bewildered early humans ascribed power.

Klein, in a 2020 essay, argues that that usage of "invisible hand," Smith’s first, provides more clarity to the more famous usage in The Wealth of Nations. "On this way of seeing the remarks, Smith, then, is like the heathen savage," he writes. Like the primitive man looking at a lightning storm, Smith looks at the operation of society with awe and wonder. The awe and wonder inspire him to look deeper and discover the regularity by which it operates, which opens up new questions to look deeper into, to infinity.

That discovery process is fundamentally what economics is all about, and Hennessey went through it in a very Smithian way. He describes being initially uninterested in economics when he was younger, but growing to understand, by way of a middle-school teacher, that "life is not determined by what you want. Life is determined by the choices you make." The focus on choices and trade-offs dominates the book, with Hennessey’s curiosity guiding the way to new discoveries about everything from Lego sets to salaries for professional athletes to running a bar.

The results of the market are visible to us; the mechanisms by which they arise are often not. And so an iterative process ensues in understanding them. Hennessey points out that, unlike in socialism, the order in capitalism is spontaneous and only apparent after the fact.

It is only when we stand back to observe the results of the market, with a sense of wonder, that we can see the order and begin to understand it. Plenty of people reap the benefits of markets without thinking twice about how they came to be. There’s nothing inherently wrong with that, but as Hennessey points out, "all reasonably intelligent people can grasp the law of supply and demand in the same way they can grasp Newton’s laws of motion."

In his essay on astronomy, Smith concludes by praising Newton, whose system of astronomy was based on "the discovery of an immense chain of the most important and sublime truths, all closely connected together, by one capital fact, of the reality of which we have daily experience." The "one capital fact" in Newton’s system is gravity.

"Gravitation is an invisible force but its effects are visible, just like the price mechanism," writes Hennessey. Reading in this light, Smith’s purpose in writing an essay about astronomy becomes clear: Markets, too, have an "immense train of the most important and sublime truths, all closely connected together, by one capital fact, the reality of which we have daily experience."

And so, the invisible hand becomes visible in our daily lives. You can start at faith, or you can start at empiricism, but the key is letting each inform the other through curiosity and a sense of wonder. Hennessey models that well in Visible Hand, producing a rock-solid defense of free markets and free people.

Visible Hand: A Wealth of Notions on the Miracle of the Market
by Matthew Hennessey
Encounter Books, 248 pp., $27.99

Dominic Pino is a William F. Buckley Jr. Fellow in Political Journalism with the National Review Institute.

Published under: Book reviews