Although everyone speaks about Adam Smith, few people read him. I love reading Adam Smith as you find something that is not in common wisdom. Anyway, here is Adam Smiths invisible hand quote. So many people talk about the invisible hand but in the Wealth of nations it only appears once.
he 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.
What does Adam Smith’s Invisible hand mean? You need to understand who Adam Smith was, he was a moral philosopher and a religious man. He believed that when people act on their enlightened self interest, than society as a whole benefits in positive ways in which the individual could not imagine.
This means man is basically good. People who are against Adam Smith’s invisible hand believe people are basically bad and need to be engineered by wiser more moral government bureaucrat. Anti-Smith thinkers like Karl Marx believe individuals can not be trusted to live their lives and government needs to put into place laws that direct social economic behavior.
Adam Smith’s Invisible hand
Smith as a thinker was pure genius. How could a government engineer an economy if the greatest benefit comes from unseen consequences of actions? Think about it please. Adam Smith’s Invisible hand is genius and minds like this come around only once every few hundred years. I live in Poland and travel to Russian and Ukraine and see the lasting affects of a government engineering an economy.
Adam Smith’s invisible hand was nothing more than Adam Smith believing in the good in people. That you personally can make free choices about your life and your career and the way you participate in the economy. Is there anything wrong with that?
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4 responses to Adam Smith’s invisible hand
Just looking at that quote (which is incomplete btw), it does not stand out to me that Smith made any mention or suggestion of moral quality concerning the “end” that was “unintended”. Could it not be suggested that you are assuming that he is qualifying this “end” as something ‘good’ and ‘good for all society’?
A more complete reading of Smith leads many economist and economic historians, such as myself, to conclude that for decades now must of the establishment characterizations are complete nonsense. Smith was closer to Marx on most issues than he is to all the libertarian-like minded folks today (so were the US founding fathers). He valued labor over multinational corporate tyranny (that usurps political power). Just my thoughts….
The context: “As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he 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.” (Book 4, Chapter 2)
That quote is the full context. When read completely, one can see how OPPOSITE the ‘myth’ of Smith’s ideas, let alone the ‘invisible hand’ concept, are from reality. Also he was writing in the mid 18th century, before not only the industrial revolution, but the 20th century take over of financial capitalism over industrial capitalism. Smith was not a ‘free market’ laissez-faire capitalist.
It also seems odd that the whole idea of representative democratic ideals is to put in check the power of the economic elite. They were more conscious of the British E. India Co., then whether King George had eggs for breakfast.
(Sorry for the multiple posts, but it is not a shallow topic. Thanks.)
Great comment and Mike this is greatly appreciated. You are right he did value labor and real value and work over corporate smoke and mirrors. However, it is a stretch to say he was closer to Marxism. He was someone who believed in natural value, money earned and wealth created over nominal wealth effects. It was the Austrian school of economics that focused on the subjective value of things.
However, I still think Adam Smith was the father of capitalism. This is my reading of him.
Further, people have choice not to work in corporate America. I do not. I am not affected by what the fat cats on Wall Street do. I basically focus my productive energies and work on creating something of value and if it is good, I will have earned some money.
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