Invisible Hand
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In economics, the '''invisible hand''' is used to describe the self-regulating nature of the marketplace. The invisible hand is a metaphor coined by the economist Adam Smith in "The Wealth of Nations". For Smith, the invisible hand was created by the conjunction of the forces of self-interest, competition, and supply and demand, which he believed would provide the best outcome for society provided that government did not interfere with these forces. | In economics, the '''invisible hand''' is used to describe the self-regulating nature of the marketplace. The invisible hand is a metaphor coined by the economist Adam Smith in "The Wealth of Nations". For Smith, the invisible hand was created by the conjunction of the forces of self-interest, competition, and supply and demand, which he believed would provide the best outcome for society provided that government did not interfere with these forces. | ||
| - | == Origin of the Metaphor == | + | >== Origin of the Metaphor == |
Adam Smith (1723-1790) uses the metaphor in Book IV of ''The Wealth of Nations'', arguing that people in any society will employ their capital in foreign trading only if the profits available by that method far exceed those available locally. In such a case, Smith argues, it is better for society as a whole if they so do. | Adam Smith (1723-1790) uses the metaphor in Book IV of ''The Wealth of Nations'', arguing that people in any society will employ their capital in foreign trading only if the profits available by that method far exceed those available locally. In such a case, Smith argues, it is better for society as a whole if they so do. | ||
| - | : | + | : "[An individual is] 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 not 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. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it." |
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== Interpretation == | == Interpretation == | ||
