You can check out some more of my Economics videos here: ua-cam.com/play/PL-MZyeaK_bhseLsGwrrrtWjiSiYO6oPIt.html Or perhaps Global Politics is more up your alley? Check those out here: ua-cam.com/play/PL-MZyeaK_bhvgZfBQ_AfjizWO27-YzXeB.html To what extent are Adam Smith's theories seen in the world today? Let us know in the comments!
No. its not adam smith envisioned , yes for the basic theory, but not like the video examples and nowadays practical capitalism. But its the best video and sinplified basic theory and idea of capitalism, ( not by adam smith though), good job
This isn't a very good example of Adam Smith's 'invisible hand' at all. A good example would be the cheese making it to market in the first place. It involves dairy famers, those who make the cheese, those who transport, those who own the shops. They aren't working exclusively with each other and there is no one in charge of them, yet you end up with cheese to buy in the shop. Slightly more complicated products provide even better examples- a pencil is a good one (see the short 'I Pencil'). It involves lumber jacks, miners, lumber yards, truckers, rubber plantations, pencil factories, shops, etc. People working independently in different locations, maybe even different countries, and not even knowing what end products their labor will produce, and without anyone in charge. All just people trying to make a living, going to work every day doing different things. No one to tell them that they need to do these things to make a pencil, yet the pencil ends up for sale at the shop. THAT is the concept of the 'invisible hand'.
@@Cutecumball Not really. He focuses everything on purchasing products and price. The core of the concept of the invisible hand is not just people choosing products and prices, but that people actually go earn their livings based on their own self interest and without anyone telling them what they have to do, and without anyone directing their activities towards a final product, yet lots of people doing these individual tasks every day leads to final products that are useful. That is a lot more profound and more fundamental to the concept than what he talks about here. Also, Adam Smith is not just the father of laissez faire economics. He is considered the father of economics, full stop. He also implies that this theory does not work out in reality. The invisible hand is not just theory- it is observable every day. It is really allegory as opposed to theory. A lumberjack cuts down trees Oregon, a Mexican works at a graphite mine, and a shop keeper sells a pencils. They don't work together, and no one directs them towards that final product, yet it happens every day- just because they are all trying to make a living. Now there are lots of other theories, details, concepts, and understanding in modern economics that has developed since Smith, but the core concept of this remains true and observable.
@@patrickmacleod2415 so basically like Dominando said, you are saying the same thing. Basically the CheeseOrama owner decided that they cannot get good cheese anywhere these days, especially since they are obsessed with it and like different varieties right. Going through the #FarmersWeekly magazine just to find all the farmers with the different cheeses is not cost effective when they just buy it for themselves. Imagine driving to different farms in different locations just to get their fix of cheese. So knowing that a lot of people read the magazine possibly with the same problem he faces, he figures that the best way to get the cheese he wants everyday, at will, is if he can find it all in one place. So a CheeseOrama would fulfill his needs and his fellow #FarmersWeekly readers. So he effectively acts independently by deciding to open a CheeseOrama, maybe he finds out from the magazine about how many people in his vicinity write to the magazine about where to find cheese. He collects his statistics and opens a store. Something he does independently like your stationary shop. And then of course, he calls all the farmers (in your example, the lumberjack and lead retailer {because the graphite miner does not necessarily convert the graphene into lead right}) with the good cheese, to place an order and hires some suitable transport person to deliver the cheese to his store (because he is using different farmers, so it is more convenient for the transport guy to fetch all the cheese unless the farmers are able to make their deliveries to the store, but imagine the traffic that would cause right {in your example, is it the stationery store or the pencil brand maker we are talking about?}). Anyway, our class teacher leaves a lot to be desired on my part. I am guessing people who watch this video have gone to University and came across Economics as a subject, so we are familiar with the normal economics terms like Indifference Curves and Marginal costs. Making it seem so basic, really takes away from the meaning he is trying to convey. With that said, I would shop at CheeseOrama before I set foot in that other place, because of aesthetics, because a person who takes the time to define the look of the cheese store knows that good wine takes time 😌 (ok I'm just saying that, because it sounds good to say it, I do not actually know). My understanding of the theory he presented about how the economy works is that there are two economies essentially: those with regulated prices and those with free trade. For example, certain petrol is regulated in South Africa, let's say the 95 petrol price is set by government, and the other fuels are like 93 or Diesel you can name your price as a garage after the government does its'price adjustments. Now since 95 is the same price across all garages, I am no inclined to just pour fuel at any garage because of aesthetics. My dilemma being that the garage I prefer is few and far between. Now the reason I prefer #Shell is the quality. Some other person does not experience my problem, because an apple is an apple to them (because there's simply apples I will not eat right). So the way it is explained here, 'the invisible hand' will force me to relocate my whole life to a place with a #Shell garage because I love my #BMW, whereas some other person will choose diarrhea by going to Cheeseopolis.
He did not explain it ! He explained what others have wanted it to mean. Adams never wanted unregulated markets, you should read his works, not rely on this guy, who havent read Adams either !
Speaking of self interest and cost benefit analysis to make decisions, all that fate in the logic of human thoughts go out the window when you see people in Las Vegas shopping around for the best buffet where they can save a few dollars. Then after the buffet, they go out to gamble almost a guarantee to lose hundreds of dollars.
@Mister Bister The point is that it’s illogical to create an economic system based on the “invisible hand of God” instead of relying on the scientific method…data and analysis wins over theology every single time.
@@KorczyksClass I got lucky as my College showed me this video, so much better than a week on Wealth of Nations to understand the concept. My Teacher said we don’t really need to read it entirely to get the idea as it’s “So much more about corn than it needs to be.” 🤣
i just started reading WoN and im on book 3. Adam eas explaining the very foundation of economy starting from the basic of learning a skill and its relation to other trades which drives the market.
In my country at least shops still have this ''price war'' sometimes, so they will compete to have the cheapest price on candy, usually when it's close to easter. That gives us customers cheaper prices, but it still about their own interest I would say.
