Editing Invisible hand (section)

=== ''The Wealth of Nations'' ===
The invisible hand is explicitly mentioned only once in the ''Wealth of Nations'', in a specialized chapter not about free trade but about capital investment, which discusses the concern that international merchants might choose to invest in foreign countries. Smith argues that a self-interested investor will have a natural tendency to employ his capital as near home as he can, as long as the home market does not give much lower returns than other alternatives.<ref>{{Cite book |last=Smith |first=Adam |title=An Inquiry into the Nature and Causes of the Wealth of Nations |publisher=W. Strahan & T. Cadell |year=1776 |edition=1st |volume=II |location=London |pages=32–33}}</ref> This in turn means...
{{Quote|text=[...] every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, 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 the society that it was no part of it. 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. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.<ref>{{Cite book |last=Smith |first=Adam |title=An Inquiry into the Nature and Causes of the Wealth of Nations |publisher=W. Strahan & T. Cadell |year=1776 |edition=1st |volume=II |location=London |pages=35}}</ref> [emphasis added]}}

As noted by [[William D. Grampp]], this example involves "a particular condition that may or may not be present in a transaction on a competitive market".{{sfn|Grampp|2000|p=443}} Essentially, the invisible hand refers to the [[Unintended consequences|unintended positive consequences]] self-interest has on the promotion of community [[well-being|welfare]].<ref>{{Cite journal |last=Rodríguez Braun |first=Carlos |date=2019 |title=Adam Smith's liberalism |url=https://link.springer.com/10.1007/s11138-019-00474-9 |journal=The Review of Austrian Economics |language=en |volume=34 |issue=4 |pages=465–478 |doi=10.1007/s11138-019-00474-9 |s2cid=202271443 |issn=0889-3047|url-access=subscription }}</ref><ref name=":1">{{Cite book |url=https://www.worldcat.org/oclc/761868679 |title=Handbook of the history of economic thought : insights on the founders of modern economics |date=2012 |publisher=Springer |others=Jürgen G. Backhaus |isbn=978-1-4419-8336-7 |location=New York, NY |pages=171 |oclc=761868679}}</ref> Nevertheless, Smith draws a practical implication in this case is that legislators should not intervene too hastily in many (if not all) cases:
{{Quote|text=What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.<ref>{{Cite book |last=Smith |first=Adam |title=An Inquiry into the Nature and Causes of the Wealth of Nations |publisher=W. Strahan & T. Cadell |year=1776 |edition=1st |volume=II |location=London |pages=35–36}}</ref>}}

According to Grampp:{{sfn|Grampp|2000|p=460}}
{{Quote|The invisible hand, then, is not an autonomous force. It is self interest operating in particular circumstances. The owner of capital acts in the public interest if acting in his private interest is profitable and happens to provide a public benefit. He does not act in the public interest if acting in his own interest would be unprofitable. There are circumstances of the opposite kind, when what is in his interest is not in the public interest. They are not rare, and although they vary in importance, none is trivial.}}