The "invisible hand

 What is the amazing "invisible hand"?

Sham Misri

The life in most important cities with millions of inhabitants require huge amounts of a variety of goods and services to meet their wants and needs. Do people lie awake at night worrying that the goods and services they need might be unavailable when they need or want them? In market economies, people take it for granted that the things they need or want will be available. But, the fact that most things are usually available when people want them is a remarkable achievement.

Suppose a person decides to have fish, cheese, and sliced tomatoes for dinner. Even though he may not have purchased these items for months, he can be almost certain that he will find them at the nearest supermarket. The fish may have come from a faraway ocean or lake and the cheese and tomatoes from a distant farm and shipped to the local supermarket at just the right time for eating. None of the many people involved in producing and marketing these products knew you were going to want them on a particular day, yet they were there at the very time you needed them.

As amazing as it may seem, there is no government agency, business, or individual responsible for ensuring that the economic needs and wants of people are met. It is the economic system-its market economy-that sees to it that products of the right type and in the right quantity are available when most people want them. Some economists say that the economy works like an "invisible hand" in meeting the needs of the people.

The principle of the invisible hand was first reported by the economist Adam Smith in 1776 in his book Inquiry Into the Nature and Causes of the Wealth of Nations. Smith said that in a market economy, if individuals were allowed to pursue their own self-interests without government interference, they would be led, as if by an invisible hand, to achieve what is best for the society. The idea of letting economic problems work themselves out with no government interference is known as laissez-faire, a French term meaning "let do" or "let things alone." Al though the  economies today are very different from the type of economy described by Adam Smith, the principle of the invisible hand still applies to some extent.

Businesses work to maximize their profits, workers seek higher wages, and consumers attempt to get the maximum value for their money. To maximize their profits, businesses must provide the goods and services that most consumers want at the right time and in the right places. In this, the economy operates as way, if it were regulated by an "invisible hand."

Adam Smith

Adam Smith (1723 90) is generally considered to be the founder of economics. Born in Scotland, Smith became a professor of logic and moral philosophy at the University of Glasgow at age 28. His studies led him to the conclusion that people always act in their own best interest. He argued that if individuals were allowed to pursue their interests free from government interference, they would promote what was best for society as a whole.

Adam Smith revolutionized economics with the publication of Inquiry Into the Nature and Causes of the Wealth of Nations (1776). Because of the ideas in this book, Smith is given credit for promoting the economic freedom, the industrialization, and the prosperity that characterized the Western world during the 1800's.