Text c: invisible hand

Before reading

What do you think Adam Smith meant by the “invisible hand” of the market? What does the “invisible hand” do?

Reading

Read the text and do the tasks following the text.

(1) By following their own self-interest in open and competitive markets, consumers, producers and workers are led to use their economic resources in ways that have the greatest value to the national economy – at least in terms of satisfying more of people’s wants. The first person to point out this fact in a systematic way was the Scottish philosopher Adam Smith, who published his most famous book, An Inquiry Into the Nature and Causes of the Wealth of Nations, in 1776. Smith was the first great classical economist, and among the first described how an economy based on a system of markets could promote economic efficiency and individual freedom, regardless of whether people were particularly industrious or lazy.

(2) Smith argued that if people are naturally good and kind, a market economy offers them a great deal of freedom to carry out their good deeds, backed up by an efficient system of production, which generates more material goods and services for them to use in doing those good works. But what if people are selfish, greedy, or lazy?

(3) Anyone who wants to enjoy more of the material goods and services produced in a market economy faces strong economic incentives to work hard, spend carefully, and save and invest. And most successful businesses have to produce good products, sell them at market prices, pay their employees market wages, and treat their customers courteously – even if that isn’t their natural way of doing things.

(4) The basic reason for that kind of change in some people’s behaviour is competition. As Adam Smith pointed out, when there are several butcher shops in a community, any butcher who is rude or tries to sell inferior meat at unreasonable prices soon loses business and income to other butcher shops. If your neighbourhood butcher is naturally friendly and benevolent, so much the better.

(5) But even customers who do not know a butcher personally don’t have to depend on such altruistic characteristics to get good service and products. The more a greedy, selfish, or lazy person wants to enjoy a higher standard of living, the more he or she will try to meet the competition and build up a large base of satisfied customers. Or as Smith described this feature of market economies, people are led “as if by an invisible hand” to work and behave in ways that use resources efficiently, in terms of producing things that other people want and are willing to pay for, even though that may have been “no part of their original intentions”.

(6) One other factor must be at work for Smith’s invisible hand to function properly: the butcher must own or rent the shop, so that he or she has the rights to its profits. Without this right to private property, and to the profits it brings, the invisible hand of competition will not motivate businesses to offer the best and most varied products at reasonable prices. Butchers who are employees of the state will view their jobs very differently than those who are in business for themselves. This fact holds true throughout the economy, whether one considers a butcher, a carpenter, a restaurant chain, or a multinational insurance company.

Task 1. Discuss how the example of a butcher’s character and behaviour illustrates the functioning of a free market. (paras.4 and 5)

Task 2. According to Adam Smith, what factor determines the difference between

“butchers who are employees of the state” and “butchers who are in business for themselves”? (para.6.)

Task 3. If somebody treats you courteously, is their attitude showing

a) politeness and respect;

b) caution and fear;

c) courage and bravery? (para.3)

Task 4. Having read the above text, how can you define the “invisible hand” with one or two words?

Business communication

At the airport

Look at the picture. What do you think the phrase Live out of a suitcase mean?

John works for a major airline. He complains about his job:

When I applied to work in this position, I had no idea that I'll be living out of a suitcase six to seven months of the year.

Here is some vocabulary about airports and air travel.

Beginning and ending your journey:

a departures board- a notice board in an airport that tells passengers information about their flight

a boarding pass- a piece of paper or card that is given to a passenger at check-in. A passenger must have one to be allowed to go onto the plane

passport control- the place in the airport where your passport and boarding card are checked before you go to the departure lounge

a final call- an announcement that's made over the airport's loudspeaker system to let passengers know that the flight is almost ready to go

baggage reclaim - part of the airport where you go to collect your luggage after you arrive at your destination airport. Usually there is a 'carousel' - a continuous moving strip of material that goes round in a circle with passengers' bags on it

Types of flights:

a short-haul flight - a flight that takes a short time (up to about three hours), compared to a long-haul flight

a long-haul flight - a flight that takes a long time (over seven hours), compared to a short-haul flight

a domestic flight - a flight between two airports in the same country

an international flight - a flight between two airports in the different countries

a red-eye (flight) - a flight that leaves late at night and arrives early the next morning

Types of seats on a plane:

a window seat - a seat next to the window

an aisle seat - a seat next to the aisle (the walkway between rows of seats)

an economy seat - a seat in the economy class part of the plane (in the back part of the plane, where the seats are smaller and closer together than in other parts of the plane)

a first-class seat- a seat in the first-class part of the plane (in the front part of the plane, where the seats are bigger and spaced further than in other parts of the plane)

Ex.1. If you take a flight from an airport in an English-speaking country, you're likely to hear some of these dialogues. In pairs read the dialogues and be ready to act them out later.

Dialogue 1. Check in.

Good morning. Can I have your ticket, please?

Here you are.

Thank you. Would you like a window or an aisle seat?

B. An aisle seat, please.

A. Do you have any baggage?

B. Yes, this suitcase and this carry-on bag.

A: OK, please place your bag on the scale.

B: I have a stopover in Frankfurt – do I need to pick up my luggage there?

A: No, it’ll go straight through to Los Angeles. Here is your boarding pass – your flight leaves from gate 15A and it’ll begin boarding at 3:20. Your seat number is 26E.

B.Thank you.

Dialogue 2. Passport Control

Good morning. Can I see your passport?

Here you are.

Thank you very much. Are you a tourist or on business?

I'm a tourist.

That's fine. Have a pleasant stay.

Thank you.