60-second Adventure in Economics(60秒读懂经济学概念).docVIP

60 Second Adventures in Economics Number one: The Invisible Hand An economy is a tricky thing to control, and governments are always trying to figure out how to do it. Back in 1776 economist Adam Smith shocked everyone by saying that what governments should actually do is just to leave people alone to buy and sell freely among themselves. He suggested that if they just leave self-interested traders to compete with one another, markets are guided to positive outcomes “as if by an invisible hand”. If someone charges less than you, customers will buy from them instead, as you have to lower the price, or offer something better. Wherever enough people demand something, they will be supplied by the market like spoilt children--only in this case, everyone is happy. Later free-marketeers like Austrian economist Friedrich Hayek, argued that this “hands off” approach actually works better than any kind of central plan. But the problem is, economies can take a long time to reach their “equilibrium”, and may even stall along the way. And in the meantime people can get a little frustrated, which is why governments usually end up taking things into their own more visible hands instead. Number 2: The Paradox of Thrift Much like a child getting his pocket money, one of the biggest economic questions is still whether it’s better to save or spend. Free-marketeers like Hayek and Milton Friedman say that, even in difficult times, it’s best to be thrifty and save. Banks then channel the savings into investment, in new plants, skills and techniques that let us produce more. And even if this new technology destroys jobs, wages will drop, and businesses hire more people so unemployment falls again. Simple-- At least in the long run. But then a “live-fast-die-young” kind of chap called John Maynard Keynes cheerfully pointed out that “in the long run we’re all dead”. So, to avoid the misery of unemployment, the government should instead spend money to create jobs. Whereas if the governme