The Evil or Good Invisible Hand ?

Topics: Economics, Market failure, Supply and demand Pages: 2 (649 words) Published: January 21, 2013
Invisible hand sound like monster from hooray movie, but in economic term it was a theory buy adam smith, What adam smith say that “Invisible hand” determines what gets produced, how, and for whom.In his views the prices signals and response of the marketplace were likely to do a better job of allocating resources than any government could. (Bradley R.S 2002)

In my point of views invisible hand is a selfishness act and it will not disturbed the resources fairly. First Public good will be underproduce , as B.R. Schiller say that when market failure, “ the market tends to underproduce public goods and overproduce private goods.” Because of “free rider” a free rider mean “An individual who reaps direct benefit from some one else purchase (consumption) of a public good.” because of Public good can be consummation by unemployment (no income ) user and pay taxes user.when Invisible hand apply the public goods will be greatly underproduced and it cause many problem (Bradley R.S 2002)

A real life example as Gavin Tee say “Public transportation such as MRT or LRT are supposed to be built to take care of working class people. A lot of people cannot afford to stay out of town simply because there is no public transportation. That’s why prices in the city centre increased because the supply from the outskirts is not in demand. If there is MRT from Kajang, for example, and the ticket price must not be too high, then prices can be lower, say RM200K. There would then be a lot of choices.” so that mean when Public transport is less make all the house expensive and more unemployment rate too. (Gavin tee 2012)

Secondly problem will be externalizes cost problem, what is externalities problem ? Externalities mean “Costs (or benefits) of a market activity borne by a third party; the difference between the social and private costs (benefits) of a market activity” (Bradley R.S 2002)

When some product is not control producing it cause a social cost need to pay. A real life example...
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