Editing Invisible hand (section)

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The '''invisible hand''' is a [[metaphor]] inspired by the [[Scottish people|Scottish]] economist and moral philosopher [[Adam Smith]] that describes the incentives which free markets sometimes create for self-interested people to accidentally act in the public interest, even when this is not something they intended. Smith originally mentioned the term in two specific, but different, economic examples. It is used once in his ''[[Theory of Moral Sentiments]]'' when discussing a hypothetical example of wealth being concentrated in the hands of one person, who wastes his wealth, but thereby employs others. More famously, it is also used once in his ''[[Wealth of Nations]]'', when arguing that governments do not normally need to force international traders to invest in their own home country. In both cases, Adam Smith speaks of ''an'' invisible hand, never of ''the'' invisible hand.

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 that always tend to create economically optimal outcomes, which in turn cannot be improved upon by government intervention. The idea of trade and market exchange perfectly channelling self-interest toward socially desirable ends is a central justification for newer versions of the ''[[laissez-faire]]'' economic philosophy which lie behind [[neoclassical economics]].<ref>Slater, D. & Tonkiss, F. (2001). ''Market Society: Markets and Modern Social Theory''. Cambridge: Polity Press, pp. 54–5</ref>

Adam Smith was a proponent of less government intervention in his own time, and of the possible benefits of a future with more free trade both domestically and internationally. However, in a context of discussing science more generally, Smith himself once described "invisible hand" explanations as a style suitable for unscientific discussion, and he never used it to refer to any general principle of economics. His argumentation against government interventions into markets were based on specific cases, and were not absolute.<ref>{{cite journal
 | url =https://www.jstor.org/stable/23724554
 | last =Kennedy
 | first =Gavin
 | title =Paul Samuelson and the Invention of the Modern Economics of the Invisible Hand
 | date = 2010
| journal =History of Economic Ideas
 | volume =18
 | issue =3
 | pages =105–119
 | publisher =Accademia Editoriale
| jstor =23724554
 | quote = Modern attributions to Adam Smith's use of the Invisible-Hand metaphor are at variance with Smith's teachings on the use and role of metaphors, and, therefore, they misread his contributions in moral philosophy and his political economy. }}</ref> Putting the invisible hand itself aside, while Smith's various ways of presenting the case against government management of the economy were very influential, they were also not new. Smith himself cites earlier enlightenment thinkers such as [[Bernard Mandeville]].<ref>{{cite web
 | url =https://www.masterclass.com/articles/what-is-the-invisible-hand-in-economics#quiz-0
 | title =What Is the Invisible Hand in Economics?
 | last =Class
 | first =Master
 | date =November 8, 2020
| website =www.masterclass.com
 | publisher =MasterClass
 | access-date =February 17, 2021
| quote = Eighteenth-century economist Adam Smith developed the concept of the Invisible Hand, which became one of the cornerstone concepts of a free market economic system. }}</ref> Smith's invisible hand argumentation may have also been influenced by [[Richard Cantillon]] and his model of the isolated estate.<ref>[[Mark Thornton|Thornton, Mark]]. "Cantillon and the Invisible Hand". ''[[Quarterly Journal of Austrian Economics]]'', [http://mises.org/journals/qjae/pdf/qjae12_2_3.pdf Vol. 12, No. 2 (2009) pp. 27–46.]</ref>

Because the modern use of this term has become a shorthand way of referring to a key neoclassical assumption, disagreements between economic ideologies are now sometimes viewed as disagreement about how well the "invisible hand" is working. For example, it is argued that tendencies that were nascent during Smith's lifetime, such as large-scale industry, finance, and advertising, have reduced the effectiveness of the supposed invisible hand.<ref name="olsen153">Olsen, James Stewart. ''Encyclopedia of the Industrial Revolution''. Greenwood Publishing Group, 2002. pp. 153–154</ref>