Common cent$ 1: One-armed economists and the invisible hand.
This article is the first in a series called Common Cent$. There is a need for leaders and managers to have a basic understanding--Common Cent$--of elementary economics. The limited, retrospective view of the accountant must be supplemented by the broader, prospective view of the economist. The limits and scope of economics are defined. The First and Second Fundamental Theorems of Welfare Economics are introduced. The mythology behind the mechanism of action of Adam Smith's Invisible Hand is dissected, and the mechanism of the free market is explained in terms of the effect of marginal cost on net market efficiency. The apparently simple case of the effect of legislating a minimum wage on a free market is discussed. This provides an example of the real-world complexity of economies and of applying economic concepts to the business world.
Wilkinson
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I
Manitoba Health, Winnipeg, MB, Canada. iwilkinson@gov.mb.ca
D000066:Accounting; D017048:Health Care Costs; D007753:Laboratories / Q000191:economics*; D007857:Leadership; D018803:Models, Economic; D011056:Political Systems; D012456:Salaries and Fringe Benefits; D014481:United States