Businesses fail partly because the invisible hand determines that they are not producing something that is socially valuable.  True or false?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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This statement is not exactly true.  There is, however, only one word in it that prevents it from being completely true.  That word is "socially."  If that word were deleted or were changed to "economically," this statement would be true.

Some businesses fail simply because they are producing something for which there is not a sufficient market.  But this is not necessarily because people think the product lacks social value.  Social value implies that a product has to be in some way good for society as a whole.  But there are plenty of things that have social value but do not have economic value.  

Therefore, this statement is false.  The invisible hand determines which products have economic value to people, not which products are socially beneficial.  It is lack of economic value, not social value, that typically contributes to the failure of a product and the business that sells it.

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