Adam Smith's invisible hand argument

Abstract

Adam Smith is usually thought to argue that the result of everyone pursuing their own interests will be the maximization of the interests of society. The invisible hand of the free market will transform the individual's pursuit of gain into the general utility of society. This is the invisible hand argument.

Many people, although Smith did not, draw a moral corollary from this argument, and use it to defend the moral acceptability of pursuing one's own self-interest.

Smith does use the invisible hand argument; however, a close reading of theWealth of Nations reveals that Smith thought the interests of merchants and manufacturers were fundamentally opposed to those of society in general, and that they had an inherent tendency to deceive and oppress society while pursuing their own interests. How can these two views of what results when merchants and manufactures pursue their self-interest be made compatible? It is argued that the invisible hand argument when applied to merchants and manufacturers, (its application to labour and landlords is only mentioned briefly), is extremely restrictive, and that similar restrictions must apply to the moral corollary. In particular, the invisible hand argument applies only to investing capital in one's own country for maximum profit.

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John D. Bishop worked for several years for two multinational computer corporations before returning to academia as Assistant Professor at Trent University, Peterborough, Ont. A previous article, “The Moral Responsibility of Corporate Executives for Disasters” appeared inThe Journal of Business Ethics, and has been republished in White,Business Ethics, and translated into Danish.

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Bishop, J.D. Adam Smith's invisible hand argument. J Bus Ethics 14, 165–180 (1995). https://doi.org/10.1007/BF00881431

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Keywords

  • Economic Growth
  • Defend
  • Free Market
  • Maximum Profit
  • Similar Restriction