The Laws Of The Market - 1131 Words

How would you describe the â€Å"laws of the market†? Adam smith is one of the powerful influence minds in the world economic history. His explanation and finding of the economic topics on the book â€Å"Wealth of Nations† are considered as the foundation of economic. One of Smith’s outstanding findings is laws of market. These rules, according to Heilbronn (1999:55) are â€Å"basically simple†, while Rà ¼stow(1942) citied by Seele and Zapt (2015:10) claims that Adam Smith illuminated rationally about laws of market which had been explained by religion laws. His finding of laws of market includes self-interest, competition, self-regulation and population. The first law of market is self- interest or profit motive. He found that self- interest was the†¦show more content†¦As the demand increases, the supply is likely to rise and the producers tends to gain higher profit. In short, through the laws of market, Adam Smith found out the common rules of market activities. Why is the market said to be â€Å"self- regulating†? According to Heilbronn (1999:57), self- regulation is one of the most important. Adam Smith’s market rule. Smith states that market is said to be self- regulating as it can operate or function itself without external interference or regulations. And he called this self-regulating mechanism is â€Å"invisible hand† theory. Market can be self-regulating as when there is a change in the market, the whole market members will adjust their behaviour to suit the change as well as still satisfy their self-interest. This explains why Smith could state that market is self- regulating How does the economic world described by Smith differ from the economic world of today? The world economic has changed significantly since the eighteen century. Hence, there are numerous difference between Smith’s descriptions of the economic world and the current circumstance. As Heilbronn (1999: 58) mentions, the world that Adam Smith described is â€Å"a world of atomistic competition† without monopolies or oligopolies. Therefore, Smith could state that competition prevents monopoly and ruthless profiteering. However, in the modern economy, monopoly and oligopoly have appeared and grown rapidly. Particularly, since the late of