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Invisible Hand

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Adam Smith coined the phrase invisible hand in his 1776 magnum opus, The Wealth of Nations. Usually stated more fully as the invisible hand of self-interest, the phrase was a way to describe an important idea. Smith argued that in the capitalist system an invisible hand, self-interest, leads market participants to produce the goods and services that tend to serve the public interest. Smith was very religious and to him the invisible hand mechanism was essentially a metaphor for divine intervention. Today the invisible hand process is regarded as an explanation of the positive outcome of decentralized activity in a free market economy. Since self-interest always exists, the impact of the invisible hand remains a topic of active economic research.



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