Term of the Day invisible hand

Term of the Day

invisible hand

Term used by Adam Smith to describe the natural force that guides free market capitalism through competition for scarce resourcesAccording toAdam Smith, in a free market each participant will try to maximize self-interest, and the interaction of market participants, leading to exchange ofgoods and services, enables each participant to be better of than when simply producing for himself/herself. He further said that in a free market, noregulation of any type would be needed to ensure that the mutually beneficialexchange of goods and services took place, since this “invisible hand” would guide market participants to trade in the most mutually beneficial manner.
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Usage Example
Adam Smith believed that the invisible hand would guide individuals to maximize their own good, through trade and entrepreneurship, thus making society as a whole better off.