Your mom was yelling at you this morning to get you up? You just sighed, “I don’t have anything important to do now. Why she can’t let me sleep till noon?!”
Well, she can’t because she cares for you. She knows it will break the sleep balance. But there are you! You believe you will still be on a right track even if you sleep eighteen hours a day! Why? Because you know you can give this habit up when you need. You balance things in your own style. Something invisible wakes you up at 6 when you have exam. Haha!
Did you think the whole world economy could be balanced by something like that too? People buy and sell things everyday numberlessly. They do not think about the economy system in a whole. It is the government who plays the mommy role here. It puts a bar on to keep a balance in the economy system. Why would it do so? Can’t the market take care of itself?
Adam Smith, our most beloved scottish economist, believed that a free market can take care of itself. Supply and demand manage to meet the place where the price should remain. He used the phrase Invisible Hand in his ‘Wealth of Nations’ to refer to this process.
When people find same product at different prices, they go for the cheaper. In free market economy there is a competition between the sellers, that’s why price can really not go awfully high. Supplies are always limited, so it cannot go that cheap either. An equilibrium is created naturally. Everyone looks for his interest but together people all work for the common interest! Adam Smith denies that government has to intervene in a Laissez Faire economy.
I personally believe Smith’s invisible hand has much influence in our life too. Like look at your dress right now. Why did you buy it? Didn’t the invisible hand made its price reasonable to you and only then you did buy it?
samha's table 