“constructing a market economy that respects the needs of nature and society as 
a whole, using a middle path between laissez faire and centralized planning”

How to Construct a New Invisible Hand: A Conversation with Peter Barnes - 
(via Instapaper)

In a previous essay, I announced a new concept of the invisible hand to replace 
the old and erroneous idea that the pursuit of self-interest robustly benefits 
the common good. The new version is based on examples of the invisible hand 
that exist in nature, such as cells that benefit multi-cellular organisms and 
social insects that benefit their colonies. These lower-level units don’t have 
the welfare of the higher-level units in mind. They don’t even have minds in 
the human sense of the word. Instead, they exhibit behaviors that have been 
winnowed by higher-level selection to benefit the common good. Higher-level 
selection is the invisible hand.

Absorbing this fact leads to a robust conclusion about the design of our own 
societies. We must learn to function in two capacities: 1) As designers of 
social and economic systems; and 2) as participants in the systems that we 
design. As participants, we need not have the welfare of the whole system in 
mind, in classic invisible hand fashion. But as design­ers, we must. The 
invisible hand must be constructed, which would be a contra­diction of terms 
according to the old concept.

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Yet, this does not mean that the invisible hand must be constructed by 
centralized plan­ning, the main alternative to laissez faire economic policies 
that is typically imagined. Instead, the design process needs to be 
evolutionary, iterative, and collaborative, resulting in mechanisms that work 
like the invisible hand, even though they never could have arisen on their own. 
This constitutes a middle path between laissez faire and centralized planning 
that could be a breakthrough in solving the problems of our age.

I have stated the new concept of the invisible hand in terms of evolution, 
which provides the strongest and most general theoretical foundation that one 
could ask for. However, the concept has also been formulated by others from 
different perspectives. Peter Barnes is one such person. A co-founder of 
Working Assets (now CREDO Mobile), his most recent book is With Liberty and 
Dividends for All: How To Save Our Middle Class When Jobs Don’t Pay Enough and 
he has written two articles for Evonomics (1,2). In this conversation, we 
discuss his own vision for constructing a market economy that respects the 
needs of nature and society as a whole, using a middle path between laissez 
faire and centralized planning.

DSW: Greetings, Peter! I am looking forward to this conversation.

PB: Likewise.

DSW: Please introduce yourself to our audience, bearing in mind that while you 
are already well known to some, you will be new to others. In fact, this kind 
of “patchiness” is something that I want to explore from a cultural 
evolutionary perspective.

PB: As an entrepreneur and writer, I’ve been exploring the inner workings of 
capitalism for — gosh — almost fifty years. Like you, I’ve come to realize that 
the Invisible Hand, if it ever worked, is now broken, and we need a new one 
that is suited to our current realities. That is, we need a set of market-based 
mechanisms that transform the self-serving behavior of autonomous agents into 
system-wide outcomes that benefit the majority of individuals, society and the 

DSW: Thank you! Now let’s get right down to business. I have made a three-fold 
distinc­tion between laissez faire, centralized planning, and a middle path 
that needs to be explored. Is this also how you see it?

PB: Yes. I don’t think markets, at least as currently constituted, can 
self-regulate for the common good, nor do I think governments can plan, much 
less administer, a vast dyna­mic economy. So we need something in the middle. 
The first question is what? And the second is how do we get there?

Regarding the first question, what we need are markets in which the interests 
of nature, future generations and the great majority of living humans are 
effectively repre­sented. That is not the situation today. Hence we have 
massive market failure.

Regarding the second question, I agree with you that there’s no time for 
unplanned cultural evolution, which in any case wouldn’t take place at the 
necessary scale. We need to re-rig our economy as intelligent designers, using 
a complex systems perspective.

DSW: Exactly. In my vocabulary, what you call “the interests of nature, future 
generations and the great majority of living humans” must become the target of 
a conscious evolutionary process, which employs variation, selection, and 
replication procedures to hit the target.

