Saturday, March 23, 2013

Quick Bites Corner No. 2

Posted on “21st Century CitizenshipHERE 
"Under Adam Smith’s view, the metaphor of “the invisible hand of the market place” describes the self-regulating behavior of the market because of two factors: self-interest and competition. …
… This self-regulative nature is why Adam Smith coined the phrase “the invisible hand of the marketplace.”
This is what students are taught by their faculty! 
It is not true historically in reference to Adam Smith.  He said absolutely nothing about "an invisible hand' in relation to the "market place" or to "competition".  
Moreover, the statement is inaccurate regarding "self-interest" and "competition" and nor was it about "self-regulating" behaviours.
In Smith's view "Merchants and Manufacturers" in 18th-century mercantile Britain were not to be trusted with "self-regulating" - that is why Adam Smith made such clear statements on the need for laws in a system of justice.  
Moreover, the same "Merchants and Manufacturers" were wont to press legislators in the governments of the day for the imposition of tariffs and other protections to prevent imports from abroad from entering the country and competing with domestic entrepreneurs by "narrowing the competition" and "raising prices".  Tariffs and prohibitions were common interventions of governments as is the operation of courts of justice without which competition won't work.


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