"Suppose our social planner tried to choose an efficient allocation of resources on his own, instead of relying on market forces. To do so, he would need to know the value of a particular good to every potential consumer in the market and the cost of every potential producer. And he would need this information not only for this market but for every one of the many thousands of markets in the economy. The task is practically impossible, which explains why centrally planned economies never work very well. The planner’s job becomes easy, however, once he takes on a partner: Adam Smith’s invisible hand of the marketplace. The invisible hand takes all the information about buyers and sellers into account and guides everyone in the market to the best outcome as judged by the standard of economic efficiency. It is, truly, a remarkable feat. That is why economists so often advocate free markets as the best way to organize economic activity."
Quote Details
Added by wikiquote-import-bot
Unverified quote
0 likes
Original Language: English
Available Languages (1)
Sources
N. Gregory Mankiw, Principles of Economics (6th ed., 2012), p. 147; Ch. 7. Consumers, Producers, and the Efficiency of Markets
https://en.wikiquote.org/wiki/Invisible_hand
Revision History
No revisions have been submitted for this quote.
Categories
Invisible hand
20 quotes on TrueQuotesView all quotes by Invisible hand →
Related Quotes
"To understand the economy then is to comprehend how it is driven by the animal spirits. Just as Adam Smith’s invisibl…"
"What Galbraith understood, and what later researchers (including this author) have proved, is that Adam Smith's "invi…"
"Writers after Coase have referred to the authority structure of the firm as a "visible hand" that works in combinatio…"
"...that every individual spontaneously tries to find the place and the trade in which he can best increase National g…"
"A man is of no use to this world, of no use to society or the neighborhood in which he lives, who has no other object…"
"The net effect of increasing scale, centralization of capital, vertical integration and diversification within the co…"
"Adam Smith was the first to perceive that we have stumbled upon methods of ordering human economic cooperation that e…"
"When the classical worldview was applied to social science, the dominant notions turned out to be struggle for surviv…"
"This it is that gives a majesty so pure and touching to the historic figure of Christ; self-abandonment to God, utter…"
"I am very liberal on social issues, but I don’t believe we can have personal liberty, which is what that means, witho…"