Economic And Social Concepts Codexery

Invisible hand

Metaphor for self-interest accidentally promoting public good.

Twentieth-century economists, especially Paul Samuelson, popularized it to mean that free markets are self-regulating systems that produce optimal outcomes without government intervention.[1][2] This modern meaning differs sharply from Smith's own modest and context-specific usage.[3][4]

Quick Facts

Field
Economics, Moral Philosophy
Nationality
Scottish
Known for
Metaphor of the invisible hand; works The Theory of Moral Sentiments and The Wealth of Nations
Associated concept
Self-interest accidentally promoting public interest

Facts from the source article.

Key facts and history

Smith first used the invisible hand metaphor in The Theory of Moral Sentiments (1759), describing a selfish landlord distributing his harvest through an invisible hand.[5] In The Wealth of Nations (1776), Smith used the phrase only once, in a chapter about capital investment, not free trade.[6] Smith argued a self-interested investor naturally prefers to employ capital near home, which unintentionally benefits domestic industry.[6] Smith himself earlier described "invisible hand" explanations as an unscientific style suitable for superstitious people.[3][7]

Modern economists often treat the invisible hand as a general rule that voluntary transactions in free markets benefit society.[2] Léon Walras developed a general equilibrium model concluding that self-interest in competitive markets maximizes total utility.[8] Milton Friedman called the invisible hand "the possibility of cooperation without coercion".[9] The modern interpretation and widespread adoption of the term originated with Paul Samuelson's 1948 introductory economics textbook.[2]

What the cited sources add

Gavin Kennedy argues that the modern use of the invisible hand as a symbol of free market capitalism is not reconcilable with Smith's modest employment of the term.[10][4] Kennedy insists that Smith's intentions are of utmost importance and that the modern construct should exist separately from Adam Smith.[11][12] John D. Bishop suggests that Smith's invisible hand argument applies only to investing capital in one's own country, not to all economic activities.[13][14] Bishop contends that the interests of merchants and manufacturers are fundamentally opposed to society's interests.[13][14]

Thomas Piketty notes that although the invisible hand exists, economic imbalances may last decades and require non-commercial processes to correct.[15][16] Daniel Klein contends that regardless of whether Smith originally meant the term to carry its contemporary meaning, its current usefulness as a concept should not be invalidated.[17][18]

References

  1. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Slater, D. & Tonkiss, F. (2001). Market Society: Markets and Modern Social Theory. Cambridge: Polity Press, pp. 54–5 (original not read by us) en.wikipedia.org
  2. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: A. Marshall, Principles of Economics, 1890; S. Jevons, The Theory of Political Economy, 1871 (original not read by us) en.wikipedia.org
  3. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Kennedy, "Paul Samuelson and the Invention of the Modern Economics of the Invisible Hand", History of Economic Ideas, 2010, p. 105–119 (original not read by us) en.wikipedia.org
  4. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Kennedy, Gavin. 2009. Adam Smith and the Invisible Hand: From Metaphor to Myth. Econ Journal Watch 6(2): 239–263. (we also read that source) en.wikipedia.org
  5. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Smith, A., 1976, The Theory of Moral Sentiments, vol. 1, p. 184 in: The Glasgow Edition of the Works and Correspondence of Adam Smith, 7 vol., Oxford University (original not read by us) en.wikipedia.org
  6. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Smith, "An Inquiry into the Nature and Causes of the Wealth of Nations", W. Strahan & T. Cadell, 1776, p. 32–33 (original not read by us) en.wikipedia.org
  7. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Smith, A., 1980, The Glasgow edition of the Works and Correspondence of Adam Smith, 7 vol., Oxford University Press, vol. III, pp. 49-50 (original not read by us) en.wikipedia.org
  8. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Ludwig von Mises (2009), Human Action: Scholar's Edition, Ludwig von Mises Institute (original not read by us) en.wikipedia.org
  9. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Friedman's Introduction to I, Pencil; Basu 2010, p. 16 (original not read by us) en.wikipedia.org
  10. Kennedy, Gavin. 2009. Adam Smith and the Invisible Hand: From Metaphor to Myth. Econ Journal Watch 6(2): 239–263.. facts only, no text reused. econjwatch.org
  11. Kennedy, Gavin. "A Reply to Daniel Klein on Adam Smith and the Invisible Hand". Econ Journal Watch 6(3): 374–388.. facts only, no text reused. econjwatch.org
  12. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Kennedy, Gavin. "A Reply to Daniel Klein on Adam Smith and the Invisible Hand". Econ Journal Watch 6(3): 374–388. (we also read that source) en.wikipedia.org
  13. John Douglas Bishop, "Adam Smith's invisible hand argument", Journal of Business Ethics (1995), doi:10.1007/bf00881431. OpenAlex metadata CC0; paper not read. doi.org
  14. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Bishop, "Adam Smith's invisible hand Argument", Journal of Business Ethics, March 1995, p. 165–180 (we also read that source) en.wikipedia.org
  15. Open Library record, ISBN 9780674245075 ("Capital and Ideology"). CC0 (metadata); book content not read. openlibrary.org
  16. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: English., "Summary of Capital in the twenty-first century by Thomas Piketty", Instaread Summaries, June 6, 2016; Piketty, "Capital and Ideology", Harvard University Press, August 14, 2023, p. 293 (we also read that source) en.wikipedia.org
  17. Klein, Daniel B. 2009. In "Adam Smith's Invisible Hands: Comment on Gavin Kennedy". Econ Journal Watch 6(2): 264–279.. facts only, no text reused. econjwatch.org
  18. Wikipedia, "Invisible hand" (CC BY-SA 4.0), which cites: Klein, Daniel B. 2009. In "Adam Smith's Invisible Hands: Comment on Gavin Kennedy". Econ Journal Watch 6(2): 264–279. (we also read that source) en.wikipedia.org

Each numbered sentence above was checked against the source it cites before publication. Sentences citing Wikipedia adapt text from the English Wikipedia article Invisible hand (contributors), used under CC BY-SA 4.0; this entry is available under the same licence. Other sources were used for facts only; no text or images are copied from them.

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