Home > conservatism, foundations of econ > The Visible Hand and the Invisible Hand: An Example

The Visible Hand and the Invisible Hand: An Example

There’s a strange tendency for my best posts (what I think are best) to get much less attention than my worst ones.  Yesterday was no exception.  I thought my post on the visible hand from yesterday was one of my better posts and indeed I had unusually high traffic yesterday… all of it directed at an old post of mine with terrible writing and a muddled argument.   Sigh.

Oh well.  My blog is meant for me, not you.  So, in that spirit, I want to expand on yesterday’s not-as-popular-as-I-think-it-should-be post a bit.

To recap: the visible hand is my name for the broad set of laws and customs which form the necessary infrastructure of the economy and allow the invisible hand of trade to perform its magic.  I presented the visible hand in a very abstract manner in that post, so now I want to back up and offer a real-world example.

Do you remember the XFL?   That competitor to the NFL brought to us by Vince McMahon of pro-wrestling fame?  Great.  Keep it in mind while I go through a thought experiment.

Suppose I’m a conservative–I was, in fact, a conservative in high school–and a businessman in the sports sector of the economy and I notice the huge monopoly profits generated in pro-football.   I want in.  If I can sell a superior football product to fans, I’ll be rich beyond my wildest dreams of avarice.

But how?  Well, as a good conservative I notice that football has a lot of rules.   More than that, a lot of those rules specifically interfere with some of the most exciting action!  Horror!  I zero in on two major culprits:  punts with all their rules to protect the punt-returner and the passing game with all those “pass-interference” calls.  I ask myself: wouldn’t game-play be much better if I stop coddling players and de-regulate the punt and pass sectors of the game?

So, I offer the following changes to the punt game:  no fair-catch and the ball’s live for either team until its downed.   Now players have to return the ball!   What could go wrong?

In the pass game, I just do away with the pass-interference rules.  Anything goes!   Now players will have to fight over the ball to make a catch!   Exciting!   What can go wrong?

When I open my new league, I make sure that I market the wide-open, fewer-pesky-rules, more extreme version of football I’m selling.   Those pesky NFL do good-ers with their dumb rules mucking up the sport won’t know what hit them.

This is of course my stylized version of the creation of the XFL–I’m of course speculating about Vince McMahon’s motives, but the rest is true to history.   So what happened?

First, punt returns stopped almost dead, even as teams became more inclined to punt than going for 4th down conversions.   Think about it.  Punts became much more dangerous for the receiving team, but they needed to make sure they got the ball.   What to do?  The only thing that can be done is to fall on the ball as fast as you can.  If you stop to consider returning the ball, chances are that someone on the coverage team will knock you on your back… and a fumble deep in your own territory would be a disaster.

The pass game didn’t fair any better.   Rather than create a wide open offensive show with DBs and receivers fighting for the ball, it turns out that doing away with pass-interference means that the DBs are constantly hanging onto receivers.  No one can catch a ball like that.   Offenses screeched to a halt.

With punts cheap for the punting team and dangerous for the receiving team, punts were more common.   With no pass-interference calls, offenses had difficulty moving the ball.  You get where this is going… these games were mind-numbing-ly dull.   Surprise of surprises viewership was declining for basically the whole history of the league and it went bell-up pretty quick.   Turns out that people don’t like watching a field-position slug-fest.

As with sport, so goes the economy; those rules that the XFL dropped are the visible hand.   It was the rules which created the incentives for players to return punts and pass-interference rules nurtured the strategies that rely on the passing game.  The incentives those rules create are the invisible hand; players acting on their own initiative within the context of the rules will create the excitement we crave as long as those rules are written wisely.

Take what lesson you will from that.

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