The Role of the ‘invisible hand’ in the Proper Role of the Government
Invisible hand refers to unobservable market force that plays a significant role in assisting in the demand and supply of goods in a free market in attaining equilibrium. This term was introduced by Adam Smith. He supposed that the economy can be efficient in a free market situation where every person works for his /her interest. He further explained that the economy can function and work well, if the government allows people to purchase and sell goods freely amongst themselves. Adam Smith highlighted three roles of the government and they are: protection against international invasions, ensuring justice for one’s own citizens, and providing of public works. Smith formulated the three functions as follows: Based on the system of natural liberty, the nation has only three responsibilities to perform: three duties of great significance that are commonly understood (Smith and Raphael 761. Firstly, the government is charged with the duty of safeguarding the society from invasion and violence of other independent societies. Secondly, the responsibility of protecting each member of the society from harassment or injustice of every member of the society or the role of coming up with a real administration of justice. Lastly, the responsibility of erecting and upholding some public works and institutions which it cannot ever be of the interest of any individual. This is because the profit could not reimburse the cost to any individuals.
Adam Smith further discussed the means of payment for government services he highlighted wider series of government responsibilities. The cost of defending the society and that of supporting the self-respect of the chief justice is useful to the entire society (Smith and Raphael 762). Additionally, other individuals who benefit from this cost are those who seek justice in one way or the other make it mandatory to look for protection from the courts of justice.
A part from the responsibility of supporting the chief magistrate, Adam Smith also adds the responsibility of giving religious instruction and education. Adam Smith introduced two varied principles for financing the varied responsibilities of the government; the initial principle is that of describing for defending the society and for providing finances of the dignity of the chief justice. The second principle is applicable when it comes to applying for maintaining good roads and communication. However, the cost benefits those who carry goods or travel from one place to the other, and those who use such goods. The second principle referred to as the principle of financing public goods. According to this principle, people are expected to pay depending on their benefit of the service. Adam Smith further outlined particular justifications for education and defense. He further argued that in the case of offering education and training for defense, the government is giving a good worthy of itself. Furthermore, about training for defense and education, the public can levy upon almost the entire body of an individual the need for acquiring those most critical parts of education. Adam Smith also made the same arguments concerning property rights. He stated that the attainment of valuable and broad property, consequently, this requires the creation of civil government. On the other hand, if there is no property whose value is more than the value of 2 or 3 days labor, then the civil government may not be necessary.
Smith, Adam and D. D Raphael. The Wealth of Nations. New York: Knopf, 1991. Print.