In his famous metaphor, Adam Smith described the unintended benefits of market behaviour as guided by an ‘invisible hand’. We all go about our business and pursue our own interests, he postulated, and often do more public good than we expected in the process.
It’s a poetic idea, one that has been elevated beyond Smith’s original intentions over the years. It’s also been elaborated on by Michael Jacobs in his book The Green Economy. He suggests that attached to the invisible hand is an invisible elbow. “Elbows are sometimes used to push people aside in the desire to get ahead. But more often elbows are not used deliberately at all; they knock things over inadvertently.”
That’s a nice description of negative externalities, the unaccounted for damage done to society or the environment in the course of business. Most of our environmental problems are not deliberate, and those that are usually constitute a crime of some kind. Nobody planned to slash the numbers of small birds in the suburban gardens of Southern England, or boost the rates of childhood asthma, or raise the sea level. They’re the unintended consequences of otherwise good ideas.
Of course, once we know about those consequences, we have a responsibility to fix the problem and prevent further harm. Externalities need to be priced in so that the polluter pays, and the environmental or social costs of business are not offloaded to others. Regulation always lags behind, so we have to be vigilant and responsive – if we had acted to price in the cost of carbon when we first understood it, climate change would not be the disruptive prospect it is now.
The market is often talked about as a benign or positive force, but there will always been externalities, abuses, and unintended consequences. When you hear people talk about the invisible hand, don’t forget the invisible elbow.