Adam Smith:The Invisible Hand

Gordon Gekko, the villain of 1980's classic movie Wall Street,said ''greed is reasonable'' and he justified all community's fears about the financiers.Disgraceful money ambition,in the brutal World of Manhattan it is not something to be ashamed of anymore;like striped shirt red trousers hanger,it should be wear proudly..

            The film shocked everyone ends of the 20th century,but think about how people would respond such a declaration two centuries ago.At that time intellectual life was under the control of the church and it was considered almost insulting to describe people as "economic animals".And now Adam Smith's the idea of ''Invisible Hand'',you can think how people respond it in 18th century more or less.Even so,Smith's book has reached to commercial success and it has been finished at first edition;it is still on classics.The Individual interest is short name of ''The Invisible Hand'' and the law of supply-demand and it explains how these two factors are beneficial for society.The simple idea behind it is:It is not wrong for people to act in their own interests.In a liberal market,to act in their own interests of people,total actions,it does benefit all society and it make rich all.

            Smith,classic work of 1776 him '' The Wealth of Nations '' it has been used that phrases three times.But the important paragraphs of work,it has been emphasized importance of ''The Invisible Hand'':

[Every individual] neither intends to protect the public interest nor knows how much s/he can protect it.While managing this [her/his own] business by the method that will reach the maximum value,s/he works only for his/her own benefit,and like in many other subjects,in this,too,and invisible hand makes him/her a part of the work s/he has never intended to do...By affording advantage for his/her own, most of the time,s/he can protect the benefit of society more effectively than the time that s/he has intended to protect it. I've not seen so far that the people acting as if they were trading in the public interest help. 

References Adam Smith,The Wealth of Nations, Chapter II - Of Restraints upon Importation from Foreign Countries of such Goods as can be Produced at Home  
         
              This idea,of free market,the reason of development in complex modern societies,it helps to understand that it is so important.

              The course to be taken from ''Invisible Hands''  Let's examine an inventor:Thomas Edison. Thomas has invented a new bulb;more effective from at markets,long-lasting and bright.Thomas had made it for his own interests.;being rich,also maybe hoping to be famous.The related emerged product will be useful for society;it will creat employment both for bulb producers and for it will brighten demanders life.If there was no demand for bulbs,nobody wouldn't pay to Thomas and so invisible hand would have punished him for falling into such a mistake.

             Similary,others who see Thomas's job and earn money will also try to make more money from him by designing a better bright bulb.They will start to being rich.But the invisible hand never sleep.At this time Thomas will try to reduce prices and will try to sell more than opponents.

             Thomas,at every stage of the process,act for his own interests,doesn't think of society's interests,but unexpectedly the result benefit to all.

            Smith specifies that the "invisible hand" is a condition in which we can not operate.One of these,as known ''public property tragedy'' impasse.A related source of- for instance everyone who grazing animals on lands - ,it creates the being limited problem.People,even if their actions are against their neighbors,they continue to using green areas.

           The limits of free market In the past decade,the invisible hands doesnt support a related political perspective in fact.In the past decade,the invisible hands does not support a certain political perspective in fact.It is an optimistic theory [please check Micro and Macro],but it goes against the ideas of those who think that the economy should be best managed from the top, or that the government should decide what to produce.

           The invisile hand, beside governments and managments,underlines that individuals must decide what is produced and consumed.But,there is important conditions;Smith,makes a distinction with between in individuals own interests and selfish greed.The laws and regulations that protect us from injustice as a being consumers are our own interests.These are,contain property rights,patents and copyrights and workers' rights.The Invisible Hand should support with laws.

``Main MESSAGE
The benefit of the individual is the benefit of the community.

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David Ricardo:The Scarcity Principle

From past to present, from the beginning to the end of the 18th century and 19th century, perspectives of economic and social transformations are objectively impressive. From the witness's perspective,, we need to understand that it is traumatic too. In fact, The vast majority of the observers of the time were relatively pessimistic about the sharing of wealth and the long-term evolution of the social structure. This situation, no doubt the most impressive two economists of the 19th century and of a small social group - According to Ricardo they're landowners, According to Marx they're industrial capitalists- to be valid for Ricardo and Marx who foresee that production and income will inevitably take on a growing share.

            In 1817 On the Principles of Political Economy and Taxation; be referred to as ''principles'', The real problem of Ricardo, who published his work, it was the price of soil and the rent of soil changed in long run. There was no statistical source that he could use his hand. However, it didn't prevent him from recognizing Capitalism closely during his lifetime. He grew up in a Portuguese, Jewish family. It seems like he hasn't got any political prejudice. He had been affected by Malthus's model but he developed it. Mostly he was interested in that logical contradiction: When production and population began to increase, the soil was getting much more scarce compared to other commodities. The law of supply and demand indicates that land prices and rents paid to landowners would increase regularly. Over time, the share of landowners in national income will gradually decrease, which will distort the social balance. According to Ricardo, there was only one solution, the taxes on soil rents were to be increased regularly.

