Loan advice

Market prices establish a reward-penalty (profit-loss) structure that encourages people to work, cooperate with others, use efficient production methods, supply goods that are intensely desired by others, and invest for the future. Self-interested entrepreneurs will seek to produce only the goods consumers value enough to pay a price sufficient to cover production cost. Self-interest will also encourage producers to use efficient production methods and adopt cost-saving technologies because lower costs will mean greater profits. Firms that fail to do so will be unable to compete successfully in the marketplace.
We asked you to reflect on why the grocery stores in your local community generally have on hand about the right amount of milk, bread, vegetables, and other goods. Likewise, how is it that refrigerators, automobiles, and CD players, produced at different places around the world, make their way to stores near you in approximately the same numbers that they are demanded by consumers? The invisible hand principle provides the answer, and it works without political direction. No government agency needs to tell decision makers to keep costs low or produce those goods most intensely desired by consumers. Similarly, no one has to tell individuals that they should
- develop skills that are highly valued by others. Once again the profit motive
- higher earnings in this case will do the job. Many of the things we take for granted in our ordinary lives reflect the invisible hand at work.