Invisible Hand

Notes

The invisible hand is a famous argument made by Adam Smith that claimed that out of selfish Incentives we could achieve prosperity. For example, the bread maker wants to sell more bread, so they are incentivized in creating bread both in quantity and quality so that it would sell, and in a competitive price too. It's not because they are generous that we reach a situation of abondence of food in good prices, but rather because they are selfish. This argument relies on everyone competing equally Competition without chances of Moral Hazard. For example, if the bread maker can become a monopoly and eliminate their competition they could produce a low amount of bread in high prices that would benefit their pocket but not the general welfare.

Visual

Overview

🔼Topic:: Economics (MOC) ↩️Origin:: Adam Smith (philosopher) 🔗Link::

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