Economic concept popularized by Adam Smith
- Quotes are arranged alphabetically by author
A - FEdit
- To understand the economy then is to comprehend how it is driven by the animal spirits. Just as Adam Smith’s invisible hand is the keynote of classical economics, Keynes’ animal spirits are the keynote to a different view of the economy — a view that explains the underlying instabilities of capitalism.
- Writers after Coase have referred to the authority structure of the firm as a "visible hand" that works in combination with Smith's invisible hand. The everyday fact that employers exercise power over their employees — not news to most employees — had been a central theme in Marx's economics, but it was (and generally continues to be) overlooked by most neoclassical economists. Early in his studies Coase noted the similarity between the hierarchical organization of capitalist firms, with their reliance on command relations, and the then-existing system of centralized economic planning in the Communist countries, where production was carried out in accordance with orders from higher authorities and where market competition played little role.
- Samuel Bowles, Richard Edwards, and Frank Roosevelt. Understanding Capitalism: Competition, Command, and Change (3rd ed., 2005), p. 85
- ...that every individual spontaneously tries to find the place and the trade in which he can best increase National gain, if laws do not prevent him from doing so.
- A man is of no use to this world, of no use to society or the neighborhood in which he lives, who has no other object in view than making a fortune for himself and his family, little caring what becomes of those around him.
- Samuel Fielden, Statement to the Court (1886)
G - LEdit
- The net effect of increasing scale, centralization of capital, vertical integration and diversification within the corporate form of enterprise has been to replace the 'invisible hand' of the market by the 'visible hand' of the managers.
- David Harvey (2006) The Limits To Capital. p. 146
- Adam Smith was the first to perceive that we have stumbled upon methods of ordering human economic cooperation that exceed the limits of our knowledge and perception. His `invisible hand' had perhaps better have been described as an invisible or unsurveyable pattern. We are led - for example by the pricing system in market exchange - to do things by circumstances of which we are largely unaware and which produce results that we do not intend. In our economic activities we do not know the needs which we satisfy nor the sources of the things which we get.
- Friedrich Hayek, The Fatal Conceit, Ch. 1: Between Instinct and Reason.
- When the classical worldview was applied to social science, the dominant notions turned out to be struggle for survival, the profit of the individual, with at best an assumed automatic coincidence of individual and societal good (through Adam Smith's "invisible hand"). When the systemic vision inspires the theories of social science, the values of competition are mitigated by those of cooperation, and the emphasis on individualistic work ethos is tempered with a tolerance of diversity and of experimentation with institutions and practices that foster man-man and man- nature adaptation and harmony.
- Ervin László (1996) The systems view of the world: A holistic vision for our time p. 12.
M - REdit
- Suppose our social planner tried to choose an efficient allocation of resources on his own, instead of relying on market forces. To do so, he would need to know the value of a particular good to every potential consumer in the market and the cost of every potential producer. And he would need this information not only for this market but for every one of the many thousands of markets in the economy. The task is practically impossible, which explains why centrally planned economies never work very well.
The planner’s job becomes easy, however, once he takes on a partner: Adam Smith’s invisible hand of the marketplace. The invisible hand takes all the information about buyers and sellers into account and guides everyone in the market to the best outcome as judged by the standard of economic efficiency. It is, truly, a remarkable feat. That is why economists so often advocate free markets as the best way to organize economic activity.
- N. Gregory Mankiw, Principles of Economics (6th ed., 2012), p. 147; Ch. 7. Consumers, Producers, and the Efficiency of Markets
- This it is that gives a majesty so pure and touching to the historic figure of Christ; self-abandonment to God, uttermost surrender, without reserve or stipulation, to the guidance of the Holy Spirit from the Soul of souls; pause in no darkness, hesitation in no perplexity, recoil in no extremity of anguish; but a gentle unfaltering hold of the invisible Hand, of the Only Holy and All Good; — these are the features that have made Jesus of Nazareth the dearest and most sacred image to the heart of so many ages.
- James Martineau Hours of Thought on Sacred Things (1879), p. 61.
- I am very liberal on social issues, but I don’t believe we can have personal liberty, which is what that means, without having economic liberty. We have economic tyranny when you add in Obamacare, we have about 50 percent of the U.S. GDP in the public sector. That means that you have a tyrannical and overregulating, and politicized economy, not a market economy, not the invisible hand.
- Honor sets all the parts of the body politic in motion, and by its very action connects them; thus each individual advances the public good, while he only thinks of promoting his own interest.
S - ZEdit
- Hayek’s theory of evolutionary rationality shows how traditions and customs (those surrounding sexual relations, for example) might be reasonable solutions to complex social problems, even when, and especially when, no clear rational grounds can be provided to the individual for obeying them. These customs have been selected by the ‘‘invisible hand’’ of social reproduction, and societies that reject them will soon enter the condition of ‘‘maladaptation,’’ which is the normal prelude to extinction.
- Roger Scruton, "Hayek and conservatism", in Edward Feser (ed.), The Cambridge Companion to Hayek (2006)
- [The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity...they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.
- 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... he intends only his own security; and by directing that industry in such a manner as 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 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.
- What Galbraith understood, and what later researchers (including this author) have proved, is that Adam Smith's "invisible hand" – the notion that the individual pursuit of maximum profit guides capitalist markets to efficiency – is so invisible because, quite often, it's just not there. Unfettered markets often produce too much of some things, such as pollution, and too little of other things, such as basic research. As Bruce Greenwald and I have shown, whenever information is imperfect – that is, always – markets are inefficient; hence the need for government action.
- Joseph E. Stiglitz, “John Kenneth Galbraith understood capitalism as lived – not as theorized”, The Christian Science Monitor (December 28, 2006)
- The reason that the invisible hand often seems invisible is that it is often not there.
- Joseph Stiglitz Quoted in Daniel Altman, "Managing Globalization: Q & A with Joseph Stiglitz", The International Herald Tribune (2006-10-11).
- What's the single most important thing to learn from an economics course today? What I tried to leave my students with is the view that the invisible hand is more powerful than the [un]hidden hand. Things will happen in well-organized efforts without direction, controls, plans. That's the consensus among economists. That's the Hayek legacy.
- Lawrence Summers, as quoted in "The Commanding Heights : The Battle Between Government and the Marketplace that Is Remaking the Modern World" (1998) by Daniel Yergin and Joseph Stanislaw, p. 150
- As against the "invisible hand" of Adam Smith, there has to be a visible hand of politicians whose objective is to have the kind of society that is caring and humane.
- Pierre Trudeau Memoirs (1993) Part 3, 1974 - 1979 Victory And Defeat, p. 190
- No People can be bound to acknowledge and adore the invisible hand, which conducts the Affairs of men more than the People of the United States. Every step, by which they have advanced to the character of an independent nation, seems to have been distinguished by some token of providential agency.
- George Washington, first inaugural address, April 30, 1789. The Writings of George Washington, ed. John C. Fitzpatrick, vol. 30, p. 293 (1939).
- The recognized "man of a vocation" ... neither inquires about nor finds it necessary to inquire about the meaning of his actual practice of a vocation within the whole world, the total framework of which is not his responsibility but his god's.