Adam Smith's "invisible hand" guides markets from "summary" of The Economics Book by DK
Adam Smith introduced the concept of the "invisible hand" in his book "The Wealth of Nations." According to Smith, individuals pursuing their own self-interest in a free market economy inadvertently benefit society as a whole. This is because when people act in their own self-interest, they are motivated to produce goods and services that others want and are willing to pay for. In this way, the "invisible hand" of self-interest guides individuals to make decisions that lead to the most efficient allocation of resources and the greatest overall benefit to society. Smith believed that the government should not interfere with the workings of the free market, as he believed that the "invisible hand" would naturally lead to the best outcomes for society. He argued that government intervention in the economy, such as tariffs or subsidies, would only distort market forces and lead to inefficiencies. Smith's ideas laid the foundation for the classical school of economics, which emphasizes the importance of free markets and limited government intervention. The concept of the "invisible hand" has been influential in shaping modern economic theory and policy. It has been used to justify policies that promote free trade, deregulation, and privatization. Proponents of the "invisible hand" argue that markets are self-regulating and efficient, and that government intervention is unnecessary and harmful. Critics, however, argue that the "invisible hand" does not always lead to desirable outcomes, and that government intervention is sometimes necessary to correct market failures and ensure a fair distribution of wealth.- Adam Smith's concept of the "invisible hand" highlights the power of self-interest and competition in driving economic activity and promoting the common good. By allowing individuals to pursue their own interests in a free market economy, society as a whole can benefit from the efficient allocation of resources and the production of goods and services that meet the needs and wants of consumers.
