Premium Essay

Capitalism and Invisible Hand

In: Business and Management

Submitted By vanesabiba
Words 974
Pages 4
Capitalism & the Invisible Hand Throughout the history of civilization have been two forms of social administrations: Individualism which has taken the form of capitalism and collectivism which has taken many different forms, each form different from one another, such as socialism, communism, nazism, and etc. Capitalism is an economic system in which most of the means of production and distribution, such as businesses or factories, are not owned by the government but by the private individuals who operate them for profits. (“13b. Comparing Economic Systems.”) In the center of the free-market capitalism is the individual who has four basic rights:
• The right to own private property.
• The right to own a business and to keep the profits made by operating his business.
• The right to freedom of competition.
• The right of freedom of choice. (Nickels, Understanding Business)
On the other hand, socialism is an economic system that calls for putting most of the means of production in the hands of government which will share the wealth and income more equally among people.( Nickels, Understanding Business) The main goal of socialism is to narrow the gap between the rich and the poor. Thus, the government has the responsibility to evenly distribute the wealth in order to make the society just and fair. (“13b. Comparing Economic Systems.”) An individual attempts to become wealthy, which explains why his focus is only on profits, but to achieve this goal he has to exchange what he owns or produces with other people who value what he offers (the freedom of property & the right to own a business). Therefore, through the process of turning the self-directed gain to what benefits the others in order to achieve the goals, enables the society at large to profit. In capitalism this is called “The Invisible Hand”, and this mechanism works efficiently only under…...

Similar Documents

Free Essay

Invisible Hand

...Invisible Hand Cheating and Punishment: Dealing with, and punishing companies who would price fix, during a natural disaster, or any time for that matter is a difficult task. The first task that would be needed to be completed would be to prove it, which can prove to be difficult with one company involved, let alone two large chains that are in a relatively stable market. The prices for certain goods that are sold by Lowes and the Home Depot tend to be relatively similar, and any discrepancies in price are usually made up by differences in the price of other goods. It is the nature of a market where only a few large chains dominate the market. The prisoner’s dilemma can be applied in this situation, where the Home Depot and Lowe’s could be in a position to set the market prices for their goods and go unchecked on the basis of a natural disaster and the inability to restock their goods in a timely manner to keep prices at normal levels. The manner in which these two companies could manipulate the prices could be deliberate, meaning both companies either colluded on the prices set or simply by accident. If someone were to raise concerns about price gouging during a natural disaster, Lowe’s and Home Depot may be able to hide behind power outages, flooding or other natural occurrences keeping supplies low, thereby raising prices, but will either company sell out their competition in hopes of saving face is the question. If they work together, they of course, can......

Words: 371 - Pages: 2

Premium Essay

The Morality of Capitalism

...Thesis Capitalism has been the subject of ethical criticism since it was first introduced into society. I defend the morality of capitalism because it gives people incentive to work, establishes a web of trust between them, satisfies their material well-being, and generates a wide spectrum of prosperity. Exposition As citizens of the United States, we are members of the leading capitalist economy in the world. Our production and distribution is mostly done privately and we operate in a “profit” or “market” system. The capitalist system has been a target for criticism throughout the last three hundred years and is being discussed now more than ever due to the recent recession and financial crisis (Shaw and Barry n.d., 1). Its effects, structure, varieties, and possibilities provide for a large field of study and writers from several different disciplines have provided their input to the debate. Most fundamental is the question of whether our capitalist system is a morally justifiable one. This question can’t be answered by reviewing the efficiency and productivity capitalism provides, but instead requires a thorough analysis of ethics. A capitalist society is characterized by the private ownership of property and a free market that grants citizens the right to use their resources for their own benefit. Private property is the ownership of productive resources like companies, stocks, and bonds and should not be confused with personal property. Personal property consists...

