The Invisible Hand

We're not kidding when we say that Adam Smith's invisible hand is probably one of the most historically important symbols ever created. It lags just behind Tolkien's One Ring, but it's still ahead of Fitzgerald's dang green light across the bay.

Present day countries (including the United States and Britain) often base massive economic decisions on the assumption that there's an invisible hand that controls markets and makes them more efficient. Ugh. Creepy ghost hand.

So what is this invisible hand and where does it come from? In Smith's mind, the invisible hand is the godlike force that makes markets produce the most human happiness possible. And this invisible hand only goes to work when all the individuals in a society work completely for their own self-interest. Yes, you read that right. Everything works out as long as everyone behaves selfishly. As Smith writes:

[By] directing that industry in such a manner as its produce may be of 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. (4.2.9)

The end Smith talks about here is increased human happiness and productivity.

If everyone pursues their self-interest, then they will be extremely productive and everyone will basically profit from all the hard work everyone else is doing. Smith sums things up when he writes:

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 publick good. (4.2.9)

In other words, Smith thinks that people tend to do more harm than good when they base their decisions on helping others, because in the long run this will lead to an inefficient economy and everyone will end up being worse off. Also, can we bring back the spelling "publick"? It looks snazzy.