The Synthetic Apriori, Market Failure, External Diseconomies

From: Ben

To: Walter Block <[email protected]>

Subject: Thoughts on the invisible hand

Hi Walter,

Thanks for your nice piece on the invisible hand:

As I understand it, the phenomenon described by the term invisible hand arises most fundamentally from the fact that all (or most) economic exchanges in the society are voluntary. Because every transaction brings with it a mutual increase in value to the participants (as defined subjectively, in terms of revealed preference), it follows almost (or perhaps even actually?) tautologically that the universalization of transaction-level mutual betterment translates into society-wide betterment.

The only question I have here pertains to the possibility that, by some mechanism that is not obvious to me, paired mutual benefits do not tautologically translate into society-wide betterment. (I wonder if this could somehow, one way or the other, be elucidated, or even proven, mathematically. I’d like to see someone try.)

To my way of thinking, the connection between universal (or near-universal) voluntary exchange and the society-level invisible hand phenomenon should be emphasized more. Doing so would make the invisible hand less (seemingly) miraculous and integrate it better into a ground-up understanding of how things function in reality. It would also provide good ammunition against those who argue that the invisible hand is really an ideology, rather than a description of how things work in reality; it would make the invisible hand phenomenon seem more intuitive and common-sensical.

I’m not sure, but the same voluntary-exchange basis may provide the mechanism of economic spontaneous order. I’d have to think about this more.

The main potential utilitarian-type problem that I see for an exclusively voluntary way of organizing things pertains to negative externalities (= there are uncounted participants in a seemingly voluntary exchange, who may experience a negative value from it). In this sense, there can be an involuntary transfer of value (~theft) from the uncounted to counted participants. As of now, I’m unclear on the best way to limit these externalities. However, I do lean strongly against most regulations and am open to your approach, which, if I understand it, would proscribe all (top-down, coercive) regulation.

Thanks again for your piece.


Dear Ben:

Thanks for your thoughtful comment.

I reject your word “tautologically.” I would substitute for it “necessarily.” As an Austrian economists, I believe in, support, the Kantian synthetic apriori. See on this: Hoppe, Hans-Hermann. 1995. Economic Science and the Austrian Method. Auburn, AL: The Ludwig von Mises Institute;

As for externalities, whether positive or negative, this is part and parcel of the critics’ of the free enterprise system doctrine of “market failure.” For a rejoinder to this fallacious argument, see:

Block, 1994, 1998, 2009, 2011, 2012; DiLorenzo, 1990; Gordon, 2021; Horwitz, 1977; Lewin, 1982; McGee and Block, 1994; Rockwell, 2000; Rothbard, 1982

Block, Walter E. 1994. “Pollution,” Cliches of Politics, Mark Spengler, ed., Irvington on Hudson, New York: Foundation for Economic Education, pp. 267-270

Block, Walter E. 1998. “Environmentalism and Economic Freedom: The Case for Private Property Rights,” Journal of Business Ethics, Vol. 17, No. 6, December, pp. 1887-1899;;; Romanian translation: www.antiteze.com

Block, Walter E. 2009. “Contra Watermelons.” Ethics, Place & Environment, Vol. 12, Issue 3, October, pp. 305 – 308;

Block, Walter E. 2011. “Ron Paul and the Environment.” December 13;

Block, Walter E. 2012. “Global Warming, Air Pollution and Libertarianism.” January 18;

DiLorenzo, Thomas. 1990. “Does Capitalism Cause Pollution?,” St. Louis, Washington University: Center for the Study of American Business, Contemporary Issues Series 38.

Gordon, David. 2021. “Can Taxation Be Justified?” August 13;

Horwitz, Morton J. 1977. The Transformation of American Law: 1780-1860, Cambridge: Harvard University Press

Lewin, Peter.  1982. “Pollution Externalities: Social Cost and Strict Liability.”  Cato Journal, vol. 2, no. 1, Spring, pp. 205-229.

McGee, Robert W. and Walter E. Block. 1994. “Pollution Trading Permits as a Form of Market Socialism and the Search for a Real Market Solution to Environmental Pollution,” Fordham University Law and Environmental Journal, Vol. VI, No. 1, Fall, pp. 51-77; Translated into Russian, and published in № 3б, 2007 of “Ekonomicheskaya Politika” (Economic Policy) Journal;;

Rockwell, Jr. Llewellyn. 2000.  “The Enviro-Skeptic’s Manifesto.” May 1;

Rothbard, Murray N. 1982. “Law, Property Rights, and Air Pollution,” Cato Journal, Vol. 2, No. 1, Spring; reprinted in Economics and the Environment: A Reconciliation, Walter E. Block, ed., Vancouver: The Fraser Institute, 1990, pp. 233-279.

Best regards,



3:31 am on April 18, 2023