The Invisible Eye
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The Invisible Eye
Adam Smith's invisible hand has been endlessly discussed, but does satellite remote sensing offer an invisible eye?
Adam Smith is often credited for the creation of modern market theory. In his central works (The Theory of Moral Sentiments and The Wealth of Nations,) the Invisible Hand is mentioned only a handful of times. But, in essence, the Invisible Hand describes how a free market sculpts the flow of goods and their fluctuating prices, eventually influencing how self-interested individuals and Nations alike behave. Though Smith's comments traverse deep behavioural and political philosophy, the Invisible Hand is one of the most enduring illustrations of what we now often now conveniently sum up as market forces.
In the last two weeks, I have had the pleasure and honour to speak at COP27 in Sharm El-Sheikh, Egypt, and the OGC's Location Powers event focused on ESG in London. These two events have helped me form the opinion that the need to monitor changing and altered landscapes amounts to an invisible eye. What’s more, this invisible eye, depending on how regulations eventually land, is quite likely to guide Smith's invisible hand.
Let’s spend some time thinking this through.
As every individual . . . endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it. By preferring the support of domestick to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.
Smith is no simple read, and this paragraph has been interpreted in numerous ways by individuals far more learned than I am. But, note the commentary supporting domestic industry highlighting Smith's concerns over the arbitrage of labour and resulting products between countries for the good of countries. This in itself questions globalization and points squarely at insecure supply chains: a deeply modern problem. Yet this passage still suggests that the market should ultimately drive the viability of multi-national businesses. Those market forces are anthropomorphized as the invisible hand. The central thrust or subsequent interpretation of the Invisible Hand is that laissez-faire businesses can reach equilibrium without government intervention. An invisible hand rather than that of Hobbes’ Leviathan. Bernake describes the hand as aiming “…to align the incentives of market participants with the objectives of the regulator.”
Policy, driven by both the SEC and FCA, has begun to consider broader societal impacts of modern industry. Either within the context of SDGs or ESG*. The central message here is that financial regulatory bodies are expecting modern businesses to start reporting their environmental, social and governance impacts within the purview of their financial performance. While Governance and some Societal measurements can be made in semi-traditional and somewhat qualitative manners. Environmental impacts have the opportunity to be derived in part through geospatial analytics: measuring landscape changes.
While Smith alludes to the invisible hand moving markets due to the cost of goods and services fluctuating in different jurisdictions, we can now OBSERVE those practices and SEE how those goods and services are being created, managed, and performed from afar.
If we agree that ESG measurement will allow some kind of market levelling from those who want to invest or purchase from businesses with demonstrably better practices, then we can lean on the scalable and jurisdiction-less nature of satellite remote sensing to be our market leveller.
Our invisible eye can look across markets and help consumers and investors choose. In that choice lay the market forces. Will the eye then guide the hand?
*Apologies for the Alphabet soup