Hiring Invisible Hands for Public Works

Abstract

The famous passage introducing the “invisible hand” is reproduced here with the first two sentences bracketed, and then certain passages below highlighted. We will first concentrate on interpreting the highlighted passages, and then look again at the bracketed sentences. The usual interpretation, of course, stresses the fact that the general good of society unexpectedly results from the pursuit of private self-interest on the part of the agents. And that is surely important. But if we look just at the phrases italicized above, we can see another message:

he intends only his own security; and... he intends only his own gain, and he is... led by an invisible hand to promote an end which was not part of his intention.

[As every individual endeavors as much as he can both to employ his capital in the support of domestic 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 public interest, nor knows how much he is promoting it.]

By preferring the support of domestic to that of foreign industry he intends only his own security; and by directing that industry in such a manner that 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 not part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it. (Smith 1776, p.423).