His use of the phrase “invisible hand,” then, allowed him to communicate his revolutionary ideas within the context of his immediate surroundings. Smith was Scottish, but that didn’t change his significant connection to Enlightenment science and innovation. Smith was not personally religious, but there is little doubt that he was shaped by his religious society. Most importantly, this was a period when young educated men like Adam Smith had the freedom to criticize “those who worked to the detriment of society” (BBC) and re-evaluate their world. Religious laws were being questioned, natural laws were being postulated, and the scientific method was being developed. However, this was also a period of Enlightenment and industrialization. In religious contexts, the invisible hand was generally used to indicate “divine providence” (Harrison 38), or the intervention of God. Religion permeated everyday life including academia, due to “the integration… of all the strands of intellectual life that are now kept separate in… a modern university” (Finn). In the 18th century, Scotland was a highly Calvinist (a form of Christian Protestantism) society. It was a narrow explanation for a specific situation. The invisible hand, in this text, was not a central theme.
There are a few important elements to note here: he only discusses international trade, he qualifies the power of the invisible hand to “many,” not all, cases, and he does not necessarily state that the outcome of the invisible hand is always beneficial. In other words, when individuals act to optimize and enrich themselves they also unintentionally affect others. He narrowly uses it to describe how “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” (Smith). Unlike modern textbook writers, he does not use it as a catch-all phrase to describe the overarching power of self-interest and markets. In the Wealth of Nations, he uses the phrase ‘invisible hand’ exactly once. His use of the invisible hand in the Wealth of Nations is what those economics textbooks commonly attribute as the first key usage (Rosalsky). One of the fathers of economics is Adam Smith, an 18th century Scottish Enlightenment philosopher. This is especially relevant when it comes to phrases- like the invisible hand- that serve to simplify counterintuitive yet alluring ideas. In two words, it establishes that self-interest, and markets by extension, are a good thing for society a critical assumption that economists, business leaders, and public policymakers regularly use in their analysis of the world and its problems.īecause of the power of economics, it is important to understand where its key assumptions come from and how they have evolved over time. Arguably, this phrase has retained popularity because of its simplicity. The invisible hand, as commonly defined by economists like Paul Krugman, is a metaphor describing the “unintended greater social benefits and public good brought about by individuals acting in their own self interests.” In Paul Samuelson’s Economics– a text that established the format of modern introductory economics textbooks- the phrase is referenced six times (Samuelson). “ Households and firms interacting in markets act as if they are guided by an ‘invisible hand’ that leads them to desirable market outcomes” (Mankiw 9), so claim many modern introductory economics textbooks.
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