Question

What did Adam Smith mean when he talked of an invisible hand that guides the production...

What did Adam Smith mean when he talked of an invisible hand that guides the production in market economies

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Answer #1

Adam Smith in his book 'The Wealth of Nations' introduced the concept of the invisible hand. The invisible hand phrase refers to the unobservable forces in the market that contributes to the demand and supply of products in a free market on reaching automatically to the equilibrium; and therefore in the market economies helps to guides the production. The invisible hand is a specification of the concept that if everyone in an economy works in a perfectly competitive market on the advancement of their self-interest, and firms maximizing their profit, everyone in market economies will attain economic gains as well as the advancement.

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