The Invisible Hand

The economic system that is followed today in the U.S., Capitalism, is one of the leading methods of organization of scarce resources (inputs) into wants of goods and services (outputs). The U.S. follows one of the closest forms of Capitalism in the world, yet it doesn’t follow what is known as pure capitalism. Pure capitalism allows next to zero government intervention and allows the free market to choose what, how, and for whom to make (outputs). However, in order to understand the nature of capitalism we must understand two basic questions about economics: What directs and what regulates an economy. With those understood one can understand a major root of the Capitalist System of the U.S.

In the year of the U.S. independence, 1776, another momentous occasion occurred. The Wealth of Nations was published by a famous philosopher/economist, Adam Smith. In the book Smith described a concept known as the “Invisible Hand.” This was what he described as the regulating force in a capitalistic society. The reason for which it becomes regulatory in Capitalism was that of the greed of entrepreneurs. Through greed, entrepreneurs constantly strive to better their product or create a new and original product so as to drive profits higher for their company or corporation. In effect, competition, spending, and consumer satisfaction occur as a result of the Entrepreneur’s self-interest (greed).

A prime example of the “Invisible Hand” concept is that of a shop known as Build-A-Bear. Entrepreneurs learned through research that people felt that presents from the heart made or constructed by their loved ones were more dear to them then artificial store bought ones with no originality of the gift giver attached to it. Thus, a concept known as build-a-bear sprung up where people could purchase the right to create a bear specially tailored to how they wanted it made. Afterwards, they would create it themselves by picking its nose, its fur, stuffing it themselves, and naming it. When this concept of creating Build-a-bears hit the market sales skyrocketed through the roof with them just leveling off yet still rising as of right now. This is because, as one can see, the originality of this product made it so that no other vendor could offer such a service/product and it fulfilled a consumer want of originality of gifts from the heart.

Furthermore, another example would be that of the