PB: The Invisible Hand as envisioned by laissez faire enthusiasts requires 
competition and prices to function properly. Competition is necessary for 
efficiency, innovation and preventing a small minority from garnering too much 
wealth and power. Prices are needed to transform a vast sea of dispersed 
information into single data points that economic decision-makers can use. But 
market failure arises when competition is insuffi­ci­ent or prices are missing 
critical information. And both are happening today, bigly.

Let’s talk about prices. Prices are driven by transactions between buyers and 
sellers. In order to participate in the pricing process you must either have 
money to buy or some­­thing to sell. On the selling side, you can offer either 
your labor or your rights to products or assets, which is to say, your property 

The root of the Invisible Hand’s current failure is that nature and future 
generations have neither money, votes or property rights. As a result, their 
needs are completely ig­nored by the pricing pro­cess and (absent government 
regulation) by all economic decision-makers. It is no won­der that nature is 
trashed and future generations forsaken for the sake of short-term gain.

At the same time, concentrated market power — when three or four companies 
domi­nate entire industries — leads to higher prices and more money flowing to 
owners of property rights (including corporate stock and intellectual property) 
than to labor. Hence, escalating inequality, insecurity and anger, with no end 
in sight.

The remedy to both crises — destruction of nature and concentration of wealth — 
is to create new forms of property that represent and benefit nature, future 
generations and all of us together as co-inheritors of common wealth. This is 
where system design comes in. If markets as they now exist aren’t sufficiently 
self-regulating, and we don’t want centralized control by government, then 
changing the mix of property rights is the only other imaginable solution.

Property rights are critical to our economy and our society. They deter­mine 
who pays whom and who works for whom. What’s more, they have staying power: 
once amassed, they are repositories of wealth and power that shape markets and 
societies for gen­erations. At a deeper level, they deter­mine the direc­tion 
in which the whole economy moves, as if by a gravitational pull. At this 
moment, a near-total domination of our economy by the interests of pri­vate 
pro­perty owners pulls our entire economy toward the goal of maximum short-term 
profit, which leads inexorably to concentrated wealth and destruction of 
nature. That is how the Invisible Hand works today. That is how our econ­omy is 

If we want to change that, we need new forms of property rights to complement 
and counter-balance the old. The new property rights, if we design them 
properly, will tug our economy toward the preserva­tion and equitable sharing 
of nature’s and society’s gifts. There will still be profit-maxi­mizing, but 
its pull on the entire system will be offset by pulls in these other 
direc­tions. In effect, we will have re-rigged our economy to balance the needs 
of nature, society and private property owners.

DSW: OK, but cultural evolution, like genetic evolution, is path-dependent 
process. How do we get there from here?

PB: More than 200 years ago, Thomas Paine distinguished between private 
property and common property. It’s time to revive that distinction. Private 
property is rightly allo­cated to individuals in proportion to their roles in 
creating it; hence it is necessarily distri­buted unequally. By contrast, 
common property, representing wealth created by nature and society, is rightly 
shared equally. The trouble is, there is very little common property out there.

About twenty years ago, Nobel prize-winning economist Herbert Simon estimated 
that about 80 percent of the income we enjoy today comes not from the efforts 
of living individuals or corporations but from our shared inheritance — gifts 
of nature plus the know­ledge, infrastructure and social institutions created 
collectively by our ances­tors. Yet the financial value that comes from our 
shared inheritance isn’t broadly shared. It flows mostly to private property 
owners who are able to monetize and capture it in a variety of ways.

But imagine an economy in which common property is much more prevalent. This 
com­mon property can take many forms, just as private property can. One form, 
for example, would be not-for-profit trusts that hold rights to use vital 
ecosystems. These trusts would have a legally binding duty to preserve their 
ecosystems for generations to come. They would fulfill this duty by limiting 
and charg­ing for use of their eco­systems based on peer-reviewed science. In 
effect, they’d be guardians of their ecosystems with control over toll bridges 
into them.

