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Tuesday, November 11, 2008

The invisible finger

Adam smith coined the term "the Invisible hand." The invisible hand demonstrated that, in a free market, an individal pursuing his own self interests tends to also promote the good of his community as a whole; each individual maximizing revenue for himself maximizes the total revenue of society as a whole.

In addition to the invisible hand created by free markets; we have the invisible finger created by governemnt. The finger of government is much like the finger of a child. The finger of the child often finds its way into places it shouldn't be; like going into the mouth after going inside the nose. The finger of government also goes into places it shouldn't, like intervening with free markets. Children have a hard time leaving a scab alone when it is so tempting to pick at it. Governemetns expereince the same temptations and just like a child, they can't resist. The difference between a child and a goverenment is the child has parents that tend to know whats best for the child, and through the efforts of the parents the child's scabs eventually heal. The government however does not have parents looking out for it. A government has its people whom, unless they were all economists, do not know how to heal the nations wounds (an economic recession). So the goverenment tends to act in a way a child would act without her parents; she gives into temptation and picks her scabs. America picks her scabs through $600 stimulas packages, $700 billion bailout bills, and even more recently, plans to try and save the american auto industry, and even worse, speculations have surfaced about a new stimulas package (I guess the original package was so successful, they figured they would try it again). So America's wounds continue to bleed as the scabs are repeatdly torn open through an interventionsim based governement.
As history shows us, economies will rebound after a recession. Just like a scab will eventually heal even if it is picked, but it is my opinion that the scabs of an economy will heal like those of a child in that the best way to heal them is to simply leave them alone.

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