             We will see that this wasn't right: The soil has been at high levels for a long time, however as the weight of agriculture in the national income continues to decrease, the values of the soil field, compared to other forms of wealth, has fallen terribly. Ricardo wrote in 1810, It was certainly not possible to predict the technical progress and industrial growth that would be of great importance for the rest of the century. Ricardo couldn't imagine a world in which humanity completely gets rid of the pressure on food and agriculture.

           The forecast of the price of soil was still interesting: '' The Scarcity Theory  '', That is mean it has the potential for too much growth of certain prices over a long time. This could have distorted the entire balance of society. A system of price, like organising millions of individuals' activities, has an important role. The problem is, that this system is not provided either a limit or a morality.

          We will make a big mistake if we ignore the importance of this theory while analyzing the global sharing of wealth in the 21st century. Instead of farmland in Ricardo's model, real estate prices in major capitals or putting oil prices, it is enough to convince us. In both cases, the observed trend from the 1970-2010 period or when we look at how the extension of 2010-2100 can be shaped, in the countries themselves and international, Ricardo's model evocation of disaster, significant economic, social and political imbalances, that we can see obviously.

           Actually, in the economy, there is a fairly simple mechanism that this process can balance: The mechanism of Supply and Demand. If a supply of goods is insufficient and if the price is too high, the demand for these goods will decrease, which will cause to make prices down. In other words, if the real estates and oil prices increase,  to make it up for this situation, we should ride a bike or live in a small town, it will suffice. But it can not only be difficult but it can take decades to build such a scheme, during which time real estate and petrol owners will have a very large credit accumulation relative to the rest of the population and they will be able to buy anything that can be bought, including rural areas and bicycles they may have bought it. As usual, we can't think that it will exactly happen.

         But for now,The Mechanism of Supply and Demand, in connection with major changes in certain relative prices, is enough to say that inequality in the distribution of wealth cannot be eliminated from being large-scale and permanent. It is the main point of Ricardo's Scarcity Principle.

     

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Supply and Demand

The law of supply and demand always lies at the heart of the economy and at the deepest level of human relations.All these things determine the interaction of these two powers,prices of products at stores,a profit of company and while one family becomes rich the other one becomes poor.

           The law of supply and demand,why supermarkets sells high quality whiskey, according to ordinary brand of whiskey so expensive, computer companies's,for only changed colors of notebooks,explains why extra money is demanded.Like some basic equations in Math and Physics, the relation of between in supply and demand it can be seen in every field.

           This law,it is everywhere up to the in Ecuador,Otavalo's crowded streets, in New York,Wall Street's wide streets.Beside some superficial differeneces, there is too many farmers in South America,those in Manhattan they are Financier- for Radical Economists for these two places it is almost identical.If you look a little closer you will see why it is the identical:They are both big market.Otavalo,Latin America's the most biggest and the most famous marketplace; Wall Street is harbouring New York Stock Exchange place.Both of in, people buy and sell somethings.

           Whether it is the market stand where the products are physically sold,whether the virtual market,most of the made up of trade on computer networks like Wall Street, markets , it put together buyer and seller.The price is intersection of supply and demand point too.These there innocent-seen fact,it says much things to us about society and it creates the Basic Marketing Economy.

           Demand,it expresses people's quantity of product or service to be willing to buy a certain price from seller.As the price increases,it wants to take fewer people ,it will continue until it refused.Supply in the same way,it expresses a seller's quantity of product or service to be willing to sell a certain price.The price how low,the seller wants to sell so little goods,because they spent a certain money and time.

          Price,is a sign that supply and demand for a good is rising or falling.The secret of the economy is not very secret, in fact, prices are never fully balanced.All year Rose prices are always rise and fall:When it is passed from summer to winter,Florists will must bring roses from farther away;rose's supply falls,prices rises.At the same time we can give and example like Valentine's Day.Economists describe this situation as ''Seasonality.'' Some of Economists beyond this fluctuation, they try to find balance price.

           In some prices,we can find importants results about people.A few years ago,computer producer Apple,they drove Macbook notebooks to the market.Macbooks were produced in two different colors and black one was more expensive than white.Although, other systematic hardwares same, if someone want to buy the black one,they have to pay $ 200 more.Although, sales were succesfull.Could not be sold if there was not enough demand.

          Elasticity,sometime it takes time to respond into supply and demand prices changes.A Mobile Phone Company,when they increase call tariffs,Subscribers start calling less often or change the company.In Economy we call it as price elasticity of demand.So demand,it changes with in price changes.In some cases, there is a delay in response to cost increase - in this situation there is no price elasticity of demand or inelastic.For instance,when oil prices rise,consumers could not found alternative to buy oil.Some of the consumers started to use public transport.That kind of alternatives, in which cheap alternatives are preferred rather than expensive products,it is defined as substitution effect.

        We can say same things to Demand too.It is possible for Demand Elasticity.As the demand for products decreases,workers are cut off from work or the company ceases to invests.

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