Classical liberals have known since the time of Adam Smith that the market’s biggest failure, by far, is its propensity to keep many of its beneficial consequences hidden or camouflaged. This market failure ensures that ordinary people simultaneously underestimate the market’s achievements as they overestimate the power of government intervention to produce good outcomes.
For example, people easily see the businesses and jobs saved by protectionism, but the businesses and jobs — as well as the economic growth — destroyed by protectionism are invisible. People easily see the higher wages paid to workers employed at legislated minimum wages, but the workers rendered unemployed, or employed in worse jobs, are unseen. To ‘see’ the destroyed businesses and employment opportunities requires more than mere eyesight and awareness of stated intentions. It requires a bit – just a bit – of analytical thinking.
The theme of the seen versus the unseen, of course, is sounded repeatedly throughout classical-liberal scholarship and public commentary.
But even when the market’s achievements are within plain sight — literally visible to the naked eye — they are often overlooked. Some innovations, such as the microwave oven in the 1970s and the smartphone in the first decade of this century, are so novel when they arrive on the scene that they’re oohhhed and aahhhed at first. But because the market soon makes these goodies affordable to almost everyone, they quickly become commonplace and expected.
And if, as is almost always the case, continued innovation and market competition drive the prices of these marvelous and amazing goods ever-further downward, they soon come to be regarded as cheap and frivolous trinkets — evidence, it is said, of the market elevating the shallow, the material, and the atomized individual over the profound, the spiritual, and the soul-sustaining community. Only sociopathic homo economicus and his silly defenders resist efforts to protect workers and communities from the vicious and soulless global competition that greedily spews out the baubles and gee-gaws available at Walmart and Target.
Workers and communities, apparently, would be far better off if the market were sclerotic and kept the likes of microwave ovens, smartphones, fresh blueberries in winter, and 1,200 thread count Egyptian cotton sheets so scarce as to be affordable only by hedge-fund managers and Hollywood starlets. Hoi polloi, noticing these luxuries being consumed by the superrich, might suffer a bit of envy, but this displeasure would be, we are told, swamped by the benefits that ordinary people would enjoy from the stability of their jobs and communities. One cannot put a price on the satisfaction experienced by welder Jones knowing that, like his father and grandfather before him, his sons and grandsons after him will also work as welders.
Innovation is Ubiquitous
The typical innovation in the modern market economy, however, remains from its inception so unnoticed that it is never oohhhed and aahhhed by grateful consumers, nor snootily condemned by pundits and professors as evidence of soul-corrupting materialism or community-destroying globalization. And yet this typical innovation is truly a marvel!
Think back to the gifts that you and your family unwrapped on Christmas morning. Nearly every one of these treasures came packaged in materials ingeniously designed to prevent breakage and to ensure easy handling. Who designed the packaging that you held for a minute or two in your own hands? Who arranged to produce that molded plastic shell that protected your new food-processor from being broken during shipping and handling? You’ve got no clue. You think nothing of the packaging. By now most of it has been thrown away. Without it, however, your bounty of holiday gifts would have been much more modest.
The market incites and directs entrepreneurs to supply brilliant, inexpensive packaging that you behold with your own eyes and touch with your own hands. But while you see it, you don’t notice it. You therefore give the market no credit for making the ingenious packaging available.
Now consider pins — or, rather, the absence of pins. Until a few years ago, the folding of each newly purchased man’s dress shirt was literally pinned in place. Six or eight pins would have to be removed to unfold the shirt. Today, in contrast, the folding of each new shirt is held in place, not by pins, but by tiny metal or plastic devices that resemble paper clips. (The same is likely also true also for women’s blouses, but, being a guy, I can’t say for sure.) These clips are far easier and less time-consuming to remove than were the pins.
This innovation is small, minuscule even. But it’s real and it improves our standard of living. Yet how many of you have noticed it? Almost none. The market, therefore, gets no credit for it.
Here are some other relatively recent innovations, each small but ingenious and either never noticed or noticed only with an emotionless and soon to be forgotten “Hum. How about that”:
The availability of clothing not only in different sizes but in different fits (for example, “relaxed” versus “tailored”).
Apps that turn smartphones into rulers, levels, flashlights, weather forecasters, and televisions
Tall, inverted-U-shaped kitchen faucets the nozzles of which retract.
The ability to make restaurant reservations on-line.
Back-up cameras on automobiles.
Electrical outlets for passengers on commercial airliners.
The ever-increasing number of items for sale in ordinary supermarkets.
This list could be greatly lengthened. Each of these innovations is the product of human creativity. It didn’t happen automatically, and it wouldn’t have happened at all if markets were not as free, as innovative, and as globe-spanning as they are now. Yet these innovations — each of which improves our lives — go unnoticed. And the economic system that makes them possible is condemned because it hasn’t created on earth any of the particular versions of heaven that dance like dreams of sugarplum fairies in the minds of our ‘betters.’