I know a good angle, I'm taking a BS Microecon course as a senior and it's pathetic. But we did go over the Inviz Hand
Ok here's the lowdown... The "Invisible Hand": "where individuals pursuing their own interests would produce goods consumer want". Right outta my notes.
So the basics of this argument is that markets move themselves (so to speak), because everyone is acting out of their best interests for themselves (profit) and all services/goods are fulfilled in society because of it.
Your argument could be that Mr.Smith is only half right, that is why we have a government: to regulate the "externalities" or "unintended effects of capitalism" created by this "Invisible Hand". A good example of an "externality" is pollution. Noone wants to clean it up because it's not in their best "interests", i.e. it's not cost efficient/profit inducing to worry about pollution. This has now created a government agency to regulate this unintended effect. So in essence, Smith was close, but he failed to realize that we need government in order for markets to be run in the most efficient manner. If you look at any gov. regulatory agency, you will see that markets have definitely created tons of externalities. The Invisible hand creates these unintended effects, and they can turn out to be detrimental to the very essence of the Invisible Hand itself. For example, we have the SEC to regulate stocks and bonds. If there is fraud that isn't taken care of, a major company could be affected financially, thereby in essence creating a rippling effect in its industry (especially if it's a bluechip/bellwether like Intel or MS!). If the SEC wasn't there to prevent this, then this "Invisible Hand" would definitely have to be questioned since it could crash that respective industry.
Of course, one could argue that the invisible hand is what puts our government here in the first place. My econ teacher would counter with the fact that in the event of a "public good", everyone would have to pay for it, because everyone would have the chance to use it. Public goods are needed in society, but the Invisible Hand would not create a public good, because private companies don't want to create something that everyone would pay for, simply because if one person paid for it, then the next person wouldn't. A private company couldn't get ALL people to pay for it simply because if it's public, then they can't collect on it because noone would pay them for a "public" good. Kind of confusing, but the bottom line is that they wouldn't profit on this "public good".
So to recap again, while the Invisible Hand is where we pursue our "best interests", mainly profit, Smith fails to realize that public goods are in our best interests and people do in fact indirectly profit from them. Take a road for instance. How would Krispy Kreme deliver their donuts and turn a profit without a road to distribute their product?
Hope this can spark some ideas and clarify some of Smith's ideology!
Rob
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