Invisible Hand Guide, Meaning , Facts, Information and Description
In The Wealth of Nations, Adam Smith makes the claim that, within the system of capitalism, an individual acting for his own good tends to also promote the good of his community. He attributed this principle to a social mechanism that he called the Invisible Hand.
- Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it... 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 society that it was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.
A contemporary example of such an effect could be the far-reaching social benefit realized via the proliferation of computers and software; goods which have been produced almost entirely by people trying to maximize their own economic gain. Presumably those producers didn't manufacture the computers and develop the software out of a love for humanity or an altruistic desire to promote society's collective fortune. Any social benefits that have accrued therefore, according to Smith's doctrine, are simply a by-product of their striving for selfish reward.
Capitalism arguably provides opportunities for maximizing one's own profit at the expense (rather for the benefit) of others. The tobacco industry is cited as an example of this: the sale of cigarettes and other tobacco products certainly brings a very good revenue, but it is difficult to see any social benefit.
In general, the term "Invisible Hand" can apply to any individual action that has unplanned, unintended consequences, particularly those which arise from actions not orchestrated by a central command and which have an observable, patterned effect on the community.
Contrary to common misconceptions, Smith did not assert that all self-interested labor necessarily benefits society, or that all public goods are produced through self-interested labor. The proposal is merely that in a free market, people tend to produce goods desired by their neighbours.
This is an Article on Invisible Hand. Page Contains Information, Facts Details or Explanation Guide About Invisible Hand See also
External link