Everyone misses the constraint that Smith put on the invisible hand in the Wealth of Nations. A person should invest and spend for his own self interest but they should do it only within their own country. " By preferring the support of domestic to that of foreign industry, he intends only his own security, and by directing that industry in such a manner as its produce may be of greatest value, he intends only his own gain, and as he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Wealth of Nations
One part of Adam Smith's writing that, while extremely important, is largely ignored. This is his analysis of how the private ownership of nature (which political economists referred to as "land") effects the production and distribution of tangible wealth (as distinct from the financial claim on tangible wealth). Smith's analysis followed that of the French school of political economists, the physiocrats. The physiocrats offered an entry level analysis of land markets, an entry level analysis because they were writing during a period when commercial agriculture dominated the French economy. Thus, they spent no real time analyzing the same land market dynamics that existed in town and cities. Here is what they all understood to be the case. Every parcel or tract of land has some potential annual rental value as determined by demand (i.e., market forces) directed by whatever restriction on use are imposed by government. With regard to agricultural land, they described the process by which rental value is based on fertility and other factors that make it possible for the same input of labor and capital goods to produce greater output of agricultural commodities. The difference between output on the best land versus the next base land is defined by the political economists as "rent." Less and less rent arises as land quality falls. At some point, land cannot be worked to produce enough output to justify the required labor and capital goods. The land market has then reached its "margin of production". Later political economists began to apply the Smith-Physiocrat analysis to other land markets, to land that holds timber or subsurface mineral deposits. All sorts of locational advantages or disadvantages determine how much, if any, rent comes from locational advantage. Some, most prominently Henry George in the late 19th century, argued that as rent arises based on natural advantage or advantage created by privilege under law, rent rightfully belongs to society. George argued that rent should be publicly collected. And, once one turned over whatever rent was due, the individual (or business entity) had met any financial obligation to society. The taxation of earned income flows, of tangible assets and of commerce is by definition an unjust confiscation of private property.
Let take two bakery and both sell croissants, but one baker does it the traditional way and sell their croissants a little more, and the buyer might pay a little more for traditional croissants. Cheaper doesn't necessarily mean more customers, but a buyer might be motivated by quality.
What happens when Cheesopolis decides to sell their cheese at a loss to compete with Cheesorama and puts them out of business? What happens when Cheeseopolis does this to all other cheese sellers? What happens when Cheesoplos is the only one selling cheese?
The invisible hand is good in theory and it works well too. But it may lead to corruption and incorrect practices. For example, a big shop can invest in a big marketing campaign and may change the local policies and thinking patterns. While a small business can not do so. Here the role of government comes in. But it should be limited only to some extent. Basically a combination of both will work well for economics.
Except when Cheesopolis lobbies the government for pro-cheese policies that would directly benefit them above competitors. The invisible hand is no match for the interests of Big Cheese.
@@KorczyksClass It was super-useful! I don't even teach h.s. anymore, but I've brought up the invisible hand with my grade 9 classes so I was looking for something simple enough for them to grasp. This fits the bill big-time.
0:44 Adam Smith was NOT advocating for Lassie Faire economics . Smith's Comments need to understood within the Context of The Theory of Moral Sentiments and the Context of his time . Smith famous quote " It is not from the benevolence of the butcher , the brewer , or the baker , that we expect our dinner , but from their regard to their own self interest . " ( WN I.ii.2 ) " It is the great multiplication of the productions of all the different arts , in consequence of the division of labour , which occasions , in a well-governed society , that universal opulence which extends itself to the lowest ranks of the people . " (WN I.i.10 ) - note how Smith says " self interest " not selfishness - He comments on a " well-governed society " referring to the social contract * - " which extends itself to the lowest ranks of the people " ** Adam Smith was writing during the Enlightenment and an era of Mercantilism . Smith detested massive wealth inequality , where the rich tobacco , cotton and lumber merchants of Glasgow had considerable wealth , while there was massive urban poverty . So in this context , Smith was advocating for a social contract where all citizens had an opportunity to participate in a capitalist ( mercantile ) system . So in a well governed society , the government creates the opportunity for all citizens to participate in this mercantile system , not just just the wealthy merchants . Also , as Micheal Hudson points out , classical economists supported using capital to create actual wealth ( goods , agriculture and services ) as opposed to using capital to exploit others . * The Social Contract is the expected set of laws , rights and common values , set up between the Government and Citizens , in order to have a civilized society . Hobbes , John Locke and Rousseau wrote their versions of the social contract . ** During the Enlightenment , the idea of Classical Liberalism starts to emerge - Which promotes of equal rights of all citizens. .
I have acquired Augustus Kelley’s reprint of the first edition of “The Wealth of Nations,” which is challenging to comprehend due to its archaic English. However, I’ll retain it rather than sell it, as this reprint has become quite scarce, causing its value to increase significantly. The relevance of “The Wealth of Nations” will endure as long as capitalist societies exist.
This system works when it's used properly, It doesn't work when people stay loyal to brand names even if an off brand is cheaper and better. Hermes by all virtue of the invisible hand, should not be profitable on its birkins, because they force you to send exorbitant pricing for it. But they create an artificial value of "wow you were worthy of buying a Birkin" even though there are alternatives that are genuinely better.
3:13 "So this competition resulting from these choices ... well that's making stuff better for everybody." "It is not from the benevolence of the butcher ... that we get our dinner, but their regard to their own self interest". American hormone-injected beef is not "better for everybody", yet is the outcome of the invisible hand in US. This single test proves the concept of the Cult of the Invisible Hand is wrong.
Adam Smith's theories are the classic example of someone who took a risk, got lucky and ascribed the entirety of the success to himself - his traits and choices...
Good question! According to free market theory, it would be a pretty bad thing as it would mean no more competition. Many capitalist countries have laws in place that are meant to prevent it from happening. In the United States, the Sherman Anti-Trust Act is one of those laws designed to give government some power to break up monopolies.
