What if the Single Most Important Idea in Economics No Longer Works?

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In 1714, the Anglo-Dutch social philosopher Bernard Mandeville published a poem called the Fable of the Bees. The poem told the story of a bee colony that underwent a conversion: All the bees became suddenly selfless, putting their vices and self-interest to one side to pursue the wider good of the hive. The result was a disaster. Without the drive of private ambition, the hive broke down. Nectar collection plummeted. Honey production stalled.[1] It turned out that a selfless society was, paradoxically, worse for social welfare than one in which free individuals chased their own visions of a good life. Mandeville’s idea might have faded into obscurity but for a young economist called Adam Smith. He incorporated the essence of the poem’s argument into his book, The Wealth of Nations.[2] In Smith’s formulation, it was bakers, not bees, that provided the organising image: It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. Thanks in large part to Smith, this idea — that markets align the interests of producers of consumers — went on to become one of the most important in all of economics, framing how we conceive of the relationship between the market and the state. Yet in the last few years, as the full scale of the digital revolution has made itself felt, this old mental model has begun to look shaky. Does a market economy still foster prosperity when the bees are all on Facebook? And, if not, where would that leave us? Finding our Feet With all this talk of the metaverse, I thought it might be interesting to explore these questions in a little more depth. What was it, precisely, that the bees and the baker were originally intended to signify? What is it about a digital economy that makes this way of thinking less valid or useful? And what could this mean for a conception of the state that rests so heavily on this intellectual foundation? We’ll be talking a lot about bakers, so let’s start by being clear about the significance of this image.