Δαφνη Ευτυχια Αρθουρος

cos, 2010-01-03:

The "invisible hand" [of the market] works well in these conditions:

• a commodity with a large number of sellers and buyers
• (relatively) low barriers of entry
• all information about the commodity is freely and equally available to everyone
• consistent rules of fairness, binding agreements, and lack of fraud are well enforced

When you have corruption, or a relatively small number of dominant players, or vastly unequal information among buyers and sellers, or a variety of other things that upset the above formula, the invisible hand's power grows weaker and weaker, and other effects take over.

It's not that the invisible hand doesn't work or doesn't exist, it's that it doesn't apply to everything, and too many people are under a near-religious belief that we should pretend it does.