@@KorczyksClass Thank you! So much I already had heard, in this case at school. Monopolies indeed seem to mean a pretty bad thing. In particular, a monopoly will come together with a lead in attainable quality. I.e., if you enforce that such a company is to be split, you at least for some time will cause that consumers can't obtain the same quality, any more, as easily as before. As long as you divide only the bad ones, it's not so much of a problem, but when you begin to act against the best, you'll appear as a person who artificially creates difficulties, resulting in the situation that you refrain from such attempts and let communism flourish. Google Translate recently has outputted nonsensical equivalents for Chinese characters because they simply have neglected to label expressions thematically. A recognition of the thematic orientation of the characters would have been possible, but Google only factored in the _pronunciation_ with its many ambiguities. Currently, a competitor of UA-cam doesn't seem to be in sight, while you on UA-cam often are exposed to unpleasant sound effects. You can assume that UA-cam fails to act against such downsides because they fear that video makers might begin to long for another place to upload. If a competitor already existed, they perhaps wouldn't be so generous. Forbidding things, they wouldn't appear that much as merciless and wouldn't have to lose that much. They altogether could proceed much more flexibly, freed from a certain _inertia_ that comes with a hegemony. Clashes they now still try to avoid, in a cramped way, would already have happened, in the form of the _introduction_ of competition. Competition could begin to unfold its beneficent effects. Even if you learn Chinese to become able to exploit China's Hǎokàn, you currently by far are not (yet?) offered a comparable amount of videos of some greater length, by the latter website. And to be able to upload on this website, you need a Chinese telephone connection. Living in Austria, I observe that you have one big chain (with a market share of c. 33%) of grocery stores a consumption of the best produce of which makes you perhaps ten times healthier than you are when you buy elsewhere. There are two other big chains (with c. 34% and c. 20%) offering some comparable products but altogether failing to reach a comparable assortment. With that best one of the big chains, the personnel often is unfriendly, and of course, you'll presume that you're dealing only with the tip of an iceberg of other shortcomings. Apart from the big chains, there is a tiny group of supermarkets which only sell organic products. Altogether, you can assume that you have a downright unbelievably good constellation. If the group of organic supermarkets improves its assortment, the 33-percent giant will follow suit, and if this giant fails to do so, the other giants might begin to surpass them. Nevertheless, the organic markets (for certain offering the best products) are hundreds of kilometers apart and only in heavily polluted areas. Recently the big chain with the good products has merged two subchains into one, for the sake of a bigger efficacy and with a loss in the variety of products. A fourth big chain with quite good products has disappeared, and so have numberless tiny eco-grocers. As an average consumer, you currently are dependent on that one chain, if you do not want to hugely reduce your bodily and mental performance. That sort of a peak achievement of one supplier is crying out for another division, after capitalism has produced it - like with IBM in the second half of the 20th century and perhaps until today. You largely can only see what immediately surrounds you, just like the inhabitants of the Soviet Union before the arrival of the first Western tourists around 1960, and you slowly begin to wonder if together with such a growth of an economic monoculture at home, there might also be emerging some faraway region of the Earth (China?) in which you (soon?) will become able to experience a totally different, altogether much higher level of supply. After all, it certainly could be much better still, in Western countries, than it is. On ua-cam.com/video/QQwQklUcXf4/v-deo.html (Chinese Vocabulary - Fruits & Vegetables, by Learn Chinese Mandarin), I already am confronted with a cornucopia of fruit and vegetables which I even haven't ever heard of. I also am reading that in the officially still communist China, a much higher percentage of cars than in the USA already is electric. They begin to build batteries for such vehicles which Western commentators only can marvel at. Obviously, there exist other factors of some important relevance than only the policy of a division of monopolies. If producers and consumers don't enable that a certain quality will be supplied, through producing and buying it, you even in a strictly capitalist society can end up with a lower wealth than in a (much more) communist one. During the time of the Soviet Union, you had many capitalist regions of the planet with a much lower standard of living than the Russian (for example, in India). Doesn't, in the end, happen the real competition rather between the several workers of a producer (like it was organized in the Soviet Union) and the several consumers? If an unwritten taboo forbids that a worker delivers a certain quality, and such a taboo also forbids that you _buy_ a certain amount of a certain quality (for example because you have to buy an expensive car, suit, or house, to represent a company, rather than the less visible organic food you move into your body), you'll end up with a monopoly of poor products, even in the middle of a polity with the most effectively applied anti-trust law. That is a capitalistically subdivided monopoly of stupidity, then, a sheer dance around the golden calf without any usable final good.
They can either sell their products at a reasonable price or abuse their power and raise the prices to the roof. In the second scenario, people will be forced to pay a very high price to get what they need and the company will make a huge profit. For a while at least. Some time into the future some businessmen will see that the industry/sector is very profitable and will shift in. And this is the point at which price competition starts. Of course the large company could use predatory pricing techniques, but the practice shows that it's usually a fight with hydra. Cut off one head and another two will arise. You can run a loss to eliminate competition, but when you do and then bring prices back up, new competitiors will appear sooner or later. It's financially suicidal in the long run. The only way to sustain a monopoly in a free market is to offer the cheapest products of the highest quality, while being able to satisfy all the demand. But in such a case, it's not at all harmful to the customers.
@@janr.9192 The hydra with the many heads emerges because the components you need for a product have their own prices, doesn't it? I.e., if you continue to offer a product for less money than you have to invest in it yourself, the competition will arrive in no time.
Ander Chydenius was eleven years before Adam Smith with his book Nationl gain. And Adam Smith was not talking about Laissez-faire since he was against merchantism and restriction that was placed on people in 1800 century. Adam Smith is tolkning about todays socity.
Your presentation was ok, but if I remember right, the phrase invisible hand was mentioned once in Smith's book and has very little to do with the book's content.
