Superphysics
The Invisible Hand of Human Dharma
November 18, 2013 11 minutes • 2222 words
Table of contents
Eastern Philosophy Explains The Invisible Hand
The concept that best matches the invisible hand is simply “the aspects of human nature which maintain social order”.
The apprehension of economists to come to such a conclusion is understandable as Western philosophy has not developed such a concept extensively.
Eastern philosophy, on the other hand, has observed natural processes for thousands of years and has formalized it under the term dharma. Dharma is defined as the nature of existing phenomena that supports and holds the universe together. The dharma that applies to human society is called societal dharma (varna dharma) and is defined as the whole set of behaviors necessary for the maintenance of the natural order of society. According to the Mahabharata (Ganguli, n.d.):
Each individual behavior, which makes up the whole, is called personal dharma (svadharma), or one’s own nature and duty within a bigger order.
Societal and personal dharma thus fall under the broader term called human dharma which is the nature and duty of humans, as opposed to animal and physical dharma or the nature of animals and physical forces.
According to the Bhagavad Gita, it is essential that each person acts according to his or her dharma (Easwaran, 2007):
A similar idea was echoed by Confucius:
| Occupation | Indian | Chinese | Japanese |
|---|---|---|---|
| Unskilled | Laborer | Shudra | 农 Nong |
| Skilled Laborer | Shudra | 工 Gong | Farmer |
| Warrior / Leader | Ksattriya | 士 Shi | Warrior |
| Intellectual / Creative | Brahmin | 士 Shi | Artisans |
| Merchant | Vaishya | 商 Shang | Merchants |
The closest English word for personal dharma is “personal-interest” and so, butchers must act on the interest of butchers (or the dharma of butchers), while brewers must act on theirs (the dharma of brewers). This will naturally and invisibly lead to societal dharma or the maintenance of society through the efficiency afforded by the division of labor, leading to better goods and services acquired through trade:
How the Invisible Hand Balances Employment Between Two Towns
Societal dharma naturally balances the amount of productive hands, by attracting self-interest (svadharma) in a location through the demand of the society which, in the end, gives back ordinary profits, or the value that the society can collectively give back:
The mercantile stock of every country naturally courts in this manner the near, and shuns the distant employment; naturally courts the employment in which the returns are frequent, and shuns that in which they are distant and slow; naturally courts the employment in which it can maintain the greatest quantity of productive labour in the country to which it belongs, or in which its owner resides, and shuns that in which it can maintain there the smallest quantity.
It naturally courts the employment which in ordinary cases is most advantageous, and shuns that which in ordinary cases is least advantageous to that country. But if in any of those distant employments, which in ordinary cases are less advantageous to the country, the profit should happen to rise somewhat higher than what is sufficient to balance the natural preference which is given to nearer employments, this superiority of profit will draw stock from those nearer employments, till the profits of all return to their proper level.
This superiority of profit, however, is a proof that, in the actual circumstances of the society, those distant employments are somewhat under-stocked in proportion to other employments, and that the stock of the society is not distributed in the properest manner among all the different employments carried on in it.
It is a proof that something is either bought cheaper or sold dearer than it ought to be, and that some particular class of citizens is more or less oppressed either by paying more or by getting less than what is suitable to that equality which ought to take place, and which naturally does take place among all the different classes of them..But if the profits of those who deal in such goods are above their proper level, those goods will be sold dearer than they ought to be, or somewhat above their natural price, and all those engaged in the nearer employments will be more or less oppressed by this high price.
Their interest, therefore, in this case requires that some stock should be withdrawn from those nearer employments, and turned towards that distant one, in order to reduce its profits to their proper level, and the price of the goods which it deals in to their natural price.
In this extraordinary case, the public interest requires that some stock should be withdrawn from those employments which in ordinary cases are more advantageous, and turned towards one which in ordinary cases is less advantageous to the public; and in this extraordinary case the natural interests and inclinations of men coincide as exactly with the public interest as in all other ordinary cases, and lead them to withdraw stock from the near, and to turn it towards the distant employment.
It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution.
Book 4, Chapter 7, Par 73, emphasis added
To illustrate the balancing of employment, let us say there are two nearly-identical towns: Red town and Blue town.
The only difference is that Blue town has ten competing brewers sharing 100% of the profits from sales of beer in Blue town or around 10% share per brewer (Point A), while Red town has only one brewer to profit 100% from its beer demand (Point B).
Soon or later, the brewers in Blue town will be attracted to the high profits in Red town.
If seven Blue town brewers move to Red town, the profit rate in Red town will fall to 12.5%, while Blue town’s will rise to 33% (Points C).
The higher profits back in Blue town will gradually prompt brewers to return to Blue town until the profit rates are roughly equal (Point D).
In a mercantile system however, the invisible hand is replaced with the mercantile and corporation spirit.
Using the same example, a mercantile Blue town brewer will seek to monopolize profits to himself by creating intellectual property on brewing, eliminating all other brewers. He will then claim the profits of Red town by setting up a corporation to extend his person to Red town, something that is not naturally possible.
The efficient distribution of productive hands artificially existed in pre-colonial India and in the Song and early Ming dynasties of China (Fairbank & Goldman), and was known to Smith:
However, the invisible hand in those empires was artificial because it was imposed by religion or tradition, and not by democracy:
Though not ideal, this artificial invisible hand prevented society from moving backwards:
This artificial invisible hand raised productivity in order to provide for the natural needs of Chinese society. Smith, back in the 1700’s, accurately predicted that the inherent productive capacity of China and Japan would be able to reproduce foreign manufactures successfully:
The wealth of ancient China and India dwarfed those of Europe, until they were uprooted by war and European colonization to be replaced by Mercantilism. Adam Smith’s first description of the invisible hand in his earlier essay The History of Astronomy, is consistent with the Eastern belief that human dharma only affects humans while physical dharma only affects physics:
While humans would naturally want to uplift society for our own sake, Mother Nature may want to destroy it through volcanic eruptions or sustain it through life-giving rain. As human dharma is different from the natural sciences or physical dharma, it observes its own sets of rules called morality, which was the focus of Smith’s book The Theory of Moral Sentiments, a book which he regarded as his greatest work:
It is the deception of wealth and power which causes the corruption of moral sentiments:
Smith declares that the invisible hand, which is a part of a larger system, is from a higher being:
This is consistent with observations throughout history wherein morality and justice are often associated with gods, or one’s conscience. Whenever selfishness and injustice reach extremes in a society, people naturally react and cause change. As Capitalist dharma is based on the dogma of selfish-interest instead of human dharma, its “selfish hand” overpowers the invisible hand rendering it unable to spread value to society while creating various economic problems such as poverty, recessions, and negative externalities.
