Invisible Hand

Invisible Hand is a popular metaphor, first used by Adam Smith to describe the mechanism of the influence of individual interests to maximize social wealth. It was first used in his work “An Inquiry into the Nature and Causes of the Wealth of Nations”.

It outlines situation when individuals striving for their own benefit, regardless of their will and consciousness direct towards the achievement of economic benefits and benefits to society. Each manufacturer pursues its own benefits, but the path to it lies through the satisfaction of someone’s needs.

The collection of manufacturers is likely driven by “invisible hand”. It actively, effectively and voluntarily implements the interests of society, often without even thinking about it, but pursuing only its own interest.

In fact, Adam Smith’s term refers to the objective market mechanism that coordinates the decisions of buyers and sellers. Signal profit function is invisible. Still, it ensures resource allocation that balances supply and demand (if production is unprofitable, the number of resources involved in this production will decrease).

At the end, this production will disappear under the pressure of a competitive environment. Resources will be spent for the development of profitable production.

Imagine a free market scenario with no regulations and restrictions imposed by the government. In case someone decides to charge less, the customer will buy from him.