The economy is a process that needs oversight and regulation from government and buffers such as unions and a sane independent banking system and my analogy - the Gardener vs the wild meadow. That's the choice we made when we left the hunter-gathering life behind for agriculture and the big city. Unfortunately the sustainable growth that might be achievable between natural free market dynamics and regulation totally fails due to (1) government and union corruption and incompetence (2) militarism, imperialism and war (3) organized and white collar crime (4) chaotic factors such as weather and climate events (5) the periodic disruption caused by new media, technologies [bit coin, the internet, fake news etc.] (6) religion, social upheaval and cultural wars (7) scarcity of resources and the destruction of the environment (8) ego, polarized politics and the war for power for power sake (9) greed and irrational human behaviour such as having 10 kids or no kids (10) the lack of any kind of common value system and Self Interest vs the common interest. So Smith might be a good starting point but economic theory has failed to properly model reality with very much sophistication and zero predictive accuracy. It is a failed science. In my opinion economic theory requires a complete rewrite from a systems engineering perspective. Capitalism is totally out of control to the point that the middle class is being destroyed, slavery and corporate elitism rule, and the planet earth is toast. No benevolent and rational gardener presides over this garden. Maybe we need an alien zoo keeper as the invisible hand. Maybe AI could be a good thing. What's in it for me? The biggest lie in human history = profit. Any engineer will tell you that you can't get more out of a system than you have to begin with.; you can only produce profit at the expense of others. Cheers.
Intersting how when Marxists point out that true socialism/communism has never been tried and that there are countries that have capitalism that are not ideal the realization never occurs to them that as countries become more socialist/communist they accelerate towards disfunction, but as countries move towards freer markets they generate more wealth and opportunity for their people
@@bensonbeebarry2055 true, but I would certainly take some corrupt idiots that still allow us to do as we please, than a corrupt government that forces people to do what they want. Very very simplified I know but I’m not getting into the nitty-gritty
Incorrect!! Smith talks about the "Invisible Hand" in a very specific discussion about international trade, suggesting that the English would prefer to invest in English businesses rather that international ones, and would therefore be protected from the evils of Free Trade by an Invisible Hand. It's not a particularly smart idea, but it also has nothing to do with laissez faire economics.
@@KidFictionOfficial He meant mercantilism and he against it. Mercantilists thought preventing imports and promote exports will make their countries wealither and its wrong. So basically he prefer free trades
@@Cutecumball Yes, but this position has very obvious flaws, which Smith recognised, that was the whole point of the chapter. If there were no import tariffs why wouldn't English businesses just buy products from Poland for half the price? The whole point of the chapter is to make an arrangement (a really bad argument) that English businesses would be moved to buy from local suppliers "as if by an invisible hand". It's a stupid argument, that only really works to prove the limits of free trade.
@@KidFictionOfficial "If there were no import tariffs why wouldn't English businesses just buy products from Poland for half the price?" that's wholesale. Free trade is about trading with whoever you want to with as less government intervene as possible. But I'm still confused about your argument. Can you make it more articulate
What can cheesopolis do to get your business back? He can use the uber price dumping formula. He can get a lot of money from large investment fonds like blackrock or vanguard, work with a loss intentionally until the competition goes bankrupt, and then rise the prices sky high because he has a monopoly. That is called the visible hand of the economy. 😁
They can either sell their products at a reasonable price or abuse their power and raise the prices to the roof. In the second scenario, people will be forced to pay a very high price to get what they need and the company will make a huge profit. For a while at least. Some time into the future some businessmen will see that the industry/sector is very profitable and will shift in. And this is the point at which price competition starts. Of course the large company could use predatory pricing techniques, but the practice shows that it's usually a fight with hydra. Cut off one head and another two will arise. You can run a loss to eliminate competition, but when you do and then bring prices back up, new competitiors will appear sooner or later. It's financially suicidal in the long run. The only way to sustain a monopoly in a free market is to offer the cheapest products of the highest quality, while being able to satisfy all the demand. But in such a case, it's not at all harmful to the customers.
@@janr.9192 thanks just like here in our city almost all establishments here owned by a single company or owner they are strict on new investors to establish their business that`s because they are afraid that their business is overwhelm. Thank you for this
to bad theres no more small independent companies to compete with:/ If there was dang that would be sweet if they were competing by each lowering the price that would be the day lol
You can check out some more of my Economics videos here: ua-cam.com/play/PL-MZyeaK_bhseLsGwrrrtWjiSiYO6oPIt.html
Or perhaps Global Politics is more up your alley? Check those out here: ua-cam.com/play/PL-MZyeaK_bhvgZfBQ_AfjizWO27-YzXeB.html
To what extent are Adam Smith's theories seen in the world today? Let us know in the comments!
No. its not adam smith envisioned , yes for the basic theory, but not like the video examples and nowadays practical capitalism.
But its the best video and sinplified basic theory and idea of capitalism, ( not by adam smith though), good job
This isn't a very good example of Adam Smith's 'invisible hand' at all. A good example would be the cheese making it to market in the first place. It involves dairy famers, those who make the cheese, those who transport, those who own the shops. They aren't working exclusively with each other and there is no one in charge of them, yet you end up with cheese to buy in the shop. Slightly more complicated products provide even better examples- a pencil is a good one (see the short 'I Pencil'). It involves lumber jacks, miners, lumber yards, truckers, rubber plantations, pencil factories, shops, etc. People working independently in different locations, maybe even different countries, and not even knowing what end products their labor will produce, and without anyone in charge. All just people trying to make a living, going to work every day doing different things. No one to tell them that they need to do these things to make a pencil, yet the pencil ends up for sale at the shop. THAT is the concept of the 'invisible hand'.
