When you understand even part of one side of it, it’s easy to see that that particular part works. And clearly the ecosystem works. **But how do the other parts (the ones you don’t understand) work?** Some sort of sorcery. Magic. Just like an Ouija board, **it seems controlled by a mysterious mind. Adam Smith called this the Invisible hand.**
**If you trust in Bitcoin you don’t need to trust all of the thieves and liars using it. I.e. instead of humans you trust the invisible hand.** The blockchain gives you the truth. In a way very resemblant of holy scriptures. Just like with religion, the truth offered by the blockchain is very different from the truth offered by the nation state governments, and the conflict between bitcoin and the state will be similar to the conflict between the religion and the state.
The concept of the Invisible Hand comes from Adam Smith in his 1776 piece “An Inquiry into the Nature and Causes of the Wealth of Nations” (“The Wealth of Nations”). Nearly 250 years after Smith coined the phrase, it is still regularly used by politicians, businesspeople, and cryptocurrency enthusiasts (see block quote above). “The term “invisible hand” is a metaphor for how, in a free market economy, self-interested individuals operate through a system of mutual interdependence to promote the general benefit of society at large.” It is now regularly used by small government enthusiasts who believe that all of society’s problems can be solved by people doing what is best for themselves.
Reading the quote above about Bitcoin got me thinking about the idea of the invisible hand in a different way, in what Hayek would refer to as, “spontaneous order”. How many systems are there in our daily lives that we go through that “just work” that we regularly take for granted? The one that initially comes to mind for me is driving. I’ve been fortunate enough to never be in a serious accident, but I also consider myself to be a very cautious driver, usually opting on the side of caution, letting others go first, not speeding through yellow lights, etc. Having been a passenger in many other people’s cares, however, I know that not everyone drives this way, yet by and large driving works all around the world (yes 10K deaths and 1M+ injuried from autho every year, but generally it works). What are other systems that require the indepedent action of millions of people that just work? (not necessarily market or finance related)
First published on August 7, 2017