Adam Smith is one of the most famous Economist and Philosopher. He was Scottish by origin. He is famous for his book “The Wealth of Nations” published in 1776. Adam Smith’s writings are studied by 20th and 21st century philosophers, writers, and economists. Smith’s ideas of free market and their importance, assembly-line production methods, and gross domestic product (GDP) has formed the foundation for theories of classical economics.
The term “invisible hand” first appeared in Adam Smith’s famous work, The Wealth of Nations, to describe how free markets can incentivize individuals, acting in their own self-interest, often selling products and services not necessary for the society. The unobservable market force that helps the demand and supply of goods in a free market to reach equilibrium automatically is the invisible hand. The invisible hand is a metaphor for the unseen forces that move the free market economy. The constant interplay of individual pressures on market supply and demand causes the natural movement of prices and the flow of trade.
For example, pharma companies constantly identify new ailments. They describe the ailment generically making feel each one that they have it. The biggest example is “restless leg syndrome” it’s an irresistible urge of leg movement. It’s not a serious condition. The pharma companies fund studies to make the ailment prominent. After they release the study, the hungry media catches it and spreads it on all media channels. The company uses this wild-spared study as promotion. Now let’s see why it works. Drugs are easier than exercise. People prefer gulping a tablet than exercising. Psychologically it gives them the feeling of relaxation from the imagined condition. The customers of pharma companies are doctors, when they prescribe any medicines, we don’t question them, we buy them. A mild opiate-based painkiller, such as Codeine, is prescribed to relieve pain associated with restless legs syndrome. This interdependence incentivizes Pharma companies to make what is “socially” necessary, they are only bothered about filling their cashbox and their own well-being.
Critics argue that the invisible hand does not always produce socially beneficial outcomes, and can encourage greed, negative outwardness, discriminations, and other harms. The invisible hand is part of laissez-faire, meaning the “let do/let go,” approach to the market. In other words, the approach holds that the market will find stability without government or other interventions forcing it into unnatural patterns.
Cosmetics
Launched in 1952, Lakmé is the first home-grown successful cosmetics brand in India. The common Indian woman is expressive, confident and redefines the definition and meaning of beauty. The key factor driving the Indian beauty and personal care market is the growing focus among individuals on personal hygiene and skin health, flawless skin, trim and slim figure, hair care etc. This is especially true for the country’s large population of young people, who are increasingly becoming conscious about their looks. In addition, the availability of a wide range of affordable and effective beauty and personal care products is also helping to drive growth in the market. The major players in the market are focusing on product innovation and new product launches to meet the changing needs of consumers.
The Indian youth gives more importance to face and body image. This fact has forced boom in cosmetics and grooming products. The Indian cosmetics products market size is estimated at USD 1.35 billion in 2023. Consumers are discovering products and brands via advertisements and promotional campaigns on various social media platforms, including Instagram and Facebook. Before purchasing, they consider product reviews, other consumers’ recommendations, celebrity endorsements, expert blog posts, and social media comments. In addition, with the increasing internet penetration, the online market for purchasing cosmetics products has seen rapid growth in India in recent years. Furthermore, the demand for luxury cosmetics is increasing among millennials and Gen Z consumers, owing to their preference for grooming up regularly to look tidy and fashionable.
Bottled Water
One more example is of bottled water. Scary health studies gave messages to stay hydrated always. Big promotional amount was spent on municipal water called “mineral water”. What worked? People gave importance to keeping themselves hydrated. Bottled water are available everywhere conveniently. The water is affordable to all at 1000 times markup price. Bottled Water’s story began with a humble cause. It was once considered a luxury item, reserved for special occasions or travellers in need of hydration. In the early days, people relied on tap water for their daily drinking needs. The idea of purchasing water in a plastic bottle became a trend.
The turning point for bottled water was the convenience it offered. Busy urban lifestyles and the on-the-go culture of the late 20th century created a demand for portable hydration. Plastic bottles, lightweight and easy to carry, quickly became the everyone’s choice. Suddenly, quenching your thirst became as simple as grabbing a bottle from the nearest store or vending machine. It was a revolution in hydration convenience.
One good thing happened. People started choosing bottled water over sugary drinks and carbonated sodas in their pursuit of a healthier lifestyle. The perception that bottled water was purer with mineral in it and safer than tap water also contributed to this shift. It became a status symbol of sorts, with brands touting their water’s source and purification methods.
Conclusion
The idea in invisible hand in market economy is that competition and self-interest will drive to offer the best products at the lowest prices to attract consumer demand, essential for securing profits. All this will contribute to raising social welfare. However, the reason behind this betterment of the human condition is ultimately selfish. Hence competition and self-interest will create a productive society contributing to the economy.