Thats pretty much what he says
@@Cutecumball Not really. He focuses everything on purchasing products and price. The core of the concept of the invisible hand is not just people choosing products and prices, but that people actually go earn their livings based on their own self interest and without anyone telling them what they have to do, and without anyone directing their activities towards a final product, yet lots of people doing these individual tasks every day leads to final products that are useful. That is a lot more profound and more fundamental to the concept than what he talks about here. Also, Adam Smith is not just the father of laissez faire economics. He is considered the father of economics, full stop. He also implies that this theory does not work out in reality. The invisible hand is not just theory- it is observable every day. It is really allegory as opposed to theory. A lumberjack cuts down trees Oregon, a Mexican works at a graphite mine, and a shop keeper sells a pencils. They don't work together, and no one directs them towards that final product, yet it happens every day- just because they are all trying to make a living. Now there are lots of other theories, details, concepts, and understanding in modern economics that has developed since Smith, but the core concept of this remains true and observable.
basically indirect cooperation due to self-interests which drives the economy is what this all is
@@patrickmacleod2415 so basically like Dominando said, you are saying the same thing.
Basically the CheeseOrama owner decided that they cannot get good cheese anywhere these days, especially since they are obsessed with it and like different varieties right. Going through the #FarmersWeekly magazine just to find all the farmers with the different cheeses is not cost effective when they just buy it for themselves. Imagine driving to different farms in different locations just to get their fix of cheese.
So knowing that a lot of people read the magazine possibly with the same problem he faces, he figures that the best way to get the cheese he wants everyday, at will, is if he can find it all in one place. So a CheeseOrama would fulfill his needs and his fellow #FarmersWeekly readers. So he effectively acts independently by deciding to open a CheeseOrama, maybe he finds out from the magazine about how many people in his vicinity write to the magazine about where to find cheese. He collects his statistics and opens a store. Something he does independently like your stationary shop. And then of course, he calls all the farmers (in your example, the lumberjack and lead retailer {because the graphite miner does not necessarily convert the graphene into lead right}) with the good cheese, to place an order and hires some suitable transport person to deliver the cheese to his store (because he is using different farmers, so it is more convenient for the transport guy to fetch all the cheese unless the farmers are able to make their deliveries to the store, but imagine the traffic that would cause right {in your example, is it the stationery store or the pencil brand maker we are talking about?}).
Anyway, our class teacher leaves a lot to be desired on my part. I am guessing people who watch this video have gone to University and came across Economics as a subject, so we are familiar with the normal economics terms like Indifference Curves and Marginal costs. Making it seem so basic, really takes away from the meaning he is trying to convey. With that said, I would shop at CheeseOrama before I set foot in that other place, because of aesthetics, because a person who takes the time to define the look of the cheese store knows that good wine takes time 😌 (ok I'm just saying that, because it sounds good to say it, I do not actually know).
My understanding of the theory he presented about how the economy works is that there are two economies essentially: those with regulated prices and those with free trade. For example, certain petrol is regulated in South Africa, let's say the 95 petrol price is set by government, and the other fuels are like 93 or Diesel you can name your price as a garage after the government does its'price adjustments. Now since 95 is the same price across all garages, I am no inclined to just pour fuel at any garage because of aesthetics. My dilemma being that the garage I prefer is few and far between. Now the reason I prefer #Shell is the quality. Some other person does not experience my problem, because an apple is an apple to them (because there's simply apples I will not eat right). So the way it is explained here, 'the invisible hand' will force me to relocate my whole life to a place with a #Shell garage because I love my #BMW, whereas some other person will choose diarrhea by going to Cheeseopolis.
😊😊😊😊😊😊😊
amazing how you explained the concept in just 5 minutes.
Haha, thanks! I appreciate the kind words!
He did not explain it !
He explained what others have wanted it to mean. Adams never wanted unregulated markets, you should read his works, not rely on this guy, who havent read Adams either !
Speaking of self interest and cost benefit analysis to make decisions, all that fate in the logic of human thoughts go out the window when you see people in Las Vegas shopping around for the best buffet where they can save a few dollars. Then after the buffet, they go out to gamble almost a guarantee to lose hundreds of dollars.
It's definitely interesting seeing these theories play out in the real world. 😅
@Mister Bister The point is that it’s illogical to create an economic system based on the “invisible hand of God” instead of relying on the scientific method…data and analysis wins over theology every single time.
@@fibonaccisequins4637 not true
Thank you for your concise and plain explanation. I wish colleges could adopt your style.
Thank you for the kind words! I'm glad it was helpful. :)
@@KorczyksClass I got lucky as my College showed me this video, so much better than a week on Wealth of Nations to understand the concept.
My Teacher said we don’t really need to read it entirely to get the idea as it’s “So much more about corn than it needs to be.” 🤣
😭🤣🤣 you guys are hilarious. This is why I love Ecos.
I wish Middle School would! 👈🏼
I have a sense this guy’s gonna carry my economics grades
I hope it helped! :)
i just started reading WoN and im on book 3. Adam eas explaining the very foundation of economy starting from the basic of learning a skill and its relation to other trades which drives the market.
In my country at least shops still have this ''price war'' sometimes, so they will compete to have the cheapest price on candy, usually when it's close to easter. That gives us customers cheaper prices, but it still about their own interest I would say.
That's how Smith's ideas are supposed to work. :)
Everyone misses the constraint that Smith put on the invisible hand in the Wealth of Nations. A person should invest and spend for his own self interest but they should do it only within their own country. " By preferring the support of domestic to that of foreign industry, he intends only his own security, and by directing that industry in such a manner as its produce may be of greatest value, he intends only his own gain, and as he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Wealth of Nations
One part of Adam Smith's writing that, while extremely important, is largely ignored. This is his analysis of how the private ownership of nature (which political economists referred to as "land") effects the production and distribution of tangible wealth (as distinct from the financial claim on tangible wealth). Smith's analysis followed that of the French school of political economists, the physiocrats. The physiocrats offered an entry level analysis of land markets, an entry level analysis because they were writing during a period when commercial agriculture dominated the French economy. Thus, they spent no real time analyzing the same land market dynamics that existed in town and cities.
