Adam Smith on the natural ordering Tendency of Free Markets, or what he called the “Invisible Hand” (1776)
About this Quotation:
Liberty Fund is pleased to publish in paperback and online the Glasgow Edition of the Works and Correspondence of Adam Smith, in 7 volumes, which was commissioned by the University of Glasgow and originally published by Oxford University Press in 1976 in order to commemorate the 200th anniversary of the first publication of Smith’s The Wealth of Nations (1776).
The concept of the “invisible hand” is one of Smith’s most potent concepts and is consequently one of his most famous statements. With his complete works online it is possible to do a “key word” search for this phrase across his entire corpus. It is surprising to see where else it crops up in his writings.
This phrase about the “invisible hand”, along with Adam Ferguson’s that societies were “the result of human action, but not the execution of any human design,” are two of the most important and profound insights to emerge out of the Scottish Enlightenment.
Other quotes from this week:
- 2009: Augustin Thierry relates the heroic tale of the Kentishmen who defeat William the Conqueror and so are able to keep their ancient laws and liberties (1856)
- 2006: In Shakespeare’s Henry V the king is too easily persuaded by his advisors that the English economy will continue to function smoothly, like obedient little honey-bees in their hive, while he is away with his armies conquering France (1598)
- 2005: William Graham Sumner denounced America’s war against Spain and thought that “war, debt, taxation, diplomacy, a grand governmental system, pomp, glory, a big army and navy, lavish expenditures, political jobbery” would result in imperialsm (1898)
Other quotes about Economics & Free Trade:
- 2010: Richard Cobden outlines his strategy of encouraging more people to acquire land and thus the right to vote in order to defeat the “landed oligarchy” who ruled England and imposed the “iniquity” of the Corn Laws (1845)
- 2009: Ludwig von Mises on the impossibility of rational economic planning under Socialism (1922)
- 2009: Frank Taussig argues for the reverse of a common misconception about the relationship between high wages and the use of machinery (1915)
- 2009: Condy Raguet lays out a set of basic principles of free trade among which is the idea that governments cannot create wealth by means of legislation and that individuals are better judges of the best way to use their capital and labor than governments (1835)
- 2009: John Ramsay McCulloch argues that smuggling is “wholly the result of vicious commercial and financial legislation” and that it could be ended immediately by abolishing this legislation (1899)
- 2009: Adam Smith argues that retaliation in a trade war can sometimes force the offending country to lower its tariffs, but more often than not the reverse happens (1776)
- 2008: Jean-Baptiste Say argues that there is a world of difference between private consumption and public consumption; an increase in the latter does nothing to increase public wealth (1803)
- 2008: Nassau Senior objected to any government regulation of factories which meant that a horde of inspectors would interfere with the organization of production (1837)
- 2007: Ludwig von Mises argues that monopolies are the direct result of government intervention and not the product of any inherent tendency within the capitalist system (1949)
- 2007: Harriet Martineau condemns tariffs as a “vicious aristocratic principle” designed to harm the ordinary working man and woman (1861)
- 2007: Ludwig von Mises argues that the division of labor and human cooperation are the two sides of the same coin and are not antagonistic to each other (1949)
- 2007: Lord Macaulay writes a devastating review of Southey’s Colloquies in which the Poet Laureate’s ignorance of the real condition of the working class in England is exposed (1830)
- 2006: Jane Haldimand Marcet, in a popular tale written for ordinary readers, shows the benefits to workers of foreign trade, especially at Christmas time (1833)
- 2006: Adam Ferguson observed that social structures of all kinds were not “the result of human action, but not the execution of any human design” (1782)
- 2006: Forrest McDonald argues that the Founding Fathers envisaged a new economic order based upon Lockean notions of private property and the creation of the largest contiguous area of free trade in the world (2006)
- 2006: Montesquieu thought that commerce improves manners and cures “the most destructive prejudices” (1748)
- 2005: Bernard Mandeville concludes his fable of the bees with a moral homily on the virtues of peace, hard work, and diligence (1705)
- 2005: Bernard Mandeville uses a fable about bees to show how prosperity and good order comes about through spontaneous order (1705)
- 2005: Adam Smith argued that the “propensity to truck, barter, and exchange” was inherent in human nature and gave rise to things such as the division of labour (1776)
- 2004: Voltaire on the Benefits which Trade and Economic Abundance bring to People living in the Present Age (1736)
31 May, 2004
 | Adam Smith on the natural ordering Tendency of Free Markets, or what he called the “Invisible Hand” (1776) |
This passage comes from Adam Smith, An Inquiry into the Nature and Causes of the the Wealth of Nations and is perhaps one of his most famous quotations (1776):
… 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.
The full passage from which this quotation was taken can be be viewed below (front page quote in bold):
But the annual revenue of every society is always precisely equal to the exchangeable value of the whole annual produce of its industry, or rather is precisely the same thing with that exchangeable value. As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; 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 publick interest, nor knows how much he is promoting it. By preferring the support of domestick 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 publick good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.