Smith explained that it was as if an invisible hand guided the actions of individual people to combine for the common good. However, the ‘invisible hand’ has come to capture his fundamental belief that society benefits more by individual people’s self-interested actions than actions that are intended to directly benefit society. Smith only used the term three times in his writings. makes the following comment regarding the invisible hand: “Its positive aspect is that if everyone in a society seeks economic self interest (in an environment of free and open competition) then, as if prodded by an invisible hand, he or she (unknowingly and unintentionally) will also be serving the larger interest of the society as a whole.” ![]() Smith, who is known today as the ‘father of modern economics’, used ‘the invisible hand’ with respect to income distribution in 1759 and production in 1776 in his papers The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations, respectively. This mechanism underscores the complexity of economic ecosystems, where individual pursuits of wealth creation can inadvertently lead to the efficient allocation of resources across a society. Smith’s ‘invisible hand’ described how individuals making selfish decisions could collectively and unwittingly contribute to an effective economic system that was in the public interest. If we all act from self-interest, motivated by profit, then the economy will function more efficiently and productively, than it would if economic activity were directed by some kind of central planner. ![]() The term refers to the free market’s ability to allocate factors of production, products and services to their most valuable use. The Invisible Hand is a term that Scottish moral philosopher and political economist Adam Smith (1723-1790) used to describe the unintended social benefits of individual actions.
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