Invisible Hand

Invisible hand (English: invisible hand) is a conceptualization reflecting Adam Smith’s theoretical perspective on morality, economics, and society. Broadly, it characterizes the “spontaneous” functioning of social order in harmony. This conceptualization describes the process through which individuals, unaware of the consequences of their actions, contribute to the benefit of society unintentionally and unexpectedly.

In economic terms, the invisible hand is used to explain the functioning of market mechanisms. It is based on the idea that individuals—producers and consumers—pursuing their own self-interest, inadvertently contribute to the well-being of society and collective progress. This metaphor serves as both an instrument and a regulating force that ensures balance, both in the market and in society at large.

Works in Which the Concept Is Used

Adam Smith used the phrase “invisible hand” in three different works, within three distinct contexts.

History of Astronomy

Smith’s first usage appears in the essay History of Astronomy (included in Essays on Philosophical Subjects). Here, the expression “invisible hand of Jupiter” refers to how people in polytheistic societies explained irregular and incomprehensible natural phenomena—such as thunderstorms and storms—as the actions of unseen entities like gods, devils, or witches. These people did not attribute the “natural flow” of nature to divine intervention.

The Theory of Moral Sentiments

Smith’s second usage is in The Theory of Moral Sentiments (1759). In this work, the invisible hand reveals how the wealthy are compelled to share their resources and, without awareness or intent, serve the interests of society.

Smith describes wealthy landowners who, despite their natural selfishness and greed, care only for their own comfort and pursue “vain and insatiable desires.” These individuals employ thousands of people to produce luxuries and, in doing so, share their wealth with the poor. According to Smith, the rich are “as if led by an invisible hand” to distribute their resources “as if the world were equally divided among all its inhabitants,” thereby “advancing the interest of society.”

The Wealth of Nations

The third and most famous usage appears in The Wealth of Nations (1776). Here the argument concerns how individuals, while seeking their own advantage, unintentionally increase social benefit. The phrase appears in a section criticizing import restrictions in foreign trade.

Smith notes that a capitalist prefers to support domestic industry rather than foreign industry because of “his own security.” When an individual employs capital to promote domestic production and maximize profits from goods, he is led “by an invisible hand” to pursue an end “that never entered his thoughts.” Smith argues that the individual “intends only his own gain” and yet, in pursuing it, “is led by an invisible hand to promote an end which was no part of his intention.” Moreover, he observes that by thinking only of his own interest, the individual promotes the public interest “more effectively than if he had actually intended to do so.”

Relationship with Core Concepts

The invisible hand metaphor is connected in Smith’s thought system to other fundamental concepts, particularly sympathy, the impartial spectator, and self-interest.

Sympathy and the Impartial Spectator

In The Theory of Moral Sentiments, Smith grounds social relations and moral values in the principle of “sympathy.” Sympathy refers to the feelings of compassion or mercy we experience when we witness or vividly imagine the suffering of others. According to Smith, human beings are fundamentally motivated by a desire to be accepted, liked, respected, and approved of within society.

The condition for developing sympathy is the individual’s ability to become an “impartial spectator.” This means viewing oneself from a certain distance, examining one’s own behavior through the eyes of others, and correcting the “natural errors of self-love.” For Smith, this “noble judge” is conscience itself.

Self-Interest and Spontaneous Order

In The Wealth of Nations, the motive of self-interest becomes prominent. Smith argues that “we do not expect our dinner from the benevolence of the butcher, the brewer, or the baker, but from their regard to their own interest.” The pursuit of self-interest by individuals forms the foundation of what is called “spontaneous order.” In this order, the collective advancement of society emerges from individuals pursuing their own interests within a commercial society, enabling exchange and cooperation in the market.

Consistency Debates (Das Adam Smith Problem)

Smith’s focus on “sympathy” in The Theory of Moral Sentiments and on “self-interest” in The Wealth of Nations has sparked debates over whether there is a contradiction between these two works. This issue has been termed by German philosophers as the “Adam Smith Problem” (Das Adam Smith Problem).

• One group of scholars emphasizes apparent contradictions in Smith’s approach to these subjects.
• Another group argues that his views form a coherent and consistent system.

According to this second interpretation, Smith’s aim was to integrate economics with moral behavior. A continuity is asserted between the fundamental motivations in both works:

1. Motivating Drive: In The Theory of Moral Sentiments, the satisfaction derived from mutual sympathy continues in The Wealth of Nations as each individual’s effort to improve their own condition.
2. Rules: The moral rules of propriety and merit in The Theory of Moral Sentiments are consistently reflected in The Wealth of Nations as rules safeguarding private property, contracts, and voluntary exchange.
3. Market: The market, viewed in The Theory of Moral Sentiments as a site of moral judgment, continues in The Wealth of Nations as the arena for the exchange of goods and services.
4. Spontaneous Order: The shared standards of moral judgment in The Theory of Moral Sentiments are expressed in The Wealth of Nations as the ideal economic system.

According to this interpretation, Smith saw no contradiction between the two approaches because he believed that every person desires acceptance by others (sympathy). In economic life, this translates into “enlightened self-interest,” where both buyer and seller mutually benefit from the transaction.

Interpretations

There are differing interpretations regarding how Smith himself understood the metaphor of the invisible hand.

One interpretation suggests that Smith may have used the phrase ironically. This view points out that the term appears only three times in Smith’s writings and was rarely referenced by commentators before the 20th century. This interpretation draws attention to other uses of “invisible hand” in Anglo-Scottish literature: Macbeth’s invocation of the “bloody and invisible hand” to conceal his crime^【1】, and a violent passage in Ovid’s Metamorphoses. It is also noted that Smith frequently associated the word “invisible” with superstition, idolatrous religion, and concepts such as “fairies and nymphs”^【2】. From this perspective, the uses in History of Astronomy and The Theory of Moral Sentiments (referring to greedy landowners) are sardonic^【3】.

An alternative interpretation regards the invisible hand as an expression of Smith’s religious or deistic (Stoic-inspired) beliefs, and as representing “the hand of the Christian God”^【4】.