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New Worlds: Visible and Invisible Hands

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If you’ve ever taken an economics class — or possibly even if you haven’t — you’ve probably encountered the notion of the “invisible hand” that guides the economy toward (theoretically) beneficial results if actors are left free to pursue their own interests. This concept is usually credited to the Scottish philosopher Adam Smith, though its application in economic thought has diverged quite a lot from his original usage.

Don’t worry, I’m not going to take us down the rabbit hole of economic theory. (Not least because I recognize I’m wholly unqualified to do so.) I mention the invisible hand only by way of leading into our actual topic here, which is the extent to which the economy of a given society is or is not consciously controlled through top-down measures like government intervention.

The capitalist societies many of us live in like to trumpet the virtues of a free market. Don’t regulate business! Let the law of supply and demand reign, raising prices where supply is low and/or demand is high, and lowering them when the reverse is true! Let individuals pursue their own economic interests without hindrance! This will, in theory, produce the greatest market efficiency, as the lack of interference allows everything to attain a natural equilibrium.

In practice, of course, this turns out to produce all manner of problems, from the exploitation of workers to the degradation of the environment to the production of low-quality goods. As we’ve all too frequently discovered the hard way, some amount of intervention is usually necessary to prevent the use of toxic chemicals, destructive fluctuations in price, and other things we consider societally undesirable regardless of their market efficiency.

Historically, price fluctuations of that sort have often been a matter of grave concern for rulers, especially when they apply to key staples. Letting supply and demand be the sole driver for grain prices is a good way to make a famine worse, as profiteers race to line their pockets at the expense of others’ lives. Governments have also been known to regulate the prices of anything sold to the government, like metal for weapons or horses to carry soldiers and supplies, regardless of whether that makes a fair deal for the seller or not.

But economic control can go well beyond a few bits of official price-fixing. There are a dizzying array of measures available, far more than I want to attempt to summarize here; instead, let’s take a look at the other end of the spectrum.

It’s possible to have an system that is very tightly controlled. A planned economy is one where somebody is explicitly in charge of deciding who should produce what, which resources should be spent where, and what the overall goal of the system is at any given moment. In modern times we associate this fairly strongly with communism, though in truth it’s vastly more complicated than that, with many fine gradations of how much planning there is, which sectors of the economy it applies to, and so forth.

And it’s older than you might think! Many societies in the ancient Near East and Mediterranean appear to have been what anthropologists term palace economies, or sometimes temple economies depending on the nature of the institution in charge. (I’m not sure to what extent the traditional economy of the Haudenosaunee resembles this model; the brief descriptions I’ve heard sound similar, but “brief descriptions” are as far as I’ve gotten on the topic.) Under communism, much or all property is held in common ownership and distributed in a theoretically fair and equitable manner; under a palace economy, much or all property belongs to the ruler, and is distributed to his subjects as he sees fit.

This doesn’t necessarily mean that all crops and livestock and so forth are literally brought to the palace and then sent out again (though in a small enough city-state, that might not be too far off the mark). Instead it means that the government takes a very interventionist role in controlling and redistributing wealth — a role justified on the grounds that the central power is the most well-informed body, and therefore the most capable of making efficient and effective decisions.

But just as with a pure free market, this can end in all kinds of problems. Those ancient Near Eastern palace economies were hardly models of egalitarianism; strangely, the most “efficient” and “effective” distribution always seemed to be one that heavily favored the social elite, while leaving the peasantry struggling in abject poverty. Similar problems have plagued communist societies, especially as they scale up in size. While full-bore central planning might well be extremely beneficial when done properly, “done properly” requires a degree of omniscience, omnipotence, and omnibenevolence as yet unattained by human beings. And even when something like an artificial intelligence is put in charge, as happens periodically in science fiction stories, that’s usually prelude to discovering that one or more of those three characteristics is not actually in play, and what seemed like a utopian system is anything but.

So that leaves most societies somewhere in the middle, leveraging a mix of regulations, price controls, subsidies, tariffs, and so forth to try and steer the economic ship. And while there are exceptions — the works of Daniel Abraham and Seth Dickinson come to mind, and I’m sure there are others — most speculative fiction isn’t going to concern itself too deeply with the nuances of economic policy. As with other specialized subjects, if you intend to make this the centerpiece of your story, 1) you probably already know a fair bit about it and 2) you’ll probably be aware of what additional research, if any, you need to do.

Even if your story isn’t focused on such matters, though, hints of it may creep in around the edges. If you need a cadre of impoverished people to start rioting, you might stop to consider why they’re impoverished: is it because the laissez-faire policy of the crown has let changing market conditions drive them into penury, or is it because governmental control is forcing them to sell their products at a loss? In either case they’re still angry and rioting, but even just a touch of concrete detail will make them seem less like [Insert Angry Mob Here] and more like real people with real grievances and demands.

