Invisible Hand

MoneyBestPal Team
The unanticipated social advantages that result from people acting in a free market economy to further their own interests.
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The idea of the "invisible hand" is a cornerstone of economics, especially the study of classical economics. In his book "The Wealth of Nations," published in 1776, the economist Adam Smith introduced the phrase.


The term "invisible hand" describes the unanticipated social advantages that result from people acting in a free market economy to further their own interests. The premise is that people unintentionally advance the interests of society as a whole when they act in their own self-interest by attempting to maximize their earnings.

Prices in a free market economy are set by supply and demand, and producers and consumers base their choices on these prices. According to the invisible hand, these choices ultimately result in the more effective use of resources and a larger overall benefit to society. This is because customers can buy products at cheaper prices when producers fight to sell their items at the lowest price, raising everyone's standard of living.

Over the years, the idea of the invisible hand has drawn a lot of discussion and criticism, notably from those who claim that it fails to take into consideration the harmful externalities that might result from economic activity, like inequality and pollution. It still influences economic theory and policy, nonetheless, and it continues to be a fundamental concept in economics.
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