Visualizing the Invisible Hand of Markets:
نویسنده
چکیده
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge from complex interactions, we need instruments that can analyze simultaneously complex interactions between many parts. Here, a simulator modeling different types of economies, is used to visualize complex quantitative aspects that affect economic dynamics. The main conclusions are: 1Relatively simple economic settings produce complex non-linear dynamics and therefore linear regressions are often unsuitable to capture complex economic dynamics; 2Flexible pricing of goods by individual agents according to their micro-environment increases the health and wealth of the society, but asymmetries in price sensitivity between buyers and sellers increase price inflation; 3Prices for goods conferring risky long term benefits are not tracked efficiently by simple market forces. 4Division of labor creates synergies that improve enormously the health and wealth of the society by increasing the efficiency of economic activity. 5Stochastic modeling improves our understanding of real economies, and didactic games based on them might help policy makers and non specialists in grasping the complex dynamics underlying even simple economic settings.
منابع مشابه
Equilibrium Versus the Invisible Hand
Twentieth century equilibrium modeling depicts an end state toward which an economy tends, whereas the invisible hand, as Adam Smith depicted it, suggests an economy continually progressing as an increased division of labor is produced by growing markets. Thus, there is an inherent tension between the concepts of an equilibrium outcome versus the invisible hand process. The paper discusses diff...
متن کاملThe Political Economy of Capitalism
Capitalism is often defined as an economic system where private actors are allowed to own and control the use of property in accord with their own interests, and where the invisible hand of the pricing mechanism coordinates supply and demand in markets in a way that is automatically in the best interests of society. Government, in this perspective, is often described as responsible for peace, j...
متن کاملThe Back of the Invisible Hand: The Costs of “High-Powered” Incentives When Markets are Incomplete
متن کامل
The Treatment of Smith’s Invisible Hand
Adam Smith used the metaphor of an invisible hand to represent the instincts of human nature that direct behavior. Moderated by self-control and guided by proper institutional incentives, actions grounded in instincts can be shown to generate a beneficial social order even if not intended. Smith’s concept, however, has been diluted and distorted over time through extension and misuse. Common mi...
متن کاملAre Invisible Hands Good Hands? Moral Hazard, Competition, and the 2 Best in Health Care Markets
متن کامل
The Invisible Hand
The marginalist revolution transformed the principles of price determination in competitive markets. Nevertheless, the systematization that accompanied neo-classical theory, especially Walras’ general equilibrium formulation, confirmed Classical economists’ belief, most powerfully articulated by Smith, that impediments to free trade should be removed. So, while the transition from the Classical...
متن کامل