Monday, December 17, 2007

The Demand Curve Slopes Downwards -without help from an invisible hand!

Andrew Mickey CommodityOnline (Kerala, India)
Writes: ‘Commodities Supercycle will continue for years’ (here):

One-hundred dollar oils and sky-high commodities prices would eventually prove to be a drag on the world economy and commodity prices would fall due to lowered demand from a world economy that isn’t growing quite as fast. It’s Adam Smith’s invisible hand at work.”

What nonsense! It’s a market at work, not invisible disembodied body parts. What do markets need from invisible hands to bring about ‘lowered demand’ as prices rise fairly quickly?

The demand curve slopes downward; they do that in Economics 101 (I hope).

Adam Smith wrote about in Book I of Wealth Of Nations and didn’t mention anything about invisible hands; he simply related the quantity demanded the price.

In fact, he only used the metaphor of ‘an invisible hand’ once in Wealth Of Nations and not in relation to markets.


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