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7 thoughts on “New Worlds: Visible and Invisible Hands”

  1. Foxessa, those plans in the WP article are not likely to get off the ground if they are being pushed by him, as he’s both too incompetent and not nearly rich enough; Elon Musk has also shown he is too busy gratifying his own whims to accomplish such a thing, unless he puts some really good people in charge (which the other guy certainly won’t do).

    Saudi Arabia and other Arabian countries like the UAE and Quatar do have autocratic rulers rich enough to try to force through such megalomaniac developments, which often don’t end well – look at the UAE’s half-done artificial archipelagoes near Dubai, and the Line city plan from the Saudi crown prince that has been started, and earlier plans for new cities in the desert, that haven’t worked out the way they were planned.

    Some extremely rich megacorporations would really like to get to build their own company towns in the US though, and US law & lawmakers in some states appear to allow that. I’ve read a few articles about two such new developments getting planning permission and being built (IIRC at least 1 in Texas, I don’t remember where the other was). That seems a likelier development, something like a gated community for Microsoft/Google/Alphabet/Amazon or whatever employees, where everything you do, say, buy, how and where you move about, what your kids learn in school, and a lot of what you and they see is filtered through the company, where the company sets the taxes and the prices in the company shop, as well as the fines for the rules the company sets and polices, decides what services the town gets and how these are delivered and paid for, what behaviour is allowed and what you can do with your property. Like a very strict HOA, but where the HOA is also your boss at work, the one making decisions about your healthcare (since that is already tied to your employment in the USA), and the one owning the only (online or local) stores where you are allowed to buy things, with the right to stop other deliveries being made in your gated community.
    I think that could become really bad, remembering the mining company towns…. “10 tons of coal and what do you get? Another day older and deeper in debt.”

  2. Price controls do not stop the invisible hand. They just drive it into black markets.

  3. Then there’s the really interesting fictional/world-building issue: How does a specific economic system deal with failures, whether internal or external or mere competition from different economic systems? (Loud chorus: “Badly if at all!”) This ranges from nothing more than shaming of/refusal to deal with those who’ve “cheated someone” — under whatever definition one wishes — to violence, criminal penalties, and in extreme cases outright revolution. Just a little bit of story fodder in there.

  4. Mary Catelli, I think that is probably true in a lot of situations where there is a real shortage and few or no alternatives. In situations where a few large companies (either the producers or the middlemen) own most or all of a specific good, price controls do seem to be able to curb the excesses of gouging the customers to create maximum profits.
    The recent & ongoing “greedflation” slowed down considerably in Europe after a price ceiling for oil was enacted in the EU – companies who had been hiking up their prices much more than necessary, making record profits, by using the excuse that “it’s not our fault, it’s the oil crisis because of the war in Ukraine” were put on notice that excessive profiteering would not be tolerated, and the OPEC countries driving up the price getting oil companies to bid against each other instead of adjusting their production found out that wasn’t a limitless ploy.
    Other things beside the price ceiling certainly played a role; people had some (limited) alternative options like turning down the thermostat, using less hot water, and driving less, and some companies could also adjust their usage of oil at least temporarily, or invest in wind turbines and such; and not all oil producing countries followed OPECs lead in diminishing production just when more was needed, to drive up the price.

    But I think price controls can and do have a part to play when near-monopolies and excessive greed are part of the problem, in societies where there is great inequality so that some people or companies can grab all or most of a resource to hoard and/or drive the price up.

    Honestly, as someone concerned about climate change, I’m glad the latest oil crisis (exacerbated by greed) has pushed more people, companies and governments to look for alternatives to their easy oil-dependency; but I’m also glad that the poorest people were not left to suffer limitless exploitation by the greedy big oil companies, at least over here.

  5. HANNEKE: Ya, I’m well aware that this Triumph of Will grandeur fantasy is in reality another of his graft-grift at an even grander level than he’s previously managed to perpetrate upon the massively gullible greedy cruel stupids, bigger than his beautiful wall. Which we shall have to pay for.

    Also, ya, of course, absolutely price controls are necessary in many conditions to contain massive death and suffering and much else as the massively greedy cruel stupids see only massive profits out of it. As for instance where I live — there is such a need for housing, yet the real estate industry keeps warehousing ever more empty apartments to artificially keep the prices rocketing while demanding tax cuts and so for their great suffering.

  6. Where I live, claims of warehousing seem quite overblown, while government regulations quite obviously engineer for expensive and underproduced housing.

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