My Pen Pal Zhu Yuanzhang

Chapter 328 The Invisible Hand

This is……

Seeing this, Zhu Yuanzhang was suddenly at a loss whether to laugh or cry. What was going on with Old Li? Why did he get the chance to take the test?

Is this because you are afraid that you will forget what you learned before or what?

Having said that, Zhu Yuanzhang started to think and began to recall the true teachings that Li Han had passed on to him.

So, what exactly is the method that Lao Li mentioned, which has already been in his hands? Oh, a flash of inspiration came to Zhu Yuanzhang's mind.

When Lao Li talked about trade and currency before, he specifically mentioned that in order to prevent currency from being overly concentrated in a few people, the court needs to regulate it. Oh, yes, Lao Zhu remembers it, it’s called the visible hand!

Thinking in this way, Zhu Yuanzhang's mind was opened up. At that time, Lao Li mentioned that in order to prevent developed regions from excessively absorbing resources from backward regions, transfer payments could be used to subsidize backward regions.

It seems that at that time, Lao Li had already implicitly told me the concept of the siphon effect. In this case, Lao Li was right, the method was indeed in my own hands, which was the visible hand of the court!

Thinking of this, Zhu Yuanzhang suddenly felt in a good mood and was once again happy with his own wit. At this moment, he felt like when he was a child in a private school and the teacher asked him to recite something and he recited it himself.

So the strategy to deal with excessive siphoning is transfer payments?
With his own guess of the answer, Zhu Yuanzhang continued reading.

"I believe you, Old Zhu, have already recalled what I told you about industry feeding back to agriculture. That's right, this method is to use the court's visible hand to prevent Yingtian Prefecture and Songjiang Prefecture from excessively siphoning off surrounding areas.

In short, it is the fourteen-character mantra that the imperial court actively regulates and ensures balanced regional development! "

Look, look, let’s just say that Old Zhu is smart, hehe!

Zhu Yuanzhang was extremely proud. The most relaxing moment for him was when he read Li Han's letter, and the happiest moment was when he answered Li's questions.

However, these fourteen words really summarize the mantra accurately. Balanced regional development means that everyone in the country can make money, right?

"Before we go into detail, we need to understand the visible hand of the imperial court and its counterpart, the invisible hand."

Invisible hand?
Zhu Yuanzhang was stunned again. Why are all these concepts so interconnected and endless? Old Li, how much do you have in your stomach? It seems like you can never empty it. Isn't this a treasure trove of knowledge?

"The court's visible hand has another name, which is macroeconomic regulation. Simply put, it is the court's behavior of coordinating economic development and market trade by formulating various policies and issuing a series of decisions.

Just like the transfer payments I mentioned to you before, it is one of the behaviors of macro-control, and more, such as deciding how much treasure notes to issue, is also the same.

This should be easy to understand, right? "

Well, what you said, Old Li, is indeed simple and easy to understand. From a macro perspective, it means that we, Old Zhu, should lead the court and consider things from the perspective of the entire Ming Dynasty. Regulation means taking corresponding measures to address specific problems.

"The concept of the invisible hand is more abstract than macroeconomic regulation. I will try to make it as simple and easy to understand as possible."

Old Li, just come over. After being influenced by so many letters, Old Zhu's brain is much better than before!
Zhu Yuanzhang was very confident, and then he was dumbfounded. "The invisible hand refers to the role of the market mechanism in economic development. Specifically, under normal circumstances, the market will maintain its healthy operation with its internal mechanism.

The main basis for this is the rational principle of economic man in market economic activities and the rational choices governed by the rational principle of economic man.

These choices gradually formed the price mechanism, supply and demand mechanism and competition mechanism in the market economy. These mechanisms are like an invisible hand, controlling everyone in the dark and consciously operating according to the laws of the market.

What is the market mechanism, what is the market law, what is the rational principle of economic man, and what is rational choice?

Old Li, why are you doing such a wicked and outrageous thing again? Old Zhu knows every word of this, but when you put them together, what do they make sense?
For a moment, Zhu Yuanzhang's mood was like riding a roller coaster. The ups and downs were really exciting. He was feeling proud just now, but now he felt deeply frustrated.

Oh, didn’t old man Yang Siyi call himself the God of Wealth of the Ming Dynasty? Just two sea trades brought in a few million strings of cash, but that guy went crazy and thought he was proficient in market trade. He even walked with his head held high.

I really need to throw this paragraph to him so that he can understand what market mechanism and market laws are!
"Of course, this may be too abstract, so I'll give you an example."

Old Li, you know that you are too abstract, but giving examples is the best. Old Zhu likes to see you give examples the most!

“For example, Lao Zhu, you sell roast geese. You can normally sell about a hundred roast geese a day, and each roast goose sells for one penny of silver. Under normal circumstances, in order to ensure a normal daily supply, you will purchase about a hundred and ten geese from farmers every day.

The number of these ten geese is the redundancy of your supply. Even if you cannot sell them, it will not bring you much loss, because you can't guarantee that you will be able to sell more someday.

Farmers will control the number of geese they raise according to your needs. If they raise too many, they will not be able to sell them and will suffer losses. Similarly, you will not purchase too many geese because you will also suffer losses.

In this economic activity, you, the farmers who raise geese, and the customers who buy roast geese together constitute a roast goose market. The three of you are the economic agents of this roast goose market.

The number of geese you purchase and the price at which you sell them are determined by your judgment based on market demand. Similarly, the number of geese a farmer raises is also determined by his judgment based on market demand.

The above set of behavioral patterns is what we call market laws.

Then this rational judgment based on market laws is called rational choice under the rational principle of economic man.

"Isn't it that you understand what I mean, Old Zhu?"

Of course it is possible, but in your mouth, Old Li, our Old Zhu has changed from a factory owner producing hoes to a small vendor selling roast goose.

Zhu Yuanzhang couldn't help but laugh. In the entire Ming Dynasty, he was probably the only one who dared to joke with him like this.

However, he did not feel angry at all, instead he felt that he was enjoying it.

In Lao Li's case, playing various roles is really a brand new experience.

Maybe, when I have some free time, I can really go and buy and sell roast goose and feel the economic activities in the market?

(End of this chapter)