Class, we are here to discuss two specialized subfields of what has been called the dismal science. They are called What the Traffic Will Bear and The Invisible Hand. They are the two main pillars of capitalist markets. Both have to do with the art of pricing. Prices are matters of intense focus for both the winners and losers in a capitalist system. The winners (the sellers) fight to set them as high as possible without provoking purchaser rebellion. The losers (the buyers) struggle to find weapons to resist the predatory instincts of the winners. Economics textbook writers and media pundits make a satisfying living arguing the merits and demerits of each approach. Since no method of reconciling their diametrically opposed aims seems so far have been uncovered, I will feel free to here throw in my two cents. If you would rather be reading the sports pages, I bear you no ill will. See you again another time. Ave!

Now that we are alone together, dear reader, I ask you whether you really believe in the Invisible Hand? Adam Smith maintained that a free market would always ultimately arrive at fair prices by threatening an over-pricer with undercutting by a competitor. This assumed that the consumer had freedom to choose among the market’s offerings, and that he would choose rationally, based on a balance between a good’s value to him and his ability to pay.

Neat idea, except where the buyer has no choice because of unavoidable need and monopoly control of supply — utility companies, transportation and communication networks, health care for just three examples. If my local gas and electric company doubles its rates I have no power to resist (pun intended). There is not a competing electric company with a Hoover Dam around the corner ready to offer me a better deal. So, unless my political representatives want to be tossed out on their ears by irate consumers, they will have to see to it that government steps in and controls electricity prices. Cries of “socialism!” will not be heard when it comes to guaranteeing light, heat, and refrigeration for everyone. (Why does this not seem to be true of health care? I guess when the lights go out, we all know we are in the dark, but when the doctor says “We’re not sure, but let’s try…” we tend to hope we may be the exceptional case that cures itself. But that’s a subject for another time. Back to more tractable areas of investigation.)

“What the traffic will bear” then is seen, in the context of what we call utilities, as an unworkable proposition when it comes to “essential” goods and services. Few pundits have any problem with that. The problems come when we start trying to figure out which segments of the market are entitled to the label essential. Education? Railroads? Telephone companies? Gasoline? Is there a moral component? Where does homelessness come in, for instance?

Then the step after that — honesty in advertising? Big Tobacco? Big Pharma? Big Soft Drink? Big Agriculture masquerading as clusters of Little Houses on the Prairie? If, despite the NIH’s warnings that sugar is rotting my teeth and giving me “feel-good” calories without any nutrition benefit and will eventually cost me and my fellow taxpayers a fortune for my dental and diabetes care, I persist in saying that my satisfaction at this moment over this cone of pink cotton candy is more precious to me than protecting against all these future probabilities, what should my government’s response be? I have made my personal judgment on “what the traffic will bear”. I have made my choice. I have declared myself willing to put up with all the duplicity and hypocrisy in return for a good taste in my mouth right now. As a good citizen have I a moral right to do that?

So the invisible hand has aces up its sleeve, put there by crooks; and lobbyists and “compassionate conservatives”. Which is where we are now. The debates, the lobbying, and the shameless lying continue, providing a good living for amoral lawyers but poor prospects for reform.

But there’s a deeper level, at which “what the traffic will bear” becomes a clear and immediate danger, requiring intervention. We have been treated recently to one example in the form of a would-be Big Pharma mogul who discovered a loophole through which he was able to worm his way by buying a company that made a valuable generic drug at $13 a pill. He then arbitrarily raised the price to $750. The patients who relied on this drug found no “invisible hand” competitors at hand (pun again intended), since they (the chronically sick patients) were few in number and unattractive as a market to anyone who might consider stepping in. Here we encounter the moral component. Should government regulators intervene based on humanitarian considerations? And if so, how?

I don’t know how we should be dealing with these questions. What I know is that we shouldn’t be denying them. They will no more solve themselves than global warming will suddenly reverse itself. Adam Smith was wrong. Once the market develops beyond the local flea market on Saturday afternoons the equation changes. When the market is no longer local, Amazon cannot be left to call the shots. We need to turn to that arch-villain, Regulation. Even the word is ugly. The reality is uglier still because — at least in the ostensibly democratic countries of the West — it requires that most difficult of all political actions : compromise. (The Russians and the Chinese, who believe that the solution is a central authority operating as a benevolent patriarchy, and who have converted the invisible hand into the pickpocket hand — distributing taxpayer money to private entrepreneurs — are finding that it doesn’t work any better than it did in some of its previous incarnations such as the Soviets’ NEP and successive Five-Year Plans and the Chinese Great Leap Forward.)

As much as the Koch Brothers might believe in reliance on American paternalism, we — except for Ted Cruz and Donald Trumpf — don’t yet seem to be so sanguine. The difficulty is that we have forgotten that compromise is a necessity for a functioning government.

Government is regulation, whether you find the word ugly or not, or choose to call it by some other name. Lack of regulation is anarchy. Eliminating regulation is just giving yourself (and your competitors) a free hand to cheat.

The only real questions are two : (1) what prices require regulation and to what degree, and (2) to which official authorities do we entrust the job? Just as we are reluctant to admit that “tax and spend” is no more than a simple description of government itself, we have a collective aversion to admitting that “regulation” is also an essential function of effective government.

The argument that weakening government regulation “gives free reign to innovators” is sophistry. It is like seeking Wall Street’s praises by firing half your workers. You will have just doubled your numbers for productivity and made your stockholders temporarily happy, but you will have also just destroyed your company’s future. Reducing taxes or cutting government spending is the same Potemkin pothole. It means weakening an organization already too broke to meet its existing commitments, which, not incidentally, include providing your “private” business with its supporting infrastructure, such as roads and a communication network, reliable legal protection, and a secure safety net for your workers. We Americans are rich. Especially the lucky few at the top. There is no excuse for our one percenters to be unwilling to reach out a hand to the ninety-nine percent that could use varying degrees of help. Or to the “wretched refuse” of the refugee world.

If we believe that this nation was truly founded “under God”, as we say we do, we should accept that we have an obligation to at least try to uphold His major principles. His hand may be invisible, and His motives may not always be entirely clear, but His motto is surely not “what the traffic will bear.”