The M cle of the Market

An op/n.on column.*! suggests tfiat the nox: t/me you sit down for Thanksg/i'.ng d-nnor, you s/ioold give thank« not only for t'w» tvrkoy on your plat* but «Ito for the economic system in which you Ave.

Giving Thanks for the "Invisible Hand"

By Jeff J»coby

GwHude to thf AfrnlgMy is 11« then* 0» Thirksavnci and has been <vet since the Pigmr. of Kyroouth brougfc m tfan fl'st good toves! Toi*y, to milions homes actoss the natcn, God wtl te thanked kit many gifts tot the (east on the utie and the company of hwd ones, tot hesrth and flood fenune h the ye* ow by, tor peace at homf in a tin» ol war. lot the «xakdflbfe piMlcge rf hsvrig bocn twin 01 Kiting become—,ajne«an

But it probatory vwitft occut to too many of us to ghe thanks fee t he fxt thit thr bed supettraikrl had plenty of turlry tot sale tNs *«k Esen the ctevoui .vent Hkelr to tl-unk God for a'rlre schedules that made it pcssfcfc for some ol those fcr/ed ones to fly home for Ihirkv^i.nj Or f« the amwl of 'f/asterand commander' * the tocal movfe-theater in tut* lor tl* holiday weekend Ot fat tKit great ctsnbetty apple pte tecipe in tlv food section of the nwipapw

I have thirKji we «fe mote 01 ess tot granted. I! Kiidy tsies a mracle to ctpian •s+r/gtxrry stores stock up en turkey befcre th}nk«ovr«j 01 why Hollywood re liases big mows n t me tor bo hoMeys Thai •sisit they <to Where is Gcd in that"'

And >*t. bit* tfi«e something v«otv drous- scmethrg almost nexpluWe--tn the way your ThinfcsgMng Aeelrm: is mjcte possible by the sill ami lat»» of *w numbers ol total straps'

To bring that turkey to the dining room ut?p tor exunpb. requited the extort-, of thousands </ pecirt«—the poultry tjmws who rabed the brds. uf tome, but alio the feed aflr.hctars who suppled tbrr «1111 ishment and the trucker who broajht r to th? «arm. rvn to mention the ircNtea who designed the hatchery, tS- workmen viho bull r, ard the technicians who keep it tunning The btrd had to b? tbuflhMKd and defeat»*?«! and Inspected and transported ard unkuded ard nr-spped and pttcod and dsplaved ibp peoplr <s*»n accomplished those tasls we«e supper«! in turn I* »ml« of othei people accom-alshmg «her tasks—Item refining the pisolrw tKit furled the trucks to rmru factoring the pbsUc In whkh the meat was

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The .vtivtes of countfess far rung men and *on-<-n ovet thfcouisp of mwy mcrths tad to be intricately choreographed ard p»e cnelf timed, so thit *t*n you up to ba^a fresh IKtnto^stng turkey there svauld te one—ot more IMy. a kisv rfczeo— warro The tesel of cccrdrwtton tl'dt was r«fjred to pul it off is mind bogglrci But wtm is evw more mind tt»aqlr«3 Is thfe No orecoordnated t

No wiry r«r sat in a command post somewhwe. censUtirg a masiei pim and Kviryonfctv No one rede fwd on all tVjse people, fixcim) them to coo^trate tot your benefit 4nd >vt they dii cooperatr rttxn jrrt/ed at the wpc-markjet. >«jr tuikey wis there. You ddtrl Kise to do «lytKng but shcrw up to buy f ll that isnt a mrade wh« dxaid sve call II'

Adsin Smith caled t "the innsibk-hand*—the mysterious power tKit leads innumetabto people, carh wnrtirq fnr his own oa»\ to preowe ends tint ben eft many. Out ol tne seeming tteos of nvl lore cf uncoordruted prrwte tisnsactcos rmnges the spontanrous coder of the m.v ket. Free bunwn bemji Itee>y imeraa and the <esut is an amy ol goods <*»d setvlces mere Immense than the human mrd can compmhend No dctator, no bwwiKr^cy no iMX-fComjxr-ei P1»« * actonce Indeed the more an economy h permed the mere It n plagjed b/ shxlages, dnloca tion..inflfalum

The social ctcfcr of freectom. Ike tht wealtli and the pica«» ( mikes pass tie. K an mtraefdrury gift hem abenv. On thn mjnfcsgwr.jDayind eeer^cby. may we be grateful.

ers and sellers do not consider these side effects when deciding how much to consume and produce, the equilibrium in a market can be inefficient from the standpoint of society as a whole.

Market power and externalities arc examples of a general phenomenon called market failure—the inability of some unregulated markets to allocate resources efficiently. When markets fail, public policy can potentially remedy the problem and increase economic efficiency. Microivonomists devote much effort to studying when market failure is likely and what sorts of policies are best at correcting market failures. As you continue your study of economics, you will see that the tools of welfare economics developed here are readily adapted to that endeavor.

Despite the possibility of market failure, the invisible hand of the marketplace is extraordinarily important. In many markets, the assumptions we made in this chapter work well, and the conclusion of market efficiency applies directly. Moreover, we can use our analysis of welfare economics ai>d market efficiency to shed light on the effects of various government policies- In the next two chapters, we apply the tools we have just developed to study two important policy issues—the welfare effects of taxation and of international trade.

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