Here is what they all understood to be the case. Every parcel or tract of land has some potential annual rental value as determined by demand (i.e., market forces) directed by whatever restriction on use are imposed by government. With regard to agricultural land, they described the process by which rental value is based on fertility and other factors that make it possible for the same input of labor and capital goods to produce greater output of agricultural commodities. The difference between output on the best land versus the next base land is defined by the political economists as "rent." Less and less rent arises as land quality falls. At some point, land cannot be worked to produce enough output to justify the required labor and capital goods. The land market has then reached its "margin of production".
Later political economists began to apply the Smith-Physiocrat analysis to other land markets, to land that holds timber or subsurface mineral deposits. All sorts of locational advantages or disadvantages determine how much, if any, rent comes from locational advantage. Some, most prominently Henry George in the late 19th century, argued that as rent arises based on natural advantage or advantage created by privilege under law, rent rightfully belongs to society. George argued that rent should be publicly collected. And, once one turned over whatever rent was due, the individual (or business entity) had met any financial obligation to society. The taxation of earned income flows, of tangible assets and of commerce is by definition an unjust confiscation of private property.
Let take two bakery and both sell croissants, but one baker does it the traditional way and sell their croissants a little more, and the buyer might pay a little more for traditional croissants. Cheaper doesn't necessarily mean more customers, but a buyer might be motivated by quality.
What happens when Cheesopolis decides to sell their cheese at a loss to compete with Cheesorama and puts them out of business? What happens when Cheeseopolis does this to all other cheese sellers? What happens when Cheesoplos is the only one selling cheese?
The invisible hand is good in theory and it works well too. But it may lead to corruption and incorrect practices. For example, a big shop can invest in a big marketing campaign and may change the local policies and thinking patterns. While a small business can not do so.
Here the role of government comes in. But it should be limited only to some extent.
Basically a combination of both will work well for economics.
Those are definitely common criticisms of the invisible hand. Thanks for the comment!
But than it aint a free Market
Except when Cheesopolis lobbies the government for pro-cheese policies that would directly benefit them above competitors. The invisible hand is no match for the interests of Big Cheese.
True, man even said to influence policies which does in fact have an effect on the market @@matheussouto3673
Excellent explanation and good video quality.
Thank you! I'm glad you found it helpful! 😊
Glad to see a fellow cheese-lover in the community!
😂🧀
Thank you korczyk’s you just made things easier for my exams tomorrow
Glad to hear it! I hope your exams went well!
Hey!
Long time, no see (Diploma Marking)! These are great!
Dan! Long time no see! I'm glad you're finding them useful! How'd you find the video, just out of curiosity?
@@KorczyksClass It was super-useful! I don't even teach h.s. anymore, but I've brought up the invisible hand with my grade 9 classes so I was looking for something simple enough for them to grasp. This fits the bill big-time.
0:44 Adam Smith was NOT advocating for Lassie Faire economics .
Smith's Comments need to understood within the Context of The Theory of Moral Sentiments and the Context of his time .
Smith famous quote " It is not from the benevolence of the butcher , the brewer , or the baker , that we expect our dinner , but from their regard to their own self interest . " ( WN I.ii.2 )
" It is the great multiplication of the productions of all the different arts , in consequence of the division of labour , which occasions , in a well-governed society , that universal opulence which extends itself to the lowest ranks of the people . "
(WN I.i.10 )
- note how Smith says " self interest " not selfishness
- He comments on a " well-governed society " referring to the social contract *
- " which extends itself to the lowest ranks of the people " **
Adam Smith was writing during the Enlightenment and an era of Mercantilism . Smith detested massive wealth inequality , where the rich tobacco , cotton and lumber merchants of Glasgow had considerable wealth , while there was massive urban poverty . So in this context , Smith was advocating for a social contract where all citizens had an opportunity to participate in a capitalist ( mercantile ) system .
So in a well governed society , the government creates the opportunity for all citizens to participate in this mercantile system , not just just the wealthy merchants .
Also , as Micheal Hudson points out , classical economists supported using capital to create actual wealth ( goods , agriculture and services ) as opposed to using capital to exploit others .
* The Social Contract is the expected set of laws , rights and common values , set up between the Government and Citizens , in order to have a civilized society . Hobbes , John Locke and Rousseau wrote their versions of the social contract .
** During the Enlightenment , the idea of Classical Liberalism starts to emerge - Which promotes of equal rights of all citizens.
.
I have acquired Augustus Kelley’s reprint of the first edition of “The Wealth of Nations,” which is challenging to comprehend due to its archaic English. However, I’ll retain it rather than sell it, as this reprint has become quite scarce, causing its value to increase significantly. The relevance of “The Wealth of Nations” will endure as long as capitalist societies exist.
This system works when it's used properly, It doesn't work when people stay loyal to brand names even if an off brand is cheaper and better. Hermes by all virtue of the invisible hand, should not be profitable on its birkins, because they force you to send exorbitant pricing for it. But they create an artificial value of "wow you were worthy of buying a Birkin" even though there are alternatives that are genuinely better.
Fantastic explanation of Adam Smith's Invisible Hand theory! 🙌 Engaging and enlightening video!
Glad it was helpful!
Thanks. But what are the determinants of the market size according to Adam Smith?
Dziękuję Mr. Korczyk
Prosze bardzo! Pozdrowienia!
3:13 "So this competition resulting from these choices ... well that's making stuff better for everybody."
"It is not from the benevolence of the butcher ... that we get our dinner, but their regard to their own self interest".
American hormone-injected beef is not "better for everybody", yet is the outcome of the invisible hand in US. This single test proves the concept of the Cult of the Invisible Hand is wrong.
Found this so helpful, thank you Korczyk😀
Happy to help!
Adam Smith's theories are the classic example of someone who took a risk, got lucky and ascribed the entirety of the success to himself - his traits and choices...
Sir,,what about philanthropic activities which are not driven by profit,self interest but for the promotion of public good
What happens if a company gains a monopoly?
Good question! According to free market theory, it would be a pretty bad thing as it would mean no more competition. Many capitalist countries have laws in place that are meant to prevent it from happening. In the United States, the Sherman Anti-Trust Act is one of those laws designed to give government some power to break up monopolies.