Words: 2675 - Pages: 11

Free Essay

Capitalism

...Capitalism: A Love Story, which opened in 962 theaters earlier this month, is Michael Moore’s most ambitious work yet – taking aim at the root cause behind the injustices he’s exposed in his other films over the last 20 years. This time capitalism itself is the culprit to be maligned in Moore’s trademark docu-tragi-comic style. And by using the platform of a major motion picture to make a direct assault at the root of the problem, Moore has created space in the political mainstream for a radical conversation (radical meaning “going to the root”). It’s a conversation that is desperately needed as the economic crisis continues to devastate low- and middle-income Americans in spite of President Obama’s and Congress’ efforts to stop the bleeding by throwing trillions of dollars at the banks. Yesterday, Democracy Now! reported that while the Dow Jones topped 10,000 for the first time in a year, foreclosures have reached a record level of 940,000 in the third quarter. But with this film airing in major chain cinemas across the nation, the normally taboo topics of how wealth is divided, who owns Congress, and how vital economic decisions are made are now open for discussion in a way they haven’t been in the U.S. for decades. In Capitalism, Michael Moore features the reality of the economic crisis for America’s usually-invisible poor and working class. The movie begins with a family filming their eviction from their own home. In a terrifying scene, we watch from inside their......

Words: 1772 - Pages: 8

Free Essay

Evolutionary Change: the Invisible Hand and Money

...EVOLUTIONARY CHANGE: THE INVISIBLE HAND AND MONEY Instead of being designed by men, civilization has evolved, according to one view. Social institutions [government, the rule of law, the social division of labor connoting production activities, markets (credit, labor, commodities, etc.), money, languages, mores (morals and values), et. al.] are determined not simply by preceding causes but as part of a process of unconscious self-organization of a structure or a pattern. These social institutions spontaneously come into existence. They are complex and self-maintaining mass phenomena. Reinforcing this point, Adam Smith wrote in The Theory of Moral Sentiments that men aiming at the “gratification of their own vain and insatiable desires” are “led by an invisible hand” in such a way that they “without intending it, without knowing it, advance the interest of society and afford means for the multiplication of the species.” The Origin of Money Theory, formulated by economist Carl Menger, in 1871, provides an account of the evolution of the social institution of money. Money, according to the Theory, is not a creation of the state as many think it is today. Rather it came into existence spontaneously through an unconscious, self-organizing, self-maintaining, evolutionary process. An outline of the theory is presented below. A. The Seven Steps of Carl Menger’s Origin of Money Theory: * The seven (7) steps below explain the emergence of a commodity money like gold or silver in......

Words: 2436 - Pages: 10

Free Essay

Capitalism

...Is contemporary capitalism a kind of imperialism? For Ellen Meiskins Wood, it is the ‘empire of capital’ that is shaping our world. For her, the empire of capital is the new form of imperialism across the globe. Capitalism, she argues, has become ‘universal’ and it spans the globe with pervasive and intrusive control over human life and nature. It is operating with its systemic logic of ‘accumulation, commodification, profit maximization, and competition’. The empire of capital has achieved its global and penetrating grip by setting free and directing the destructive forces of the capitalist market and ‘totalizing itself’ intensively and extensively to permeate all spheres wherever it establishes itself. It is alive and there's no sign of its demise in the near future. Wood argues that capitalist imperialism, driven by market imperatives, and unlike other imperialisms before it, ‘seeks to impose its economic hegemony without political domination wherever it can.’ Empire of Capital provides perceptive insights into the fundamental nature of capitalist imperialism and what drives it. ‘The Detachment of Economic Power’ she provides an explanation of and dissects capital imperialism. She shows how under ‘empire of capital’ (the new imperialism) the economic power of capital is detached from political and military power (extra-economic force) and discusses the relation between them, as well as the implication of the detachment on the relation between the economy and the......

