One-Armed Economists and The Invisible Hand: An Introduction to Economics

The need for leaders and managers to have a basic understanding of elementary economics is demonstrated. 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 upon 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. “Common sense is what tells you that a ten pound weight falls ten times as fast as a one pound weight”. Anon “Common sense is the collection of prejudices acquired by age eighteen.”, Albert Einstein