How did Adam Smith use the concept of "Invisible Hand" in his following works? (a)The wealth...

How did Adam Smith use the concept of "Invisible Hand" in his following works?

(a)The wealth of Nations (b)The Theory of Moral Sentiments (c) The History of Astronomy.

Solutions

Expert Solution

Adam Smith and concept of invisible hand : Theory of invisible hand introduced by Scottish Economist Adam Smith in 1776 also known as father of economics. The term invisible hand talks about self- regulatory nature of market. He made first appearance of the term invisible hand in his book The theory of moral sentiments. Invisible hand Theory says that if people will leave freely in market place where buyer is freely to choose what he wants to buy and seller is also free to decidewhat he want to sell in market it will lead to a positive market and it Will be beneficial for society as whole as well.

Now we will discuss concept of Invisible hand in Adam Smith's work :

1. The wealth of nations : In his book The wealth of nations Adam Smith referred invisible hand to an unseen mechanism which make balance or maintain between supply and demand of resources. He said that in a free market where Market participants buyer and seller will work for their personal own gain it will be beneficial for them and society at large. In a good economy government's intervention is not necessary.

2. The theory of Moral sentiments : It was the first work of Adam Smith, in his first book The theory of Moral sentiments he showed existence of invisible hand and said that invisible hand promotes the welfare of the poor despite the greed of the rich , in this the term of theory of invisible hand was used quite in a different way from the wealth of nations. In this it's emphasis was on political, ethical and economic effects. In The moral sentiments of nations he clearly says that " Rich are lead by an invisible hand to make the same distribution of necessities of life .

3. The History of Astronomy : In the history of Astronomy Adam Smith used the term invisible hand in non-economic context. He said that in ancient times whatever the irregular events of nature was happening like thunder, eclipse, storm the Jupiter was invisible hand and he was liable for these.

Rahul Sunny answered 1 year ago

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