Words: 834 - Pages: 4

Premium Essay

Invisible

...Invisible (Hunter Hayes) Crowded hallways are the loneliest place For outcasts and rebel Or anyone who just dares to be different And you’ve been trying for so long To find where your place is But in their narrow minds There’s no room for anyone who dares to do something different Oh, listen for a minute (Chorus) Trust the one Who’s been where you are wishing all it was Was, sticks and stones Hear me out There so much more to life than what you’re feeling now Someday you’ll look back on all these days And all this pain is gonna be invisible Oh, invisible So, your confident is quite To them quite looks like weakness But you don’t have to fight it Cause you’re strong enough to win without a war Every heart has a rhythm Let your beat so loudly That everyone can hear it Yeah, i promise you don’t need to hide it anymore Oh, and never be afraid of doing something different Dare to be something more (Repeat Chorus expect the last part) (Bridge) These labels that they give you Just ‘cause they don’t understand If you look past these moment You’ll see you got a friend Waving a flag for who you are And all you’re gonna do Yeah, so here’s to you And here’s to anyone who ever fell invisible (Chorus) Yeah, and you’re not invisible Hear me out There so much more to life than what you’re feeling now And someday you’ll looks back on all these days And all these pain is gonna be invisible It’ll be invisible...

Words: 265 - Pages: 2

Premium Essay

Capitalism

...and consumers only sell and buy for their own benefit and the “invisible hand” applies to the entire economy. If this quality is satisfied, then the market as a whole is improved by the participation of individuals for personal reasons, leading to the highest possible outcome of well-being within the community (19-20). According to Robert Nozick’s philosophy, this would not be an accurate way to decide on the justness of an economic system. He completely disregards the topic of well-being and does not see it applicable to the evaluation of such systems. He views that the only way to attain justice is through ‘voluntary exchanges’ that accompany the individual’s right to free will (Nathanson, 24). This is due to his historical, or procedural, theory of justice. Rather than judging whether an economic system is just by the end result – such as the well-being of citizens – he judges by the process of how individuals come to obtain their belongings (Nathanson, Blackboard). His two theories of ‘entitlement’ and ‘self-ownership’ support this claim, and they will be explained later in this paper. I disagree with this claim of maximum well-being, not because I view the welfare and financial security of individuals as unnecessary, but because the well-being is achieved without government intervention. To me, it seems impractical to have an economy functioning solely with private corporations, such as in pure capitalism, because there is no alternative to save a market if it begins...

Words: 1184 - Pages: 5

Premium Essay

Adam Smith Invisible Hand

... STUDY QUESTIONS “ADAM SMITH’S INVISIBLE HAND ARGUMENT> JOHN D. BISHOP 1. Briefly state the “invisible hand” theory in your own words. The “invisible hand” is a term used by Adam Smith to describe the natural force that guides free market capitalism through competition for scarce resources. The theory of the Invisible Hand states that if each consumer is allowed to choose freely what to buy and each producer is allowed to choose freely what to sell and how to produce it, the market will settle on a product distribution and prices that are beneficial to all the individual members of a community. 2. Two advocates of the “invisible hand” theory who are quoted in the article encourage a “deliberate amorality” in the executive suite. How do they justify this? They contend that this results in systemic morality due to the action of the invisible hand. 3. What does Milton Friedman see as the social responsibility of corporations? Milton Friedman is quoted saying, "There is one and only one social responsibility of business -- to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." Friedman argues that corporations have no social responsibility, only a responsibility toward their customers and shareholders to maximize profits. 4. According to Bishop, what does Adam Smith say about laws or regulations......

Words: 506 - Pages: 3

Free Essay

Capitalism

...The Morality of Capitalism 500520316 ENT 527 Ryerson University Dr. Jeffrey Overall Friday, January 23, 2015 Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned. Through the capitalist system, state and economic affairs are completely separated, leaving the government with a single role to protect individual rights against those who pose a threat against others through physical force. Capitalism is diminishing as government regulations of most countries have increased with the intent to gain more revenue through the involvement of business affairs. Therefore, governments are subsidizing businesses through loans, bailouts and tax credits. Although laws and institutions are vital, capitalism is sustained by the more fundamental role played by basic human spirit of independence, initiative, and innovation conducted through entrepreneurship. Capitalism is the only social system that protects the human means of survival which consists of thinking and applying reason to produce material values or creating innovation. Capitalism is a system of freedom where individuals have a choice in work or business to be involved with and the choice to trade with others freely through mutual agreement. Capitalism creates better products, better production and better distribution processes through its system of competition and innovation, resulting in lower costs and prices. An example......

