Now no one on the right is using the term Free Market Fairy – they use is “free markets”, or very rarely “invisible hand” – but let’s be very clear that they are invoking not a general theory of markets nor a deep understanding of economic systems, but instead a magical mythical benevolent force that can do only good and can never do harm and will solve all the world’s problems if only we’d let it. I will refer to that force as the Free Market Fairy.
The Free Market Fairy is a very different creature from the original Invisible Hand of Adam Smith, who only mentions it briefly in all of his works where it is couched in a whole framework of economic theory. Today we know that Adam Smith’s Invisible Hand is the operation of free markets to maximize efficiency. It is the beginning of an understanding of emergent behavior, the power of individuals, acting locally, that can produce globally things no individual could produce.
So let’s retire the myth of the Free Market Fairy and get back to a reality-based strategy of using free markets, taxes, regulation and public spending to make the world a better place. Little things like rebuilding our transportation and energy infrastructure, expanding broadband access to everyone, and providing universal health insurance.