Written by Rainer: rainer.lehrer@yahoo.com Learn languages (via Skype): Rainer: + 36 20 549 52 97 or + 36 20 334 79 74

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About the superstition of the “invisible hand” Written by Rainer: rainer.lehrer@yahoo.com Learn languages: Rainer: + 36 20 334 79 74 or + 36 20 549 52 97 Click here!      German version     Hungarian version     Russian version       French version    Spanish version    Latin version     all seven versions together  ------------------------------------------------------------------- A brief summary of the work "The wealth of nations" by Adam Smith When you talk about Adam Smith and his work "The wealt of nations", the term "invisible hand" appears again and again. This suggests that these people either have not read his book, or have not understood it. Essentially, Smith here compares three countries from the 1750's. - United Kingdom - France - The English colonies in North America In France at that time, the economy was controlled by the king and centralized. In the UK, there was a parliamentary system with various interest groups represented in Parliament. And the English colonies in North America could not really be controlled from England, because even a trip there and back took six months to complete. He now collected a lot of data on: - Population growth - Economic growth - Price development He noted that the economy develops best when it is not controlled by the state, but can develop freely. But then where does the superstition come from that Smith wrote about "invisible hand"? At his time the European world was living in an "Aristotelian" view of the world. Everything had to be organized and regulated by someone. The world had been created by God, and so the economy had to be controlled. The fact that the economy regulates itself, simply did not enter people’s imagination. Later this idea of selfregulation was taken over by Charles Darwin to establish his theory of evolution. Another important part concerns the effects of protective customs duties on import goods (quality of products offered, prices). Here he refers to the example of Holland. There the cities, a kind of free cities were very strong, and they founded in these walled settlements guilds that not only lined up a combat-capable defense squad, but also controlled the trade in the settlement. A craftsman had to be a member of this guild (the name of the currency guilders derives from guild) in order to trade in the given city. That way, his business was protected from the extra-urban competitors protected. Only for buyers that often was bad because they had to acquire bad goods at a higher price. Today, when a politician says that we need to protect our jobs, I always think: Damn, again I have to buy bad goods too expensive. I also need to be competitive on the market. Why is that not valid for everyone?

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