Question

Ethics in Accounting and Business Question

In today's extreme capitalist system where there a large amount of income equality do you think that the invisible hand theory is still one that should be considered when talking about financial policies?

Answer 1

Yes, even in  today's extreme capitalist system where there a large amount of income equality do you think that the invisible hand theory is still one that should be considered when talking about financial policies. Firstly it is not possible for government to intervene in every market to ensure that justice is provided to weaker sections and it is not even efficent,. At times the government intervention worsens situation as for example when government puts price ceilings then black marketing starts which further reduces the supply. Since the resources are limited therefore resources are required to be allocated according to demand and supply. It is not necessary that if the market is allowed to work independently it will lad to inequality only. It is believed many a times that benefits trickle down to the bottom whih ensures wellfare of all. So if we take case of India though income inequality is more but still government considers entry of more private companies in major sectors because it runs on invisible hand concept and ensures efficient allocation of resources.