How the invisible hand of the market works

The principle of the invisible hand of the market is a term coined by the Scottish economist and one of the founders of modern economic theory, Adam Smith, to explain the mysterious processes in the market. He realized that the behavior of buyers and sellers in the market is determined not only by their desires, but also by some third party that is not visible.

The basic principle of the invisible hand of the market

The invisible hand of the market can influence the decisions that buyers and sellers make. It has a voice in any transaction and can give it to both the seller and the buyer. Everything would be fine, but the expression “invisible hand of the market” is a little frightening. Everything that is not visible is not clear, you do not know what to expect from an invisible person, you do not know whether it is a friend or an enemy.

Accordingly, the question arises, what is the “invisible hand of the market”? The answer to this question is very simple. Everything visible is material, so the invisible hand of the market has nothing to do with the material. If it is not material, then it is ideal, because there are simply no other options. Accordingly, the invisible hand is an idea.

But what kind of idea is this? Everything is logical – this is the idea that underlies this particular market. Each market has its own idea and, accordingly, its own”invisible hand”. The idea behind the market is the invisible hand that controls it. The idea is invisible in itself, so it governs invisibly.

How the invisible hand controls the market

More precisely, the invisible hand controls the elements of the market: manufacturers, consumers, distributors, developers, marketers, and creatives. The idea behind the market connects all the elements of the market and drives its development. A detailed diagram of the market is shown in the picture above.

However, there is one problem. The point is that the expression “the principle of the invisible hand of the market” has two meanings. On the one hand, it indicates that there is a market mechanism, but on the other hand, it indicates that the invisible hand of the market is guided in its actions by certain principles. In other words, the invisible hand has principles.

Knowing these principles, you can use it to your advantage. How can you use the invisible hand of the market to your advantage? As already mentioned, it has a voice in any transaction and can give it to one or the other party. If you want to, pay the seller, and if you want, give to the buyer. We can say that the “invisible hand of the market” deals with sales.

The principle of the invisible hand of the market in business

Accordingly, it can be used primarily to increase sales. It is clear that if she gives her vote to the seller, the buyer will be forced to buy the product from him. It’s enough to get her vote to sell the product. Many products just do not sell well, because the “invisible hand of the market” does not give its voice to their sellers.

If she doesn’t give it away, it’s against her principles. Of course, the first principle of the invisible hand of the market-it helps only its own. It is clear that there is no point in helping someone else. Accordingly, to get a voice from the invisible hand of the market, it is necessary to get acquainted with it, and it is better to be on friendly terms with it.

The second principle is to help only when help is really needed. If you help when they don’t ask, they can send you to hell. This happens very often and she is well aware of it. The third principle is that it only helps products that it has enough information about, products that the market really needs. This information needs to be passed on to her.

Who is helped by the invisible hand of the market

She herself will not ask for it, guided by her second principle. Moreover, the more information is transmitted to the invisible hand of the market, the more likely it is to get its vote in your favor, because the more information it has, the easier it is to convince the buyer to buy the product. To transmit information, the seller must have it.

When the seller is poorly pumped with the idea of a product, then he has little information about it. This is often one of the reasons for low sales volumes. As mentioned above, the second principle of the invisible hand of the market – if asked to help, it helps. How do I get help from her? First of all, you need to get acquainted with the “invisible hand of the market”.