Inklings: a tumblelog

I’m most interests in one of the comments on the post. I’m reproducing most of it here for reference because I think the point made is very, very important:

I think invoking Adam Smith always requires caution. The positive claims of the invisible hand, that private vice leads to public virtue, are too oft used & abused to defend vice in laissez-faire style capitalism.

As Nash & game theory demonstrate, the invisible hand only works when private vice and public virtue are aligned. This alignment however, is purely coincidental. There is no market force that drives this alignment and left unchecked, private vice often destroys public virtue.

To ensure markets provide a public good, strong regulation is needed to align private and public incentive. So while it may seem to the outsider that Wall St and VC are the same, if the cost of increased regulation is the limitation of some VC activity, then that would be a small price to pay given the public costs of this last financial debacle.

This point applies quite strongly here in Ireland too. McCreevyism, with its treatment of any and all growth being good, its treatment of the invisible hand of the market as infallible (thus under-regulation because none is needed), and its simple-minded use of the Laffer curve to justify cutting tax rather than optimising it, can’t be let happen here again.