Freeman

ARTICLE

The Invisible Hand at Work

APRIL 01, 1989 by JANE S. SHAW

Jane S. Shaw is a Senior Associate of the Political Economy Research Center in Bozeman, Montana.

A friend of mine recently received an inheritance that appeared large enough to let her quit work. She was then employed as a part-time English teacher and wanted to spend more time with her 1 l-year-old daughter and pursue intellectual interests such as history and German literature.

My friend, whom I’ll call Ellen, is a gentle person who lives simply, loves humanity, and has a great interest in culture. The last thing she would ever think of is hurting people or depriving them of something valued. Yet she was about to deprive students of an excellent teacher.

In considering whether to continue teaching or not, Ellen looked at her job-as most of us do—in terms of what it did for her. Did it pay well? Did it provide meaning in her life? Was it emotionally rewarding or mostly tedious? Much lower on the list, or completely forgotten in the calculation, was whether or not her students might lose a good teacher.

Most jobs exist because they provide a product or service that someone wants. Yet, like Ellen, we rarely think about them this way.

We read “how to” books that tell us how to improve job satisfaction through higher pay and better relationships with the boss. We never read about how our job benefits our customers.

In the press, it’s the jobholder, not the customer, who gets our attention. High unemployment dismays us because it means people are left without jobs and income—rather than because people lose the opportunity to buy goods or services, even though their losses, too, may be substantial.

Our focus on the jobholder is so intense that we tend to suppose that those who work with little or no pay, such as Peace Corps volunteers, are doing more for society than, say, Sears Roebuck & Co. employees in the same country. Yet however admirable it may be, personal sacrifice doesn’t make a person more effective.

Our emphasis on job satisfaction is really an example of Adam Smith’s “invisible hand” at work. By pursuing our own desires we inadvertently satisfy those of others. That is because the only way we can earn income is by providing what other people want. Their wishes create our jobs.

So, paradoxically, a hardhearted and selfish entrepreneur who builds a great business selling clothes or canning soup may improve the lives of millions of people while a Peace Corps volunteer may help only a few. This entrepreneur may care nothing personally about his customers, and his character may not deserve our praise, but in order to succeed he has to consider what other people want—convenience, economy, good taste, for example,—and provide it at a reasonable cost.

It is sad but indisputable that without this desire for material gain, most people would be unlikely to give as careful consideration to the desires of others. Even tender-hearted Ellen weighed income and job satisfaction against the trial and tribulation of teaching high school students. What made her different was that her desire for material gain was so very modest. Yet by wanting little, she gave little as well.

If income meant more to Ellen if she were more greedy—she would have tailored her talents to provide services that people want. Ironically, without such greed and with a little income, she could pretty much do what she pleased.

In the end, it didn’t turn out that way. Ellen soon found that the property she had inherited doesn’t provide enough income for her to live comfortably. So, she is back at work again, this time teaching German to college students, and she is earning extra income working at a retail store. I don’t think she realizes it, but her need for income has had a positive result it has led her to help others.

ASSOCIATED ISSUE

April 1989

ABOUT

JANE S. SHAW

Jane Shaw is president of the Pope Center for Higher Education Policy.

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Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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