In the world of economics, the concept of the “Invisible Hand” remains elusive to those skeptical of free-market principles, yet its influence is ubiquitous. Market Institute President Charles Sauer has a new article in The American Spectator that delves into the dichotomy between the proponents of self-interest and free markets, and those who, like the Biden administration, favor a visible governmental hand in shaping the economy. As government intervention surges, this shift results in both intended and unintended social consequences, challenging the very essence of innovation, competition, and economic progress.
“The “Invisible Hand” is a hard concept to grasp for people who don’t believe in free-market economics, but the effects are all around us. When self-interested people act on their own interests, there are often unintended (and sometimes even intended) social benefits. However, those who don’t believe — like the Biden administration — prefer to use the not-so-invisible hand of government to mold the economy to fit their goals. The problem is that this usually means that unintended consequences follow, and, instead of social benefits, there are social consequences.
For instance, at the Federal Trade Commission (FTC), Chair Lina Khan is trying to put an end to business mergers — or, at least, mergers that she doesn’t agree with. To accomplish that goal, she is doing away with decades of precedent of using the consumer welfare standard as the metric for legal mergers; instead, she is constructing her own set of rules. In fact, she recently published a list of 13 rules that seemingly can be applied to any and all mergers at the discretion of the FTC. The metrics the agency uses focus on competitors and employees instead of consumers and innovation. This shouldn’t be a surprise: Khan gained notoriety for a paper attacking Amazon; now, in office, her targets have grown.
The Biden administration hasn’t stopped with the FTC, though. The railroads are also under attack from the not-so-invisible hand. The railroad industry was one of the first to feel the effects of government regulation. Fortunately, once the Staggers Rail Act was passed in 1980, and other changes were made to deregulate the railroads, prices fell while service, investment, and safety increased. Railroads are still a highly regulated industry, but the deregulation led to growth, and our modern economy has benefited greatly. Like the FTC, however, the Surface Transportation Board (STB) is turning its back on decades of precedent by beginning to squeeze private railroads with government regulation. As an example, one railroad is being forced not only to provide services to a company that broke their contract but to divert scarce resources to do it. This level of government control hasn’t been seen in the train industry since before the mid-’70s, when heavy government control slowed the railroads to a crawl.
The administration’s actions are sometimes even more hidden, ignorant, and socially detrimental. With all of his policy bravado, President Joe Biden likes talking about everything that he has done in health care — although it wasn’t his policy to start. One of the biggest problems in health care, however, is something he has never touched: the reimbursement rate differential between hospitals and independent doctor’s offices. Currently, hospitals get paid more than independent doctors do for providing the same services. For instance, an injection at a doctor’s office gets less reimbursement than a hospital. The hospitals, therefore, are buying all the independent doctor’s offices. This consolidation isn’t like free market-mergers — it’s merely a rent-seeking arbitrage thanks to bad government policy. In this case, it is indifference to the actions of the not-so-invisible hand.”