MARKETS ARE UNNATURAL INSTITUTIONS:

Like its 18th-century predecessor, this 21st-century bee story is a fable with wider resonance. To understand this we have to see how the attraction of Mandeville's original metaphor rested in large part on the naturalness of the hive. Proponents of free markets ever since have played the same card, most obviously when appealing to a Darwinian survival of the fittest to justify the "creative destruction" in free markets.

Coupled with this appeal to the glory of mother nature was a dim view of human nature. This view has been celebrated and defended as robust realism. As Mandeville said in his discussion of his fable, "Most writers are always teaching men what they should be, and hardly ever trouble their heads with telling them What they really are."

But Mandeville's logic contained two fatal flaws. In the fable, main character Jove becomes so indignant at the vice of the bees that he "in anger swore, he'd rid The bawling hive of fraud." The result was calamity. The economy collapses and everything runs to ruin. In case the reader is too dim to understand the message, Mandeville ends the poem with "the moral," namely

Fools only strive

To make a Great an Honest Hive. [...]

Fraud, Luxury and Pride must live,

While we the Benefits receive:

Hunger's a dreadful Plague, no doubt,

Yet who digests or thrives without?

Mandeville gives private vice all the credit for creating general prosperity and portrays private virtue as wholly harmful. Half a century later, Adam Smith saw through this caricature of human nature. Smith is often is presented as endorsing Mandevellian cynicism. Out of context, one of his most famous passages does indeed sound like something from The Fable of the Bees:

It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

But Smith explicitly condemned "the system of Dr Mandeville" saying that it is "wholly pernicious." Smith's attack on Mandeville came in The Theory of Moral Sentiments (1759) in which he argued that "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it."

Not only did Smith believe that human motivation cannot be reduced to pure egotistical drives, he also saw that whatever the natural benefits of markets it took artifice to preserve them. In The Wealth of Nations (1766) he argued that without regulation, monopolists would artificially restrict production and raise prices. A beehive many not need regulating but the human hive most certainly does. If the "invisible hand" is attached to a corrupt, unchecked body, it will wreak havoc.

The plight of present-day pollinators alerts us to a deeper problem with both Mandeville's logic and the cruder applications of Smith's. Both appeal to the "naturalness" of market mechanisms and human avarice. But human civilisation is not a hive and human beings not wholly bad. What's more, bees never alter nature, human beings often do. In doing so, we can undermine precisely what makes nature work.

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