6/6/2018 12 Short Steps to Retell the Story of Economics - Evonomics

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Illustration by Julia Suits

Commentary

12 Short Steps to
Retell the Story of
Economics
It’s time for a di erent economic narrative

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By Jag Bhalla

Are there key plot holes in a tale that shapes our times?

1. Economics illustrates “the pitfalls of a good story,” says science writer Philip
Ball.

2. It is built on a simple story that can discount or hide complicating logic.

3. Here’s Adam Smith’s plot summary: “He who intends only his own gain … is
… led by an invisible hand … [and] frequently promotes [the interest] of
… society.”

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6/6/2018 12 Short Steps to Retell the Story of Economics - Evonomics

4. The key “characters” are self-seeking individuals and competitive markets,

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where prices automatically coordinate good collective outcomes (benign
efficient “spontaneous order” = unintended consequence).

5. But what Smith’s invisible hand “frequently promotes,” it can’t guarantee.

The other logical possibility is that self-seeking can cause collective harm,
intended or not.

6. Plus the “simple story” mischaracterizes competition and prices.

7. Competition can be efficient, or wasteful — see Markets Dumb As Trees.

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8. Prices often aren’t “right.” Both sellers and buyers gain (short-term) by
ignoring “externalities,” like pollution costs. That complicates voluntary fixes.

9. Two “invisible hand” types exist. Sometimes local incentives combine to

generate good group outcomes. Sometimes they undermine group goals. As
Charles Darwin saw, these bad invisible hands create spontaneous disorder,
which local incentives can’t cure.

10. Parts relate to wholes in two distinct ways. Sometimes we can predict how
wholes behave from the properties of their parts. Other times not; it’s more
complicated.

11. The field of “complex systems” studies these trickier beasts. That’s an
unfortunate name — jet engines are complex but predictable, and two simple
parts can generate unpredictable complexity (Wolfram Rule 30).

12. Markets are the most powerful social forces on earth, they shape how
billions of people live. Let’s get their whole story straight. We can’t afford to
continue ignoring their complicating logic.

For less one-sided stories, and more on efforts to deploy tools and ideas from
complex systems, evolution and business, keep following Evonomics.

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Jorge Icabalceta • 2 years ago

This article is a total contradiction. It starts by saying "...It is built on a simple story..." Well, this
is exactly what this "article" is doing. It criticizes economics for being so simplistic and then the
author makes a simplistic "article" (not sure it actually is). I actually wonder myself why evonics
has fallen so low in the quality of what they publish. And then I answer my own question when I
remember that evonics is a garbage site
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robertmkadar Mod > Jorge Icabalceta • 2 years ago

Great useless comment. Did you know that you can choose not to read and just leave?
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David Burns • 2 years ago

Efficient compared to what?
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Jan de Jonge • 2 years ago

There are many visible hands that support the invisible hand. Think of organizations,
institutions or the government.
1△ ▽ • Reply • Share ›

jothwu • 2 years ago

Markets work beautifully, except where they don't. We should consider the obvious reason the
invisible hand is invisible.
1△ ▽ • Reply • Share ›

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JAG BHALLA

Jag Bhalla is an entrepreneur

and writer. His current project is
Errors We Live By, a series of
short exoteric essays exposing
errors in the big ideas running
our lives. Follow him:
@hangingnoodles

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