The Invisible Hand Of Adam Smith

"PRICES and profits signal to entrepreneurs what to produce and what price to charge. High prices and high profits sound alarms in the ear of entrepreneurs, screaming at them to start producing a certain good. Low profits or losses grab him mercilessly until he stops producing."

excerpt from New Ideas From Dead Economists

Supply and demand. High demand will grant the suppliers exclusive share of profit, but others will soon join in the fray, upping the supply. This will satisfy the high demand, making exclusive profits re-adjusted to normal, acceptable level. As supply over flows demand, consumers will be spoilt for choices. This will result in auto-filtering of weaker links in the supply chain, forcing less adaptable suppliers out of business, and re-adjusting the ridiculously low prices up to acceptable levels again.

This single example easily proved that without a central planner to fix a price of any product, prices will correct itself. Thus proving that self-interest based community will thrive without anarchy.

Adam Smith pointed out a point that I have mentioned in my previous post but perhaps crudely expressed. I mentioned that below a leader, there must be supporters doing the "dirty work."

"A great part of the machines made use of in those manufactures in which labour is most subdivided, were originally the inventions of common workmen, who, being each of them employed in some simple operation, naturally turned their thoughts toward finding out easier and readier methods of performing it. Whoever has been much accustomed to visit such manufactures, most frequently have been shown very pretty machines, which were the inventions of such workmen."

A leader cannot be the one inventing the machines needed to improve production efficiency and reducing cost, it must be the person working to be paid a wage who understands what needs to be built. While this person who can produce such machinery of high value is worth so much more than what the leader is paying him, the person usually do not attempt to take over the leader's role. This explains why men with the best brains end up working for man of a good brain. The mindset is what sets these 2 category apart. One is a risk assessor while the other is a risk avoider. Men with the best brains usually saw too much into a risk. They decide to avoid it all together without giving the slightest possibility of success a try. In their protocol, if it doesn't succeed 100%, it's sure to fail.

Though it's not a proud thing to say that I'm not the most intelligent person, its definitely a proud thing to say that I qualify to have the most intelligent people working for me. Intelligent people play their own game, but smart people use intelligent people to play their game.

Anyway, that is another topic altogether, I might discuss it in later posts.

The book New Ideas From Dead Economists is so interesting. I'm going to read it twice and make notes like its a text book.