@@KorczyksClass Thank you! So much I already had heard, in this case at school.
Monopolies indeed seem to mean a pretty bad thing.
In particular, a monopoly will come together with a lead in attainable quality. I.e., if you enforce that such a company is to be split, you at least for some time will cause that consumers can't obtain the same quality, any more, as easily as before. As long as you divide only the bad ones, it's not so much of a problem, but when you begin to act against the best, you'll appear as a person who artificially creates difficulties, resulting in the situation that you refrain from such attempts and let communism flourish. Google Translate recently has outputted nonsensical equivalents for Chinese characters because they simply have neglected to label expressions thematically. A recognition of the thematic orientation of the characters would have been possible, but Google only factored in the _pronunciation_ with its many ambiguities. Currently, a competitor of UA-cam doesn't seem to be in sight, while you on UA-cam often are exposed to unpleasant sound effects. You can assume that UA-cam fails to act against such downsides because they fear that video makers might begin to long for another place to upload. If a competitor already existed, they perhaps wouldn't be so generous. Forbidding things, they wouldn't appear that much as merciless and wouldn't have to lose that much. They altogether could proceed much more flexibly, freed from a certain _inertia_ that comes with a hegemony. Clashes they now still try to avoid, in a cramped way, would already have happened, in the form of the _introduction_ of competition. Competition could begin to unfold its beneficent effects. Even if you learn Chinese to become able to exploit China's Hǎokàn, you currently by far are not (yet?) offered a comparable amount of videos of some greater length, by the latter website. And to be able to upload on this website, you need a Chinese telephone connection.
Living in Austria, I observe that you have one big chain (with a market share of c. 33%) of grocery stores a consumption of the best produce of which makes you perhaps ten times healthier than you are when you buy elsewhere. There are two other big chains (with c. 34% and c. 20%) offering some comparable products but altogether failing to reach a comparable assortment. With that best one of the big chains, the personnel often is unfriendly, and of course, you'll presume that you're dealing only with the tip of an iceberg of other shortcomings. Apart from the big chains, there is a tiny group of supermarkets which only sell organic products. Altogether, you can assume that you have a downright unbelievably good constellation. If the group of organic supermarkets improves its assortment, the 33-percent giant will follow suit, and if this giant fails to do so, the other giants might begin to surpass them. Nevertheless, the organic markets (for certain offering the best products) are hundreds of kilometers apart and only in heavily polluted areas. Recently the big chain with the good products has merged two subchains into one, for the sake of a bigger efficacy and with a loss in the variety of products. A fourth big chain with quite good products has disappeared, and so have numberless tiny eco-grocers. As an average consumer, you currently are dependent on that one chain, if you do not want to hugely reduce your bodily and mental performance. That sort of a peak achievement of one supplier is crying out for another division, after capitalism has produced it - like with IBM in the second half of the 20th century and perhaps until today.
You largely can only see what immediately surrounds you, just like the inhabitants of the Soviet Union before the arrival of the first Western tourists around 1960, and you slowly begin to wonder if together with such a growth of an economic monoculture at home, there might also be emerging some faraway region of the Earth (China?) in which you (soon?) will become able to experience a totally different, altogether much higher level of supply. After all, it certainly could be much better still, in Western countries, than it is. On ua-cam.com/video/QQwQklUcXf4/v-deo.html (Chinese Vocabulary - Fruits & Vegetables, by Learn Chinese Mandarin), I already am confronted with a cornucopia of fruit and vegetables which I even haven't ever heard of. I also am reading that in the officially still communist China, a much higher percentage of cars than in the USA already is electric. They begin to build batteries for such vehicles which Western commentators only can marvel at.
Obviously, there exist other factors of some important relevance than only the policy of a division of monopolies. If producers and consumers don't enable that a certain quality will be supplied, through producing and buying it, you even in a strictly capitalist society can end up with a lower wealth than in a (much more) communist one. During the time of the Soviet Union, you had many capitalist regions of the planet with a much lower standard of living than the Russian (for example, in India). Doesn't, in the end, happen the real competition rather between the several workers of a producer (like it was organized in the Soviet Union) and the several consumers? If an unwritten taboo forbids that a worker delivers a certain quality, and such a taboo also forbids that you _buy_ a certain amount of a certain quality (for example because you have to buy an expensive car, suit, or house, to represent a company, rather than the less visible organic food you move into your body), you'll end up with a monopoly of poor products, even in the middle of a polity with the most effectively applied anti-trust law. That is a capitalistically subdivided monopoly of stupidity, then, a sheer dance around the golden calf without any usable final good.
They can either sell their products at a reasonable price or abuse their power and raise the prices to the roof. In the second scenario, people will be forced to pay a very high price to get what they need and the company will make a huge profit. For a while at least. Some time into the future some businessmen will see that the industry/sector is very profitable and will shift in. And this is the point at which price competition starts. Of course the large company could use predatory pricing techniques, but the practice shows that it's usually a fight with hydra. Cut off one head and another two will arise. You can run a loss to eliminate competition, but when you do and then bring prices back up, new competitiors will appear sooner or later. It's financially suicidal in the long run. The only way to sustain a monopoly in a free market is to offer the cheapest products of the highest quality, while being able to satisfy all the demand. But in such a case, it's not at all harmful to the customers.
@@janr.9192 The hydra with the many heads emerges because the components you need for a product have their own prices, doesn't it? I.e., if you continue to offer a product for less money than you have to invest in it yourself, the competition will arrive in no time.
The issue becomes when one corporation is able to grow large enough to be the only compelling choice
My teacher showed my class this video and all we did was say you look like you eat rocks the whole time.
Ander Chydenius was eleven years before Adam Smith with his book Nationl gain. And Adam Smith was not talking about Laissez-faire since he was against merchantism and restriction that was placed on people in 1800 century. Adam Smith is tolkning about todays socity.
Your presentation was ok, but if I remember right, the phrase invisible hand was mentioned once in Smith's book and has very little to do with the book's content.
it works when the government doesn't get involved
Wealth of Nations implies there should be state social services which laissez-faire capitalism lacks.
