The gift of the visible hand

On this Labor Day, let us return to those heady days of 1776. No, not the Declaration of Independence, but to Adam Smith’s “Wealth of Nations.”

To the tome that gave us the concept of the invisible hand, that talked about benefits of unfettered commerce, that spoke of how acting in one’s self interest leads to mutual benefits.

The complexity of commerce is so vast, so rapidly changing that no one person can direct it, but there is always someone whose ego is big enough that they will try.

Today, according to the AP, President Barack Obama is announcing in Milwaukee that he is asking Congress to approve at least $50 billion in spending on roads, railways and runways in an effort to stimulate the economy.

Here is a brief description by Smith of one little corner of the “economy” of his day. It is the famous wool coat example:

“The woolen-coat, for example … is the produce of the joint labor of a great multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. How many merchants and carriers, besides, must have been employed in transporting the materials from some of those workmen to others who often live in a very distant part of the country! How much commerce and navigation in particular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world! What a variety of labor too is necessary in order to produce the tools of the meanest of those workmen! To say nothing of such complicated machines as the ship of the sailor, the mill of the fuller, or even the loom of the weaver, let us consider only what a variety of labor is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smeltinghouse, the brick-maker, the brick-layer, the workmen who attend the furnace, the mill-wright, the forger, the smith, must all of them join their different arts in order to produce them.”

So, today the plan is to take taxes from the shepherd, the sorter, the comber, the dyer, the spinner, the weaver, the builders, the rope-makers, the smelters, the fellers, the brick-makers and brick-layers, the smith and the tool-makers and give it to the road, railroad and runway workers to stimulate the economy so the makers of things can get to market things they can no longer afford to make.

Rather O’Henryesque.