Adam Smith - one of the founding fathers of modern economics, described how the invisible or hidden hand of the market operated in a competitive market through the pursuit of self-interest to allocate resources in society's best interest. The influence of the invisible hand can be affected by businesses who have monopoly power and where brand loyalty is so strong that goods and services produced by rivals are not considered by consumers to be feasible substitutes.
The invisible hand is a concept in economics that refers to the unintended consequences of individual actions, especially in a market economy. The concept was popularized by the economist Adam Smith, who argued that individuals who pursue their own self-interest in a market economy will, through their interactions, inadvertently promote the overall well-being of society.
The invisible hand suggests that the pursuit of individual gain can lead to the greatest good for society as a whole, as long as the market is functioning efficiently and competition is allowed to occur. The concept is often used to defend the idea of a free market and to argue against government intervention in the economy.
While the concept of the invisible hand has been influential in economic theory, it has also been the subject of criticism and debate among economists. Some argue that the invisible hand does not always lead to the optimal outcomes for society, and that government intervention may be necessary in certain cases to promote the greater good.
What is the Invisible Hand of the market?
Substitutes and Complements
Invisible Hand in a Perfectly Competitive World
27th February 2016
The Invisible Hand - BBC's A History Of Ideas
28th August 2015