Thank you sir.
Most welcome!
The economy is a process that needs oversight and regulation from government and buffers such as unions and a sane independent banking system and my analogy - the Gardener vs the wild meadow. That's the choice we made when we left the hunter-gathering life behind for agriculture and the big city. Unfortunately the sustainable growth that might be achievable between natural free market dynamics and regulation totally fails due to (1) government and union corruption and incompetence (2) militarism, imperialism and war (3) organized and white collar crime (4) chaotic factors such as weather and climate events (5) the periodic disruption caused by new media, technologies [bit coin, the internet, fake news etc.] (6) religion, social upheaval and cultural wars (7) scarcity of resources and the destruction of the environment (8) ego, polarized politics and the war for power for power sake (9) greed and irrational human behaviour such as having 10 kids or no kids (10) the lack of any kind of common value system and Self Interest vs the common interest. So Smith might be a good starting point but economic theory has failed to properly model reality with very much sophistication and zero predictive accuracy. It is a failed science. In my opinion economic theory requires a complete rewrite from a systems engineering perspective. Capitalism is totally out of control to the point that the middle class is being destroyed, slavery and corporate elitism rule, and the planet earth is toast. No benevolent and rational gardener presides over this garden. Maybe we need an alien zoo keeper as the invisible hand. Maybe AI could be a good thing. What's in it for me? The biggest lie in human history = profit. Any engineer will tell you that you can't get more out of a system than you have to begin with.; you can only produce profit at the expense of others. Cheers.
Intersting how when Marxists point out that true socialism/communism has never been tried and that there are countries that have capitalism that are not ideal the realization never occurs to them that as countries become more socialist/communist they accelerate towards disfunction, but as countries move towards freer markets they generate more wealth and opportunity for their people
Absolutely, at the expense of others though
@@bensonbeebarry2055 true, but I would certainly take some corrupt idiots that still allow us to do as we please, than a corrupt government that forces people to do what they want.
Very very simplified I know but I’m not getting into the nitty-gritty
But as freer markets generate more wealth and opportunity, they also expand inequality.
What about his stance on monopolies
Omg you are so talented 🤭 From Turkey
Thank you so much! I hope you found the video helpful! 😊
What about slavvery?
Incorrect!! Smith talks about the "Invisible Hand" in a very specific discussion about international trade, suggesting that the English would prefer to invest in English businesses rather that international ones, and would therefore be protected from the evils of Free Trade by an Invisible Hand. It's not a particularly smart idea, but it also has nothing to do with laissez faire economics.
lmao wut. have u read the book?
@@Cutecumball Book 4 chapter 8 if I remember correctly
@@KidFictionOfficial He meant mercantilism and he against it. Mercantilists thought preventing imports and promote exports will make their countries wealither and its wrong. So basically he prefer free trades
@@Cutecumball Yes, but this position has very obvious flaws, which Smith recognised, that was the whole point of the chapter. If there were no import tariffs why wouldn't English businesses just buy products from Poland for half the price? The whole point of the chapter is to make an arrangement (a really bad argument) that English businesses would be moved to buy from local suppliers "as if by an invisible hand". It's a stupid argument, that only really works to prove the limits of free trade.
@@KidFictionOfficial "If there were no import tariffs why wouldn't English businesses just buy products from Poland for half the price?" that's wholesale. Free trade is about trading with whoever you want to with as less government intervene as possible. But I'm still confused about your argument. Can you make it more articulate
What can cheesopolis do to get your business back? He can use the uber price dumping formula. He can get a lot of money from large investment fonds like blackrock or vanguard, work with a loss intentionally until the competition goes bankrupt, and then rise the prices sky high because he has a monopoly. That is called the visible hand of the economy. 😁
Great video!
Thank you! Glad you liked it!
Why is the hand called invisible though?
Cheeseopolis for the WIN!
Haha, yes! 🧀
@@KorczyksClass :D
my goat 🐐
Hope you found it helpful!
Thank you
Welcome! Thanks for the comments!
very good explaination
Thanks, I hope it helped!
thank u sir
Welcome! All the best!
@Private vs public sector need competitive @
The idea goes out the window when Blackrock owns everything
What happen if the business in a city own by a single company?
They can either sell their products at a reasonable price or abuse their power and raise the prices to the roof. In the second scenario, people will be forced to pay a very high price to get what they need and the company will make a huge profit. For a while at least. Some time into the future some businessmen will see that the industry/sector is very profitable and will shift in. And this is the point at which price competition starts. Of course the large company could use predatory pricing techniques, but the practice shows that it's usually a fight with hydra. Cut off one head and another two will arise. You can run a loss to eliminate competition, but when you do and then bring prices back up, new competitiors will appear sooner or later. It's financially suicidal in the long run. The only way to sustain a monopoly in a free market is to offer the cheapest products of the highest quality, while being able to satisfy all the demand. But in such a case, it's not at all harmful to the customers.
@@janr.9192 thanks just like here in our city almost all establishments here owned by a single company or owner they are strict on new investors to establish their business that`s because they are afraid that their business is overwhelm. Thank you for this
The coldest march
🙌🏾
🙌
to bad theres no more small independent companies to compete with:/ If there was dang that would be sweet if they were competing by each lowering the price that would be the day lol
Or they could hire lobyists to make Cheesopolis' cheese illegal.
I
Wow ❤❤
The invisible hand doesn't stop corporations from becoming monopolis unfortunately.
It does. If only the government stopped bailing out big failing companies
If it were applied correctly it would.
@@CombatDoc136 elaborate
What kind of business is your business is indivisible enough. The good socialism tooth fairy of a regime never did.
This is absolutely not what Adam Smith meant by the invisible hand .
What did he mean?
Laissez faire economics.
NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
STOP PROPAGATING THE LIE !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Very false information you have on this matter! You haven't read the book more than 20-30 pages! Better read it or stop all of your false statements!