How the principle of the invisible hand of the market works
The principle of the invisible hand of the market is a term introduced by the Scottish economist and one of the founders of modern economic theory, Adam Smith, to explain the mysterious processes in the market. He realized that the behavior of buyers and sellers in the market is determined not only by their desires, but also by some third party that is not visible.
The principle of the invisible hand of the market
For the reason that this side is not visible and is clearly related to the market, it was called the “invisible hand of the market”. This third party coordinates the decisions and desires of buyers and sellers, and does so unnoticed by them. In the course of the transaction, they receive information not only from each other, but also from this very invisible hand of the market.
And not just receive, but also take it into account when making decisions. The fact that the impact on the decisions of buyers and sellers occurs unnoticed, as well as independently of them, is the principle of the invisible hand of the market. This principle has one very interesting consequence, which affects both individual businesses and the economy as a whole.
The invisible hand of the market can influence the decisions that buyers and sellers make. She has a voice in any transaction and can give it to both the seller and the buyer. Everything is good, but the expression “the invisible hand of the market” is a bit scary. Everything that is not visible is not clear, you do not know what to expect from the invisible, you do not know whether this is a friend or an enemy.
Accordingly, an invisible hand is an idea.
Accordingly, the question arises of what is the “invisible hand of the market” after all? The answer to this question is very simple. Everything visible is material, which means that the invisible hand of the market has nothing to do with the material. If not material, then it is ideal, because there are simply no other options. Accordingly, an invisible hand is an idea.
But what kind of idea is this? Everything is logical – this is the idea that underlies this particular market. Each market has its own idea and, accordingly, its own “invisible hand”. It is the idea underlying the market that is the invisible hand that controls it. The idea is invisible in and of itself, therefore it rules invisibly.
More specifically, the invisible hand controls the elements of the market: producers, consumers, distributors, developers, marketers, and creatives. The idea underlying the market connects all the elements of the market and controls its development. A detailed scheme of the market is presented in the picture above.
… the “invisible hand of the market” sells
However, there is one problem. The bottom line is that the expression “the principle of the invisible hand of the market” has a double meaning. On the one hand, it indicates that there is a certain market mechanism, but on the other hand, it indicates that the invisible hand of the market is guided in its actions by certain principles. In other words, the invisible hand has principles.
Knowing these principles can be used to their advantage. How can you use the invisible hand of the market to your advantage? As already mentioned, she has a voice in any transaction and can give it to one party or another. If he wants, he will give it to the seller, and if he wants, he will give it to the buyer. We can say that the “invisible hand of the market” is engaged in sales.
Accordingly, it can be used primarily to increase sales. It is clear that if she gives a voice to the seller, then the buyer will be forced to buy from him the goods. It is enough to get her voice to sell the product. Many products do not sell as well, because the “invisible hand of the market” does not give its vote to their sellers.
… the first principle of the invisible hand of the market – it only helps its
If he does not give, it means that this is contrary to its principles. Of course, the first principle of the invisible hand of the market – it helps only his own. It is clear that there is no sense at all to help someone else. Accordingly, in order to get a voice from the invisible hand of the market, it is necessary to get acquainted with it, and it is better to be in friendly relations with it.
The second principle is to help only when help is really needed. If you help when not asked, they can send it to hell. This happens very often and she is well aware of this. The third principle is that it helps only goods about which it has enough information, goods that the market really needs. This information she needs to pass.
She herself will not ask her, guided by her second principle. Moreover, the more information will be given to the invisible hand of the market, the more likely it is to get her voice in her favor, because the more information she has, the easier it is for her to convince the buyer to buy the product. To transmit information, it must be from the seller.
… you need to become closely acquainted with the “invisible hand of the market”