Writing in The Wealth of Nations in 1776, Adam Smith explained how in a perfectly working economy, resources will be moved around to the areas where they are required, by means of an invisible hand. The forces of supply and demand, operating through the profit motive, will dictate the destination of resources, and the invisible hand therefore dispenses with the need for economic policies on the part of the government. In this schema, the economy should be left to market forces to determine outcomes. Should it be necessary to concede a less than perfect outcome from the operations of the invisible hand, then it is assumed that some impediment has been introduced. The role of government is simply to remove this impediment and guarantee the free flow of economic forces. However, any attempt to go beyond this and attempt to intervene directly in the workings of the economy is guaranteed to distort the operations of the market and lead to a worse outcome for society.
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