Retrospectives: Adam Smith's Invisible Hands

Abstract

After more than two centuries, Adam Smith's famous simile comparing the market system to an invisible hand continues to convey the essential message of Anglo-American political economy. In fact, Smith's buoyant optimism in the efficacy of his system of “natural liberty” has a quite modern ring in this age of deregulation, free trade, and perestroika. For many, the seductive idea of the invisible hand has mutated from analysis to mythology. Given the almost transubstantial view of the invisible hand that sometimes prevails, it may come as something of a shock to discover that Adam Smith required a few awkward and historically specific assumptions to make his argument. Apparently, invisible hand stories have never been all that easy to describe, as a perusal of Smith's original text demonstrates.