Those who make decisions in business, do not need a central authority,which would indicate that what they produce. This function is performedprices. For example, no one has forced farmers to growwheat, to persuade the builder to build houses and furniture maker - to makechairs. If the prices of these and other items indicate that consumersassess their value for at least the same level as the costs of theirproduction, the entrepreneurs in the pursuit of personal gain will be theirproduce.There is no need also to the central government controlled themanufacturing methods companies. Farmers, builders, furniture makers andMany other manufacturers will seek the best combination of resourcesand the most effective organization of production, since lowercosts mean higher profits. In the interest of each producerreduce costs and improve quality. Competition almost forcesthem to do so. High-cost producers will be hard to survive in themarket. Consumers tend to spend their money with the greatest benefit,take care of it."Invisible hand" of the market process works so automatically,most people and does not think about it. They simply take forgranted that some goods are produced in the quantities in whichconsumers want to buy them. Long lines, typical for countries withcentrally planned economies, virtually unknown to the peopleliving in a market economy. Access to a huge variety ofgoods, which is amazing, even today's consumers are alsolargely taken for granted. "Invisible hand" creates orderharmony and diversity. This process, however, is so implicitly, thatfew people understand its essence, and few pay homage to him. ButHowever, it is crucial to economic well-being of society.
Sunday, August 12, 2012
Market prices are sending a personal interest for the common good
Every single person is constantly trying to find the best dealuse of capital, which he can dispose of. He has a mind of itsown benefit, not benefit society. But when he takes intoattention to their own benefit, it is natural or rather inevitableleads him to prefer that employment which is most advantageoussociety ... He pursues his own advantage, and in this case, asin many others, he is sent by an invisible hand to the target, which is quiteno part of his intention.Adam SmithAs noted by Adam Smith, an amazing phenomenon in an economy based onprivate property and freedom of transactions, is that market pricessubordinate objectives of the korystolyubtsev prosperity of society or the nation as aa whole. Entrepreneur, "driven only by self-interest" is sent,Nevertheless, the "invisible hand" of market prices "to the goal (namely,economic prosperity of the country), which is not part of his
intentions.Many people find it difficult to understand the law of the "invisible hand", because therenatural tendency to associate the procedure with centralized planning.If the task is a reasonable allocation of resources, it seems naturalthat it should respond to any branch of the central government. Law"Invisible hand" claims that it is not necessary. In privateproperty and freedom of exchange rates, forcing millions of consumers,Manufacturers and suppliers of resources to make their personal choice,however, are a means of harmonizing their interests. Prices includethe information about consumer preferences, cost, and factorsassociated with time, location and other circumstances into accountwho are unable to either an individual or a planning authority.Only one single figure summarizing - market price -provides manufacturers with a full range of information needed tobring their own actions in line with the actions andpreferences of others. Market price guides and encourages andmanufacturers and suppliers of resources to produce things, valuedhighest in comparison with their cost of production.
Those who make decisions in business, do not need a central authority,which would indicate that what they produce. This function is performedprices. For example, no one has forced farmers to growwheat, to persuade the builder to build houses and furniture maker - to makechairs. If the prices of these and other items indicate that consumersassess their value for at least the same level as the costs of theirproduction, the entrepreneurs in the pursuit of personal gain will be theirproduce.There is no need also to the central government controlled themanufacturing methods companies. Farmers, builders, furniture makers andMany other manufacturers will seek the best combination of resourcesand the most effective organization of production, since lowercosts mean higher profits. In the interest of each producerreduce costs and improve quality. Competition almost forcesthem to do so. High-cost producers will be hard to survive in themarket. Consumers tend to spend their money with the greatest benefit,take care of it."Invisible hand" of the market process works so automatically,most people and does not think about it. They simply take forgranted that some goods are produced in the quantities in whichconsumers want to buy them. Long lines, typical for countries withcentrally planned economies, virtually unknown to the peopleliving in a market economy. Access to a huge variety ofgoods, which is amazing, even today's consumers are alsolargely taken for granted. "Invisible hand" creates orderharmony and diversity. This process, however, is so implicitly, thatfew people understand its essence, and few pay homage to him. ButHowever, it is crucial to economic well-being of society.
Those who make decisions in business, do not need a central authority,which would indicate that what they produce. This function is performedprices. For example, no one has forced farmers to growwheat, to persuade the builder to build houses and furniture maker - to makechairs. If the prices of these and other items indicate that consumersassess their value for at least the same level as the costs of theirproduction, the entrepreneurs in the pursuit of personal gain will be theirproduce.There is no need also to the central government controlled themanufacturing methods companies. Farmers, builders, furniture makers andMany other manufacturers will seek the best combination of resourcesand the most effective organization of production, since lowercosts mean higher profits. In the interest of each producerreduce costs and improve quality. Competition almost forcesthem to do so. High-cost producers will be hard to survive in themarket. Consumers tend to spend their money with the greatest benefit,take care of it."Invisible hand" of the market process works so automatically,most people and does not think about it. They simply take forgranted that some goods are produced in the quantities in whichconsumers want to buy them. Long lines, typical for countries withcentrally planned economies, virtually unknown to the peopleliving in a market economy. Access to a huge variety ofgoods, which is amazing, even today's consumers are alsolargely taken for granted. "Invisible hand" creates orderharmony and diversity. This process, however, is so implicitly, thatfew people understand its essence, and few pay homage to him. ButHowever, it is crucial to economic well-being of society.
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