What Is the Invisible Hand?

By directing that industry in such a manner as its produce may be of the greatest value, he [the owner of capital] intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

- Adam Smith, The Wealth of Nations

Podcast of the Day

Adam Davidson and Alex Blumberg chat with Amartya Sen, a Nobel Prize Laureate in Economics, about his new book, The Idea of Justice, and its critique of the theory of social justice. Sen spends time in his book, and on the podcast, talking about what he sees as common misinterpretations of Adam Smith's oft-cited but perhaps more complex embrace of an absolute free market.

Listen to the Planet Money episode on Adam Smith and the Not So Invisible Hand

Video of the Day

Short Article of the Day

If you’ve heard of one economist, it’s likely to be Adam Smith. He’s the best-known of all economists, and is typically hailed as the founding father of the dismal science itself. Furthermore, he’s usually portrayed as not only an early champion of economic theory, but of the superiority of markets over government planning. In other words, Smith is now known both as the founder of economics, and as an ideologue for the political Right. Yet, despite being widely believed, both these claims are at best misleading, and at worst outright false.

Smith’s popular reputation as an economist is a remarkable twist of fate for a man who spent most of his life as a somewhat reclusive academic thinker...

Continue reading Paul Sagar's article: We should look closely at what Adam Smith actually believed

Further Reading

The invisible hand is a term used by Adam Smith to describe the unintended social benefits of individual self-interested actions. The phrase was employed by Smith with respect to income distribution (1759) and production (1776). The exact phrase is used just three times in Smith's writings, but has come to capture his notion that individuals' efforts to pursue their own interest may frequently benefit society more than if their actions were directly intending to benefit society. Smith may have come up with the two meanings of the phrase from Richard Cantillon who developed both economic applications in his model of the isolated estate...

Continue reading the Wikipedia article on the Invisible Hand

Bonus Webcomic

Hotels - xkcd

Related Topics

If you’re interested in the idea of the invisible hand, check out some of the following related topics for more resources:

 CapitalismEconomics | Money | Political Philosophy

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