The Invisible Hand

Have you ever wondered how eggs end up in your fridge? It is not the conscious attempt of the chickens, nor is it the intention of the poultry farmers to ensure that the world is not egg-less. The farmers work to earn profit, and you buy the eggs to satisfy your own demand. You do not know the farmers, the farmers do not know you. The only force that connects you to the farmers is the invisible force of the free market.

This is the idea behind the INVISIBLE HAND, an econ term first introduced by the father of economics, Adam Smith. It is the very idea that if everyone is left to pursue their own self-interest (i.e. compete in a free market), the invisible free market force (aka, the invisible hand) will work its magic and bring the economy to equilibrium, where social benefits are attained without people actively and deliberately trying to achieve them.

As Adam Smith states in his book, An Inquiry into the Nature and Causes of the Wealth of Nations:

“By pursuing one’s own interest, a person 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 public good.”

Watch this less than 2 mins video to learn more.