Many Hands Become Invisible
I don’t have a strong economic ideology, though I’d say that my bias is to try first a market-based approach to most economic issues, turning to public-sector solutions only when the private sector is sorely wanting.
In general, I think Adam Smith’s “invisible hand” a decent explanation for this choice. Investopedia describes the idea succinctly:
The invisible hand metaphor distills two critical ideas. First, voluntary trades in a free market produce unintentional and widespread benefits. Second, these benefits are greater than those of a regulated, planned economy.
Even with my capitalism-first bias, however, I tend to distrust markets dominated by small number of competitors. I suppose some of that distrust is due to my assumption that corruption is more rampant when huge amounts of money are at stake.
Daniel Herriges added a new wrinkle to my distrust in a 2019 article called “A City Shaped by Many Hands":
What a lot of pro-market folks don’t understand is that the invisible hand is really just a large number of real, visible hands. The whole idea is a consequence of the Law of Large Numbers: it depends upon there being many actors in a market, none of whose decisions have outsized influence.
The invisible hand of the market simply doesn’t exist in situations where a few people … make all the crucial decisions.
Smith’s invisible-hand metaphors presumes many hands!
First, as the number of decision-makers dwindles, the mistakes by each remaining competitor are amplified, so the market loses the wisdom of the crowd.
Second, and here I’ll go a bit beyond what Herriges said, as the number of competitors in a market shrinks, the market more closely resembles one under central, state control. The normal benefits of a competitive market – innovation and price controls – start to disappear even as the remaining few competitors remain under pressure to generate revenue for shareholders. Unlike in a public-sector monopoly, however, there are no political ways to redress the market imbalances.