Pope Leo XIV Cuts Off the Invisible Hand

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Pope Leo XIV, in his first encyclical, Magnifica Humanitas, compressed here from Paragraphs 163-168, asserts that:

“More than ever, in the age of AI and robotics, it is no longer possible to rely solely on the ‘invisible hand’ of the market. Politics has the task of orientating economies and technologies to the common good ... to ensure equity: taxation, social protection and industrial policies must correct the imbalances created by the concentration of wealth and power” (emphasis mine).

Can the Pope reasonably hope to achieve these aims by relegating Adam Smith’s invisible hand illustration to the dust bin of history?

Graphic: X Post

Pope Francis, Pope Leo’s predecessor, was also skeptical of Adam Smith's "Invisible Hand" concept in his Apostolic Letter Evangelii Gaudium, despite ample real-world examples that the freer the economy, the less hunger versus less free economies where government edicts allocate goods instead of widespread competition.

“Suppose a brother or a sister is without clothes and daily food. If one of you says to them, ‘Go in peace; keep warm and well fed,’ but does nothing about their physical needs, what good is it?”

asked the Apostle James (Chapter 2, 15-16).

Should it be, however, by government command, which takes away from people the choice about a voluntary action of mercy and charity? In Matthew Chapter 19:21, Matthew writes:

“If you would be perfect, go, sell what you possess and give to the poor, and you will have treasure in heaven; and come, follow me.”

He does not say: "sell and give to an agency to give to the poor." Through the ages, many have asked: what if people do not do what is asked of them? Free will versus compulsion seems similar to the invisible hand economy versus the command economy: the invisible hand economic model produces the most good and the least evil, but the various political parties and organizations that claim we can end poverty now imply a perfectibility in governments managing citizens (or subjects?) to a perfection never yet grasped. Even the World Bank hosts an annual conference optimistically titled: End Poverty Now.

Faith versus works and humankind’s imperfection are among the puzzles about why God created a world and brought into it the sabotaging language adjustment described in Genesis, Chapter 11:6-7, the Lord said:

“If as one people speaking the same language they have begun to do this, then nothing they plan to do will be impossible for them. Come, let us go down and confuse their language so they will not understand each other.”

Thus came an end to the Tower of Babel.

Today, the debate about Adam Smith’s “Invisible Hand” illustration rages on, because it has not been recognized as axiomatic, but remains only a theorem. Expensive hypotheses continue to be implemented, which devour human capital and potential. Smith wrote:

“But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavors as much as he can, both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention” (emphasis mine).

Like a Zen koan, Adam Smith points out that all manner of good, prosperity, and fair allocation of resources will happen if we let the invisible hand of the marketplace do its incredible work unimpeded.

Thomas Sowell reminds us that if only we would hear, even Lenin recognized the mistake of doing away with the marketplace’s invisible hand, and in 1921-28 Lenin’s New Economic Policy tried, by command, to re-construct that invisible hand despite the fact that the invisible hand is itself the very antithesis of government command.

In his Empedocles on Aetna, Act 1, Scene ii, Matthew Arnold noted this conundrum:

“We mark not the world’s course, but would have it take ours. The world’s course proves the terms on which man wins content; reason the proof confirms; we spurn it, and invent a false course for the world, and for ourselves, false powers. Riches we wish to get yet remain spendthrifts still; we would have health, and yet still use our bodies ill; bafflers of our own prayers, from youth to life’s last scenes. We would have inward peace, yet will not look within; we would have misery cease, yet will not cease from sin; we want all pleasant ends, but will use no harsh means; we do not what we ought, what we ought not, we do, and lean upon the thought that chance will bring us through; but our own acts, for good or ill, are mightier powers. Yet, even when man forsakes all sin, — is just, is pure, abandons all which makes his welfare insecure — other existences there are, that clash with ours.”

I hope the Pope will reconsider his thesis that the invisible hand is not enough. Truly free markets have too often been disrupted by misguided laws and regulations that try to help people but end up hurting them instead. To simplify Adam Smith: people fairly seeking their own well-being will together make a fairer world than micro-managing government rules.