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1. The Invisible Hand, as explained by Adam Smith, refers to an overall process that keeps

society in check. He argues that through the invisible hand, the pressure of the marketplace

will push the selfish activities of individuals into socially responsible paths (Heilbroner &

Thurow, 1998). When people set out to do business, they do so with the most significant

intention of making profits. If not put in check, these sellers can exploit the customers for

their selfish gain of huge profits. Thus, the other players in the same market provide

competition, making them provide favorable prices for buyers to afford. As a result, the

prices shift from the selfishly high amounts to what society can easily afford.

I find the view on the Invisible Hand keeping the economy at an optimal wrong. Just

like Heath (2001), I support those who oppose it and believe that government regulation, as

opposed to an invisible hand, keeps the economy in check. The Invisible Hand only makes

sense if the price decisions by the sellers favor the buyers. Sometimes this may not be the

case because the said sellers can collaborate to increase prices. According to the prisoner's

dilemma, cooperation with the other parties often yields better results than pursuing a

personal interest. The flaw with Adam Smith's argument is that it always assumes that the

producers will always have to match the lowest prices in the market to stay in business.

Suppose collaboration is all that is needed for the prisoner's dilemma to be practical, then

there is the possibility of sellers ganging up against buyers and collaborating to effect higher

prices for commodities.

According to Heath (2001), the government should regulate market prices than allow

individual players to determine costs. Heath (2001) notes that most of the social problems

arise from prisoner's dilemma and collective action problems. The author also says that with

government intervention, many of these collective action problems can be alleviated. I agree

with his reasoning because individual players in the market all look out for their own
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benefits, not those of the consumers. An example is in the healthcare industry, where places

like America have the cost of healthcare so high that the average American has challenges

accessing the same. This is attributed to the fact that the market is regulated by individual

providers whose main aim is to make profits and not improve the health of the citizens. This

is in contrast to the Canadian system, where government intervention is the order of the day,

and Canadians are very tolerant of this.

Lack of government regulations of market prices may result in market failures like

externalities. This stems from a third party's production or consumption of goods or services

with high costs or benefits. This does not make economic sense because the actual costs and

benefits of the product are not reflected in the prices. The problem with externalities is that

they exploit buyers, and this happens mainly because individual players determine market

prices (Heilbroner & Thurow, 1998). The externalities are often not covered by either the

producers or the consumers, and the results are societal borne. If government regulations

were properly reinforced for such situations, then there would be fewer cases of externalities.

The rules would adequately factor in externalities and prevent the social burden that comes

with the same. Therefore, I support those who oppose the inviable hand and propose

government regulation to keep such matters in check.

The Invisible hand, therefore, is not the best tool for keeping society in check. It may

work in some instances, yes, but this may not always be the case. If sellers decide to gang up

and issue large selling prices for the buyers by prisoner's dilemma, they will have no choice,

especially if these are vital needs. If they realize cooperation yields better results than

defecting, this will be a significant blow to the consumers who will be forced to contend with

the crazily high prices. I support government regulation of market prices as this prevents

exploitation of citizens and allows them to afford basic human needs. If all sectors of the

economy are regulated, then the manufacturers too will not complain about the loss of profits
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because they will get favorable prices from their suppliers. It is a whole loop of sales that,

once regulated, everyone remains happy as they either afford to buy or make desirable

profits. It is upon the government to take over and take charge to ensure the citizens do not

get hurt by selfish decisions made by individuals in business.

3. The staples trap is a theory for economic growth that emphasizes traditional commodities'

role in shaping a resource-rich economy. The thesis was created by economist W.A

Mackintosh and historian Harold Innis. The Staples model puts Canada in the position of

producing unprocessed goods for export to the international markets (Belshaw, 2016). The

theory explains the struggles of the Canadian economy to rise to a more complex economic

position. The approach can also be used to understand general aspects of the Canadian

economy.

