Invisible Hand

*In economics, the invisible hand is a metaphor used by Adam Smith to describe unintended social benefits resulting from individual actions. The phrase is 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.[1]

He first introduced the concept in The TheoryOfMoralSentiments, written in 1759, invoking it in reference to income distribution. In this work, however, the idea of the market is not discussed, and the word "CapitalIsm" is never used.[2] By the time he wrote The Wealth of Nations in 1776, Smith had studied the economic models of the French PhysioCrat-s for many years, and in this work the invisible hand is more directly linked to production, to the employment of capital in support of domestic industry. The only use of "invisible hand" found in The WealthOfNations is in Book IV, Chapter II, "Of Restraints upon the Importation from foreign Countries of such Goods as can be produced at Home."

The first appearance of the invisible hand in Smith occurs in The Theory of Moral Sentiments (1759) in Part IV, Chapter 1, where he describes a selfish landlord as being led by an invisible hand to distribute his harvest to those who work for him.

Elsewhere in The Theory of Moral Sentiments, Smith has described the desire of men to be respected by the members of the community in which they live, and the desire of men to feel that they are honorable beings.* (Tribalism, FeedBack)

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