Why would the public and politicians conceivably support such trusts? A key 
reason is that they would use a substantial portion of their income to pay 
equal dividends to all residents within their borders. The better the trusts 
protect ecosystems, the higher the divi­dends. There will then be a virtuous 
alignment between living and future genera­tions, and between humans and 
nature. Humans won’t be any less selfish or short-sighted, but the economic 
framework in which we operate will push us and our businesses to act with 
nature’s and society’s interests in mind. That is the new Invisible Hand. At a 
large enough scale, it would create a kind of homeostasis between our economy, 
our society and our planet.

DSW: Exciting! This actually appears to be happening, with ecosystems being 
granted the rights of individuals around the world. What examples have come to 
your attention?

PB: The Alaska Permanent Fund uses royalties from North Slope oil to pay equal 
divi­dends to all Alaska residents. In Britain, the National Trust (a 
non-profit established in 1895) owns and preserves over 600,000 acres of 
landscape and historical buildings. Just north of San Francisco, where I live, 
the Marin Agricultural Land Trust owns permanent conservation ease­ments on 
about half the farmland in the county. In the U.S. Con­gress, legislation 
recently intro­duced by Sen. Chris van Hollen (D-MD) would cap and auction 
rights to emit carbon di­oxide into our atmosphere, steadily lowering the cap 
year by year, and returning 100 per­cent of the income in equal dividends to 
every American. There are also thousands of land trusts with many shapes and 
forms. There is no shortage of common property seedlings. What we need now are 
social en­tre­preneurs to help them multiply and evolve. It is hard work, but 
it can be done.

It’s worth remem­bering that, early in the 19th century, private corporations 
barely existed in America, yet by the end of the century they had become the 
dominant business form. It is possible that, in the 21st century,common 
property institutions could prolifer­ate in a similar way.

DSW: There is one final topic area that I want to explore. I began by saying 
that we must learn to function in two capacities: as designers of social 
systems and as participants in the systems that we design. Operating in 
designer mode requires having the welfare of the whole system in mind. This is 
required not only for the designers—people like you and me—but for a majority 
of the population for any policy that must be passed by a vote. Yet, when 
describing the market system that you have in mind, you seem to switch to a 
Homo economicus view of human nature as entirely selfish and short-sighted. For 
example, you said “we need a set of market-based mechanisms that transform the 
self-serving behavior of autonomous agents into system-wide outcomes that 
benefit the majority of individuals, society and the planet”.

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This strikes me as not quite right. What we know, from multiple lines of 
inquiry, is that the majority of people expect to cooperate in their social 
endeavors and to punish those who don’t. The cooperators expect to benefit from 
their joint efforts, but that’s a far cry from being entirely self-regarding. A 
market system must be protected against the minority that is inclined to cheat 
and free-ride, but that’s not the same as assuming that everyone wants to cheat 
and free-ride. In short, we shouldn’t need to change our basic conception of 
human nature when we shift from designer mode to participant mode. What are 
your thoughts on this?

PB: Like you, I believe that humans are capable of both cooperation and 
competition, and that that’s why market economies work. The market economy I 
envision also relies on both sides of human nature. In the production of goods 
and services, self-centered behavior would still reign. But in the institutions 
of common property, loyalty to nature, future generations and the majority of 
fellow humans would prevail.

What’s new here is that the innate human impulse to serve the greater good 
would be buttressed­­ by appropriately designed property rights and 
institutions. Hopefully, when both sides of human nature are adequately 
represented in markets, the aggregate behavior of our economy will have the 
right balance as well.

That said, I don’t want to leave our self-centered impulses entirely on the 
side of profit and growth maximization. If we do that, nature will continue to 
lose. We need to reward ourselves for doing the right things as well as the 
wrong things, ecologically speaking. That’s the reason for making diminishing 
use of ecosystems pay immediate monetary dividends to ourselves. Also, it’s 
good politics as well as good economics to reward good behavior, and if we want 
to win enduringly on the econo­mic playing field, we have to win enduringly on 
the political field as well.

DSW: This has been a terrific conversation and I look forward to following it 
with others who are traveling the “middle path” between laissez faire and 
centralized planning. Thanks very much!

PB: Thank you!

2018 March 3

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