How Does The Invisible Hand Work Again?

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Sunday July 08, 2007 · 9:33 PM PDT

2007/07/08 · 21:33

Consider the scenario where there is a bar in a downtown area. Each and every morning there are beer bottles, cups and other such drunken refuse scattered about in a two block radius of the bar. Now, imagine that this is a world completely controlled by the invisible hand of the free market.

If the bar keepers are responsible people, they will embark on a cleaning spree each morning. These are like many in the real world though and are not responsible bar keepers. There is no town clean up crew to clean the area, since there are no real tax revenues to support that. One might say ‘Well, make a law that would require the bar keepers to clean their refuse". The problem with that idea is that the market would no longer be ‘free’ as you would have just constructed a law regulating business and that just would not be OK in this imaginary world.

Then we are left with the fabled invisible hand of the market. Under this theory, the market would take care of itself. As the area became more and more refuse laden people would simply stop going to the bar in favor of cleaner areas. Losing revenue would force the bar keeps to change their ways or go out of business. However, what about all the businesses in that two block radius that go down with it? Also, hardcore drunks have shown time and again that they could care less how nasty the area they drink in is. These are not acceptable answers.

So, I pose two questions:

How does the invisible hand of the free market take care of this problem?

Would the bar keeps around the Power Block of Helena Montana please start cleaning up after their drunks?

[Cross posted here at Montana Netroots]

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