Words: 676 - Pages: 3

Premium Essay

Invisible Hand in the Vietnamese Context

...Invisible Hand in the Vietnamese context Introduction Adam Smith is an infamous political economist in the UK and around the world. He has many valuable arguments among which this essay will refer to the theory of "invisible hand" which was coined in The Wealth of Nations. The invisible hand is essentially a natural phenomenon that guides free markets and capitalism through competition for scarce resources by maintaining equilibrium between the supply and demand of resources. Also, as market participants compete, driven by their own needs and wants, they involuntarily benefit society at large without the help of goverment. This essay will examine the core theoretical ideas behind Adam Smith’s invisible hand theory, focusing on the negative aspects, and show that the negative aspects are more prominent when applied to the article ‘Power trader accused of abusing monopoly position’ Understanding of theory Adam Smith's invisible hand theory sets the foundation for laissez-faire economic philosophy, which describe the self-regulating behavior and minimize the role of government intervention and taxation in the free markets .Smith argued the most crucial variable in the market is the price and its functions is providing information telling people what to do and presenting incentive for them to act on this information. Both companies and workers are guided, as if by an invisible hand, to produce the goods and services that are most desired by consumers, which occurs when all......

Words: 3465 - Pages: 14

Premium Essay

Invisible Hand

...the term of “Invisible Hand“ stand for? What are the real consequences and premises of “Invisible Hand”? Introduction In Adam Smith’s conception, it is the ‘invisible hand’ of the free market that organizes the seemingly chaotic and self-interested activities of human beings into a beneficent and industrious social order. The conception tries to describe “Self – regulating nature of market” based on natural inclination of human-being. Unplanned, unintended actions coined with natural inclination of self-interest channels ambitions towards meeting social necessities. The main motto of the argument was that the market freely will lead to perfect equality. Actually, perfect competitive market fundamentalism was bulwarked with “Invisible hand”. It is very arguable and ambiguous that why Adam Smith called this sort of regulation “invisible hand”. Cognitively, it is tangible but in terms of understanding of special mechanism is very incomprehensible and too invisible to put forward as a market regulatory factor. Self-interest as a part of human nature took a role of supervisor and established “self-regulatory nature of marketplace”. Diving into deep comprehension of the term of invisible hand, we can see that the term implies decentralization of the wealth among inhabitants. We can face with the term of “invisible hand” in his previous work called “The Theory of Moral Sentiments” which envisages the natural propensity of human-being: “They are led by an invisible hand to make......

Words: 1428 - Pages: 6

Premium Essay

The Invisible Hand Versus the Hand of the Government

...Riko F. Business, Government & the International Economy Week 3 Assignment Facilitator ----- 13 May 2016 * The invisible hand versus the hand of the government The invisible hand theory is a concept described by Adam Smith in the 18th century to explain the forces of a free market. The theory explains without government controls people pursing their own interest promotes to the good of society better than controlled measured by the Government(Ecocommerce101,n.d.). People acting in their own self-interests generates a higher demand for goods and service that compels others to deliver those good and service in the most efficient manner so they are able to compete in the market(EconomyProfessor,n.d). Who is Adam smith? Adam Smith was as Philosopher and Economist whose book “Wealth of the Nation” is considered one of the most influential books ever written. Smith was born in Scotland on 16th June 1723 and at the young age of fourteen, he attended University of Glasgow on a scholarship and later graduated from Balliol College at Oxford. Smith was known as the father of economics and deeply influenced the political powers of the day with his theory that no external interference should be in the economic markets because it will only lead to chaos and disaster. Adam’s book the Wealth of the Nation was published in 1776(EconomyProfessor,n.d). Smith was appointed the commissioner of customs in 1778 which he helped enforce the laws against smuggling but he in his...

