The Invisible Hand - 60 Second Adventures in Economics (1/6)
OpenLearn from The Open University・2 minutes read
Adam Smith and Friedrich Hayek advocated for free markets where self-interested traders can freely exchange goods, leading to positive outcomes through the "invisible hand" of the market, even though it may take time for economies to reach equilibrium, prompting government interventions.
Insights
- Adam Smith advocated for free market principles where self-interested individuals trading freely could lead to positive outcomes through the "invisible hand" of the market, a concept further supported by Friedrich Hayek.
- While free markets are considered more effective than central planning, the time required for economies to reach equilibrium can lead to government interventions to address issues and frustrations that arise.
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Recent questions
Who proposed the concept of the "invisible hand" in economics?
Adam Smith
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Summary
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"Adam Smith's Invisible Hand and Free Markets"
- Economist Adam Smith in 1776 proposed that governments should allow self-interested traders to freely buy and sell among themselves, leading to positive outcomes guided by an "invisible hand" of the market. This approach, supported by free market advocates like Friedrich Hayek, is believed to be more effective than central planning, although economies can take time to reach equilibrium, leading governments to intervene to address frustrations.
