Our proposed science of SORAnomics is derived almost entirely from The Wealth of Nations by Adam Smith and is fundamentally different from the current science of Economics which is completely objective in nature. For example, Economics targets specific, numerical goals like 10% GDP or 4% inflation and then imposes them on people.
SORAnomics on the other hand, balances the objective with the subjective. It asks what the people want to achieve in the first place, and then creates its objectives from them, implemented as a resource allocation system. This is how all economic activity happens anyway, and that’s why SORA means Social Resource Allocation which physically manifests as a social network where people can express what they want to achieve. This network can then work according to the invisible hand, which is one of Smith’s most famous ideas, to help them achieve their socioeconomic goals. This 'hand' forms the core of our entire system as it leads to division of labour which then sustains human societies.
As it is so fundamental, an explanation of this invisible hand is required. Unfortunately, it has been so badly misinterpreted by Samuelson (perhaps on purpose to advance his own agenda). Since then, it has been unjustly blamed for bad things about the economy and has even been denounced by some economists.
Therefore, the first step is to start with a blank slate and separate the popular definition of the invisible hand done by Paul Samuelson in his textbook Economics:
Of course, that is a plain fallacy, since Smith pointed to sympathy and benevolence, which are the opposites of selfishness, as the substance that keeps the machine called society running smoothly. Samuelson merely cherry-picked Smith’s views on self-interest (which to Smith was a 'praise-worthy' positive quality) and corrupted it into selfishness (a negative quality):
Regard to our own private happiness and interest often appear as very laudable principles of action. The habits of oeconomy, industry, discretion, attention, and application of thought, are cultivated from self-interested motives. These habits are seen as very praise-worthy qualities..
Our instinct for self-preservation instructs us to take proper care of our health, life, or fortune. A person who fails in this would be pitied instead of hated. Carelessness and want of economyare universally disapproved of because it shows a lack of attention to the objects of self-interest and not because of the lack of benevolence.Simple Theory of Moral Sentiments, Part 7, Section 2, Chapter 3
The cause of the easy corruption of self-interest into selfishness is the word 'self' that is present in both ideas. To solve this, we will instead use 'personal interest', using the Latin word 'person', meaning mask, instead of the English 'self' which means 'I'. Metaphysically, a mask refers to an indirect ego, different from 'I' which is the direct ego. Thus, Samuelson's invisible hand leads to selfishness, while that of Smith implies personal preferences or choice -- if a man orders burgers instead of fries, we never say that he is selfish for burgers.
Now that we have separated Samuelson's invisible hand, we can move to the original invisible hand described by Adam Smith. Its best description is not in The Wealth of Nations, but in The Theory of Moral Sentiments, wherein he describes the innate human desire for things to work as they were meant to:
To Smith, humans have an innate desire for man-made things to function as they were designed. This desire comes naturally, even for human systems such as resource allocation:
The proud and unfeeling landlord views his extensive fields, and without a thought for his brethren, he imagines to eat its whole harvest.. The capacity of his stomach is far less than the immensity of his desires and receives no more than that of the meanest peasant. The rest of the food he is obliged to distribute among his servants.
The rich.. divide with the poor the produce of all their improvements despite their natural selfishness and rapacity. They are led by an invisible hand to make nearly the same distribution of life’s necessities which would have been made, had the earth been divided equally among all its inhabitants.
Thus, without intending or knowing it, they advance the interest of the society, and afford the means to multiply the species.
When Providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who were left out in the partition. These last too enjoy their share of all that it produces. In the real happiness of human life, they are not inferior to those who seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly on a level. The beggar, who suns himself by the side of the highway, possesses that security which kings are fighting for.Simple TMS, Part 4, The Effect of Utility on Approbation [emphasis added]
This inherent desire for perfection of the distribution of resources is thus done by employment and is more fundamental and basic than the desire for compassion or community:
Smith reveals that this desire leads to institutions and is based on the love of system or the natural order of things:
He gives an example of how a man naturally wants to arrange messed-up chairs just to have order:
This love for the ideal and natural arrangement of things comes from an invisible hand which Smith describes does not only work on man-made designs and systems, but also for natural ones such as gravity and thermodynamics:
Hence the origin of Polytheism.. which ascribes all the irregular events of nature to.. gods, demons, witches, genies, and fairies. In all Polytheistic religions.. only the irregular events of nature are ascribed to.. their gods. By.. their own nature: fire burns, water refreshes, heavy bodies descend, lighter substances fly upwards. The invisible hand of Jupiter was never perceived in those matters.
But the more irregular events were ascribed to Jupiter’s favour or anger: storms and sunshine, thunder and lightning. Savages only knew the designing power of man.Simple Essays, Origin of Philosophy [emphasis added]
Up to this point, Smith has described two invisible hands: one that runs and maintains human systems, such as clocks and economics, and one for natural systems, such as typhoons and earthquakes. These hands are so fundamental to human nature and physical nature that they should have been observed by all civilized philosophers up to that point, even by those from Asia. For the invisible hand to be a universal principle, other cultures and philosophies must have had observed them too. Otherwise, such a hand would just be an opinion and not be suitable as the base for a new and better science of economics.