Fisheries, which were the very first economic link between Canada and Europe, was

initially simply structured. The process involved sending ships, harvesting the fish, and

sending the ships back to Europe. After 1783, there were significant advancements into

farming, particularly wheat around the Great Lakes, mainly done for export to Britain. At this

point, fishing and wheat were considered the Canadian staples, and the country relied on

exporting them for economic development. The staples theory alludes that the degree to

which countries rely on their staples for export for their development positively affects their

social, economic, and political development. The staple trap is best used to understand the

process of transformation of the Canadian economy.

The primary export of a region in Canada majorly influenced their development. For

example, fishing was the core of the Atlantic Canadian region, while the northern and central

parts heavily relied on fur trade for their development. Accelerated urbanization in Europe

further influenced the Wheat boom, which was a dominant export of this time. Wheat
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planting involves large tracts of land, meaning its farming influenced certain types of

settlements and social interactions (Belshaw, 2016). Grain elevators were built to contain the

vast quantities of wheat produced and railways to transport the grains to the port. The focus

on the staple led to Canadian economic development, which was what economists referred to

as forward linkages.

The staples-driven economic development of Canada had two dimensions to it. First,

the staples plan imparted a globalized dimension to Canada's economic growth because the

expansion was towards export markets (Stanford, 2019). The global dimension of this trade is

seen in the physical sale of these staple commodities to the international markets. Secondly,

the Canadian market has always been supported by Canadian investors and companies. For

many resource-exporting companies, there has always been a huge reliance on foreign

investment to boost the financial state of such companies. The Canadian influence of

financial capital has thus been a significant driver of the staples-driven economy.

Canadian's present economy is highly influenced by the more aggressive and intrusive

influence of globalization. Historians and economists warned that Canada might be caught in

a staples trap because of the dominance of a particular form of resource. They argued that a

staples-led economy shaped the resulting pattern of economic development, although it may

not always be for the best. The staples trap allowed dominance of a particular form of

resource extraction and export, thus undermining the country's capacity to have a fully

functional diversified economy. There is the risk of depletion of the staple resource and,

therefore, may draw the country back because there was no exploration of alternative sources

of economic development. As Canada continues to rely on specific staple goods for export, it

hurts its chances of economic growth through diversification.

Canada is considered to have a branch plant economy where companies set the

subsidiaries in Canada (Stanford, 2019). The USA mainly uses this strategy to avoid high
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freight charges and import duties. A branch plant economy also helps these multinationals

maximize profits and encourage exports. Canada relies on such companies to create

employment for those directly producing goods and those providing supporting activities.

They also get to sell their goods and services in such markets in exchange for foreign goods

and services. When branch plants are set up in a country, in this case, Canada, they result in

an economic boom because of the support from the main branch located abroad. However,

this boom is not sustainable, and the economy soon falls if there is no existent fallback plan.

The branch plant economy is characterized as one of the significant challenges facing the

growth of the Canadian economy. Although the country has staple goods for export and

foreign investments, the staple trap and branch plant economy are some of the reasons why

the country cannot still match up to economic giants like the USA. The economy is overly

reliant on a few staples which are at risk of depletion and boom from multinational

subsidiaries. Numerous branch plants have shut down in Canada and moved to neighboring

areas like Mexico, creating an imbalance in the Canadian economy.

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References

Heath, J. (2001). The efficient society (selections). Toronto: Penguin Canada.

Heilbroner, R., & Thurow, L. (1998). Three great economists. In Economics Explained (pp.

26–43). New York: Touchstone.

Belshaw, J. D. (2016). Canadian history: Post-confederation. Victoria, B.C.: BC Campus.

Retrieved from

https://openlibrary-repo.ecampusontario.ca/xmlui/handle/123456789/234

Stanford, J. (2019). Staples dependence renewed and betrayed : Canada's twenty-first century

boom and bust. In M. P. Thomas, L. Vosko, C. Fanelli, & O. Lyubchenko (Eds.),

Change and continuity : Canadian political economy in the new millennium (pp. 79–

105). Montreal: McGill-Queen's University Press.