Fridays at Restoration Nation: Invisible Hand

Today for Restoration Nation, I decided to look online for some information about basic economics. I found this course online and read the first lecture, “Ten Principles of Economics.”

Principle #6: Markets are usually a good way to organize economic activity.

Adam Smith made the observation that households and firms interacting in markets act as if guided by an “invisible hand.”

Because households and firms look at prices when deciding what to buy and sell, they unknowingly take into account the social costs of their actions.

As a result, prices guide decision makers to reach outcomes that tend to maximize the welfare of society as a whole.

I see some problems with these statements, which I’ll elaborate on below.

After I got my hair cut in the Uptown Denver neighborhood the other day, I sat on a bench and took notes. Across the street two men were cleaning up the leaves that covered the sidewalks and curbs. One of them wore a mask and was pushing what looked like a large vacuum cleaner.

Later that afternoon, I was about to leave D Bar Desserts when the waitress knocked over a glass. The owner came over with a broom and dustpan and carefully cleaned up the shards of glass.

In what different ways do these two methods of cleanup “organize economic activity”?

In the first case, what’s being provided is a service, which is probably paid for as part of rent or homeowner’s association dues.

The goal is to do it in the most efficient way possible, hence the massive leaf-sucking machines.

The second is part of the day-to-day efforts of running a restaurant. Because that particular restaurant is so small, the owner is more likely to come out and clean up a mess. Maybe that restaurant doesn’t even use a vacuum to clean up—maybe it just uses mops and brooms. I’ve never worked in the restaurant business, so I don’t know.

It seems to me that I witnessed economic activity that afternoon, but in the case of the leaf cleaners it is indirect. It’s more direct in the case of the restaurant. I was impressed that the staff worked so well together. It made me want to go back.

The first activity is negative—you notice it only when it is neglected. The second activity is positive.

I want to take this discussion in a certain direction. I want to say that for the purposes of Restoration Nation, brooms are better than vacuum cleaners.

But I don’t know how to get there from here.

I also don’t think the quote listed above accurately captures the “social costs” of using motorized equipment to clean up leaves. For example, making the vacuums requires resources (plastics, metals) and energy, and powering them requires more energy. A broom, in contrast, might be made of wood, or of leftover materials, such as wood chips or wood dust. The energy is human, which is powered by food.

Of course, the vacuums could also be made of recycled materials. Even the fuel could be (if the vacuums used biodiesel).

If we got rid of the vacuums, and made the brooms from something we would otherwise throw away, would we save enough “money” (in the form of fuel costs and resource costs) to employ enough people to get the job done as quickly with the brooms?

I believe that simplicity reduces social costs.

But can simplicity get us to Restoration Nation?

Feel free to comment on the “logic” of this post. I don’t think it’s very logical. It’s stuck between my ignorance of economics and my desire for a certain kind of society.

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