The Wealth of Nations and Invisible Hand by Adam Smith
The wealth of Nations is a very famous book about capitalism. Many economists would agree that the wealth of Nations is The book of capitalism. It was written by Adam Smith which was one of the first and one of the most important capitalists of all time. His metaphor of an invisible hand has become famous all around the world and many people have heard of it even though they have no idea about economy.
In this article I will talk about The wealth of nations in general and will try to explain the invisible hand in more details. The wealth of Nations talks about how the market controls itself. By using the metaphor of invisible hand, Adam Smith tried to explain how the supply and demand principle regulate the market and sets the price. The capitalism market makes sure that the market produce stuff that people actually need. How does this happen?
Well when many people want something on the market, and there is not much of this product on the market, price of this product goes up like hell. What does that cause? Because the price is high, that means that anyone doing this product, can earn alot of money. Because companies see a chance to earn a lot of money they start producing that product. What happens then? Because many companies produce that product, price of the product probably drops. As we can see, the demand for certain product causes more and more companies to produce that product. The invisible hand makes sure that market has the product the market wants.
This is more or less it. The most important thing that one can learn from The wealth of nations by Adam Smith is that market controls itself. The invisible hand makes sure that only the best companies survive in the market and that the market sells only the products that market actually want.
Written by: Matt
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Tagged as Adam Smith, capitalism, economy theories, free market, invisible hand + Categorized as Other, About economy, Economy articles