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Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it... 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 no part of his intention. Nor is it always the worse for society that it was no part of his intention. By pursuing his own interest he 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.

The metaphor occurs in the context of an argument against protectionism and government regulation of markets.

A contemporary example of such an effect could be the far-reaching social benefit realized via the proliferation of computers and software; goods which have been produced almost entirely by people trying to maximize their own economic gain. Presumably those producers didn't manufacture the computers and develop the software out of a love for humanity or an altruistic desire to promote society's collective fortune. Any social benefits that have accrued therefore, according to Smith's doctrine, are simply a by-product of their striving for selfish reward.

A counter-example could be Wikipedia itself, including the article you are reading right now. The observed benefit to society — this encyclopedia — is not associated with any material gain for any of the thousands of contributors. Thus, Wikipedia was written by people who were presumably motivated by an altruistic desire of some sort, or who were at least not motivated by any selfish desire for material reward.

Moreover, capitalism arguably provides numerous opportunities for maximizing one's own profit at the expense (rather than for the benefit) of others. The tobacco industry is often cited as a good example of this: the sale of cigarettes and other tobacco products certainly brings a very good revenue, but the industry's critics deny that the social benefits (the pleasures associated with smoking, the camaraderie, the feeling of doing something 'cool,' etc.), can possibly outbalance the social costs.

In general, the term "Invisible Hand" can apply to any individual action that has unplanned, unintended consequences, particularly those which arise from actions not orchestrated by a central command and which have an observable, patterned effect on the community.

Contrary to common misconceptions, Smith did not assert that all self-interested labor necessarily benefits society, or that all public goods are produced through self-interested labor. His proposal is merely that in a free market, people usually tend to produce goods desired by their neighbours.

1 See also

• The Theory of Moral Sentiments By Adam Smith
• The Wealth of Nations by Adam Smith
• Spontaneous order

2 External link

• The Wealth of Nations (full text)

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