Concept

A detailed Summary of Concept


Explaining a Concept: Concept of the Invisible Hand in a Laissez-faire economy

"By preferring the support of domestic 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 it." Adam Smith, Inquiry into the Nature and Causes of the Wealth of Nations 1776.

What business does a government have in commerce and trade? Why would a government want to interfere between two countries benefiting from each other by trade? What right does the government have in two individuals wanting each other's products or services? According to some, commerce and trade should be permitted to operate free of controls of any kind; there should be no tariffs or other barriers. This is where the term laissez-faire is introduced. It's direct translation in French, "leave alone to do", is self-explanatory.

A strong believer in this type of economics is Adam Smith, both a philosopher and an economist. Born on 1723 in Kirkcaldy, Fife, he studied at Oxford, and became a professor of logic at Glasgow (17


Our economic system today seems to lean toward another philosophy called Keynesian economics. Keynesian economics is based on a belief that the economy can possibly fall into a recession and not be able to pick itself up. The solution is, without the aid of the government; an economy will stay in the "trough" and will never reach the "peak". Though laissez-faire has not been a very popular belief since the mid-19th century, we as a people are able to do business independently. For "he intends his own security" and "...intends his own gain."

IV, Chap. II), who stressed the role that the "invisible hand" played in attaining a harmony of interests.

Adam Smith is most remembered today for his explanation of our market system. A majority of people saw confusion when they observed economic activity in England during the middle of the 18th century. They saw everyone doing whatever they pleased and deemed necessary. Businesses produced whatever they wanted to make. Consumers purchased whatever they wanted to buy. No one told anyone what had to be bought and what had to be sold especially the government. And yet, somehow, businesses seemed to be providing the goods and services that consumers wanted and needed. Some might have called it luck; Adam Smith called

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Category: Politics

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