Fortunately, Asian philosophy has the same concepts as Bhagavad Dharma (human dharma) for human systems, and Rta dharma (physical dharma) for natural systems.
Dharma in Hinduism and Buddhism is basically the inherent nature of things. A fire's dharma is to be hot and a water's dharma is to be wet. A fire that is not hot is not called a fire and a water that is not wet is not called water. Similarly, a clock that doesn't run is called a broken clock, just as a starving society is a 'broken' one. We can thus say that a clock's dharma is to be accurate, and a human's dharma is to have security and sustainability. The latter is proven by the selfish landord sharing his food with the poor because his stomach cannot naturally eat it all.
This human dharma of distributing resources rationally, despite humans having selfish-interest, extends itself into all aspects of life, even in local and international trade:
Every individual necessarily works to render the society’s annual revenue as great as he can. He generally does not intend to promote the public interest, or know how much he is promoting it. By preferring to support domestic industry over foreign industry, he intends only his own security. By directing that industry to produce the greatest value, he intends only his own gain. In this case, as in many other cases, he is led by an invisible hand to promote an end which he did not intend. Nor is it always the worse for the society that it [the society] was no part of it [the goal].
By pursuing his own interest, he frequently promotes the society’s interest more effectively than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation not very common among merchants. Very few words can be used to dissuade them from it.Wealth of Nations Book 4 [emphasis added]
Here, Smith adds a new characteristic to human dharma -- the regard to self-security and self-benefit. However, it is easy to notice that this is fundamentally different from the human dharma in the selfish landlord who spent some of his food for his poor servants. This dharma for self-security and self-benefit is related to the concept of 'personal interest' mentioned earlier. It also must have been noted by Asian philosophers for the principle of dharma to be universal.
Fortunately again, Hinduism has such a concept in svadharma and Taoism has the concept of the Tao.
Svadharma means self-dharma or the inherent nature of the self. It means one's own path, nature, or destiny and is described in the Bhagavad Gita:
Thus, the local manufacturer follows the dharma of local manufacturing in order to create excellent goods for local consumption, not expecting it to be exported. He finds them getting exported anyway because of their superior quality and fit for purpose. This is similar to the Tao, which is one's own, natural way:
Knowing others is intelligence;
knowing yourself is true wisdom.
Mastering others is strength;
mastering yourself is true power.Tao Te Ching verse 33
To the Tao Te Ching, knowing and mastering others is human dharma, while knowing and mastering oneself is svadharma. A manufacturer who knows his core competencies will be a better manufacturer who is a jack of all trades and a master of none. An army squad made up of specialists will perform their missions better than one made up of general infantry.
Unknown to many, Socrates mentioned this as well. In fact, it is one of the foundational principles which justice, and subsequently economics, spring from:
The division of labour which required the carpenter and the shoemaker and the rest of the citizens to be doing each his own business, and not another's, was a shadow of justice. But in reality, justice was concerned not with the outward man, but with the inward or the true self. The just man does not permit the several elements within him to interfere with one another, or any of them to do the work of others. He sets his own inner life in order, and he masters himself with his own law, to be at peace with himself.
Like human dharma, svadharma works unconsciously in humans and is not based on compassion or fellow-feeling, just as typhoons do not operate on the wind's affections for the land. Svadharma's purpose is to secure, propagate, and add meaning to life, giving everyone ease of body and peace of mind in their own way.
Smith also wrote that governments must understand the invisible hand of svadharma in order to create happy societies and avoid disorder:
The man of system is.. often so enamoured with.. his own ideal plan of government.. He imagines that he can arrange the members of a great society with as much ease as the hand arranges the different pieces on a chess-board.
He does not consider that the pieces.. have no other principle of motion besides that which the hand impresses upon them. But that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress on it. If those two principles.. act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.Simple TMS, Part 6, Chapter 2
Thus, the invisble hand is never an external imposition, but rather an internal principle of movement -- the same principles that make a fire burn or the wind blow. We can now see how different the invisible hand described by Smith is from the one described by Samuelson. The former's hand has public and private aspects working together according to the designer of Nature:
That wisdom which contrived the system of human affections and that of every other part of nature, seems to have judged that the interest of the great society of mankind would be best promoted by directing the principal attention of each individual to what was most within the sphere of his abilities and understanding.Simple TMS, Part 6, Chapter 2
Every individual can, in his local situation, judge much better than any statesman on what domestic industry his capital produce the greatest value. The statesman who directs private people how they should employ their capitals would load himself with a most unnecessary attention.Book 4, Chapter 2
While Samuelson applies the invisible hand shallowly to justify deregulation and personal selfishness, Smith's invisible hand is applicable to so many non-business and non-selfish aspects of human life:
With this, we can now expand the scope of the invisible hand away from business and trade, into politics, education, organizations, and society in general. Smith gave other types of invisible hand in The Theory of Moral Sentiments that mirror the observations made by Hindus, which we can simplify as follows:
In our future posts, we shall compare these different invisible hands to show how physical and human dharma oppose each other morally. We will also show how ashrama and varna dharmas were used by ancient China and India to become prosperous by maximizing labor productivity and quality, leading to great, prosperous empires, without any "profit maximization function" or any fanciful "supply or demand curves".