Concepts
Invisible Hand
Also Known As Invisible Hand of the Market
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A metaphor coined by Adam Smith for the way individuals pursuing their own self-interest within a competitive market can, without intending to, produce outcomes that benefit society as a whole. The phrase appears only a handful of times across Smith's writing, most famously in Book IV, Chapter II of the Wealth of Nations, where a merchant who invests at home rather than abroad out of ordinary self-interest is led, as if by an invisible hand, to promote an end, the employment of domestic industry, that was no part of his intention. Later classical and neoclassical economists elevated the phrase into the central metaphor for market self-regulation, a reading historians of economic thought debate as broader than Smith's own, narrower use of it.
Facts
FieldMarket Theory, Classical Economics 1 Origin YearYear Smith published An Inquiry into the Nature and Causes of the Wealth of Nations, where the metaphor's most famous appearance sits in Book IV, Chapter II. SignificanceTwentieth-century economists, especially Paul Samuelson, elevated the phrase well beyond Smith's own narrow use of it into the general, abstract claim that free markets are self-regulating systems, a reading historians of economic thought continue to debate as broader than what Smith himself wrote. 2 Cross-Tradition Connections
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Attributed To
Sources
1. An Inquiry into the Nature and Causes of the Wealth of Nations
Adam Smith, 1776Book IV, Chapter II
2. Wikipedia
2. Wikipedia
Wikimedia FoundationInvisible hand, Later usage sectionQuote, Invisible hand, Later usage section
Going far beyond the original intent of Smith's metaphor, twentieth-century economists, especially Paul Samuelson, popularized the use of the term to refer to a more general and abstract conclusion that truly free markets are self-regulating systems.
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