The Invisible Hand
Published: February 5, 2020
Adam Smith’s flash of genius was to see how prices that emerged in the market could coordinate the activities of millions of independent people. This “invisible hand” improves the general welfare, even though it comes from individuals pursuing their own self-interest. The invisible hand explains how self-interest can create an orderly society that benefits everyone.
Discussion Questions:
- Why do some people believe there is no “invisible hand” in the market?
- Under what conditions is the “invisible hand” stymied or otherwise disrupted by government mandates?
Additional resources:
- Watch “The Tyranny of Control” with Milton Friedman, available here: http://bit.ly/2tmtaSh.
- Read How Adam Smith Can Change Your Life by Russ Roberts, available here: https://amzn.to/2UptXxt.
- Listen as Russ Roberts talks about his book How Adam Smith Can Change Your Life, available here: https://hvr.co/31AubDz.
Adam’s Smith flash of genius was to see how prices that emerged in the market, the prices of goods, the wages of labor, the cost of transport, could coordinate the activities of millions of independent people, strangers to one another, without anybody telling them what to do. The “invisible hand” is a phrase introduced by Adam Smith in his great book, The Wealth of Nations, in which he talked about the way in which individuals, who intended only to pursue their own interests, were led by an invisible hand to promote the public welfare, which was no part of their intention. He was talking about the economic market, about the market in which people buy and sell, and he was pointing out that in order for a butcher, or a baker, or a candlestick maker to make an income, he had to produce something that somebody wanted to buy. Therefore, in the process of promoting his own interests and looking to his own profit, he ended up serving the interest of his customers.