Words: 486 - Pages: 2

Free Essay

Capitalism

...Capitalism vs. Socialism CAPITALISM HISTORY The history of capitalism can be traced back to early forms of merchant capitalism practiced in Western Europe during the Middle Ages,[1] though many economic historians consider the Netherlands as the first thoroughly capitalist country. In Early modern Europe it featured the wealthiest trading city (Amsterdam) and the first full-time stock exchange. The inventiveness of the traders led to insurance and retirement funds as well along with much less benign phenomena such as the boom-bust cycle, the world's first asset-inflation bubble, the tulip mania of 1636–1637, and according to Murray Sayle, the world's first bear raider – Isaac le Maire, who in 1607 forced prices down by dumping stock and then buying it back at a discount.[2] Over the course of the past five hundred years, capital has been accumulated by a variety of different methods, in a variety of scales, and associated with a great deal of variation in the concentration of economic power and wealth.[3] Much of the history of the past five hundred years is concerned with the development of capitalism in its various forms, its condemnation and rejection, particularly by socialists, and its defense, mainly by conservatives and libertarians. PRE-HISTORY OF CAPITALISM The Crisis of the 14th century and the "pre-history of capitalism" According to some historians, the modern capitalist system has its origin in the "crisis of the fourteenth century," a conflict......

Words: 915 - Pages: 4

Free Essay

Capitalism

...Capitalism can be defined ideally as an economic system in which the major portion of production and distribution is in private hands, operating under what is termed a “profit” or “market” system. Socialism is an economic system characterized by public ownership of property and a planned economy. Capital, as an economic concept, is closely related to private property. When traditional restraints are removed from the sale of goods and from wages and when all individuals have equal access to raw materials and markets the doctrine of laissez faire, from the French meaning “to let people do as they choose”. Oligopolies—a concentration of property and resources, and thus economic power, in the hands of a few. Corporation—an artificial being, Invisible, intangible, and existing only in the contemplation of law. Limited liability is a key feature of the modern corporation. Consumer sovereignty: the idea that consumers should and do control the market through their purchases. Dependence effect: as a society becomes increasingly affluent, wants are increasingly created by the process by which they are satisfied. Moral vegetarians are people who reject the eating of meat on moral grounds. 2 In my opinion, Wal-Mart is an example of a morally bad corporation. There are three reasons to improve that: (1) Unfair competition. Our textbook describe it like this: “Some critics of capitalism maintain that capitalism breeds oligopolies that eliminate competition and......

Words: 1707 - Pages: 7

Free Essay

Capitalism

...Capitalism acts to constrain the forces of production. The notion of free and competitive market penalizes inefficiency and redistributes the surplus to the more efficient enterprises. Adam Smith’s idea of invisible hand promotes rivalries. Therefore the majority of petty owners is pushed out of the market and forced to sell labor power. The surplus value is derived from exploiting these workers. The rate of exploitation is surplus value divided by the labor value. Laborers produce a use value but get paid only for their labor value. The left-over surplus value becomes profit for the capitalist. This wealth can be use for investment, mechanization, research development, management and etc. Industrial enterprises spend money on capital and labor to produce a product. Rate of profit is calculated from surplus value divided by capital and labor cost. Therefore the rate has an inverse relationship with labor and capital cost. As they fall, rate of profit rise. The average cost is total spent divided by output. By mechanizing, it allows companies to produce more resulting in cheaper price per unit For example, say three companies produce the same amount of goods using identical labor and capital cost structure. When one company mechanizes, it can produce more goods by only increasing capital and not labor cost. It can also produce more merchandise with same amount of capital and labor. These two scenarios are both forms of increase efficiency. They also are forms of labor......

Words: 880 - Pages: 4