Introduction
Economics as a discipline has been in development for quite a while, influenced by a variety of theories, concepts, and ideas. Some of these theoretical frameworks have been in use for an impressive amount of time, while some have been sparked only recently by the changes in the economic environment and the tendency for the current relationships to be geared toward the process of globalization. However, when it comes to defining the magnitude of the effects that theoretical frameworks have had on the realm of economics as a discipline, one must give Adam Smith’s works credit for serving as the foundation for the evolution of the discipline (Heilbroner 95). The role of the government should not be underrated as the legal framework in accordance with which economic transactions occur exists owing to the actions of the state authorities. However, allowing state representatives to make essential decisions as far as the trading process is concerned means hampering the economic relationships as they are self-guided, i.e., governed by the invisible hand.
Analysis
Differently put, Adam Smith assumes that the role of the government in determining the course of economic relations must be limited significantly, while the agents of these relationships must trust the invisible hand. The reasons for the stated assumption are quite basic – the author of the theory believes that the economic processes are stifled otherwise. Indeed, when executing their influence to the point of shaping companies’ decision-making processes and compelling them to follow a set of rather rigid patterns, one is likely to observe an impressive drop in the companies’ profitability and popularity in the target market (Hargroves 176).
It should be borne in mind, though, that Smith’s theory is not perfect. Dismissing the possibility of state bodies having an impact on the key economic transactions, he makes companies quite vulnerable to the possible violations of the economic laws. Therefore, a delicate balance between the suggestions made by Adam Smith and the idea of a rigid system of governmental supervision should be viewed as an option. While the very concept of the state government not interfering with the crucial choices made by organizations is rather sensible, the security of these firms demands that certain restrictions should be imposed on the trading processes.
Conclusion
Smith’s assumptions concerning the significance of the invisible hand in the economic interactions between the representatives of for-profit organizations are quite legitimate as they contribute to the improvement in the decision-making processes and allow making the choices that can be viewed as the most favorable for all the participants involved in the economic process. Although it would be wrong to assume that governments should play no role in the identified relationships whatsoever, the extent to which the state shapes economic interactions should be reduced to its logical minimum, leaving the participants the freedom to choose the tools that they view as necessary. Therefore, the concept of the invisible hand is a crucial part of interactions in the context of the global economy as it creates an environment of harmony.
Works Cited
Hargroves, Katson. The Natural Advantage of Nations: Business Opportunities, Innovation and Governance in the 21st Century. Sterling, VA: Earthscan, 2013. Print.
Heilbroner, Robert L. Teachings from the Worldly Philosophy. New York, NY: W. W. Norton & Company, 1997. Print.