This free market theory of 18th century economist Adam Smith (that there is an invisible hand to guarantee, that without government, there will always be a supply to placate demand) continues to be seen with striking divergence. Smith wrote, “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self interest.”
Whether or not the larger economic system self-regulates - or has the capacity to do so in a beneficial way to all - remains sharply contested. For some who think it untrue, government regulation provides crucial directives that guide the economy in a healthy direction. For others who believe Smith’s premise, these government regulations are seen as getting in the way to the healthy progress a truly free market could make. From this perspective, the market has never truly been ‘free’ due to these many regulations in place.
A more sophisticated approach acknowledges that the market fails systematically, but also that government fails systematically. Thus the extent to which the market self corrects should not be judged relative to an abstract ideal. This is a straw man against which the case for government regulation becomes very strong. Instead, the imperfections of the market should be compared against the imperfections of government. From this perspective, government action to correct the “invisible hand” is only justified when the perverse consequences of the government correction are likely to be minor and containable.
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