Adam Smith: The Invisible Hand


Adam Smith was one of the principals of an
astonishing period of human learning, called the Scottish Enlightenment, during the 18th
century. Heís the author of two books. In 1759, The Theory of Moral Sentiments was his
first book. In 1776, the one heís more famous for now, An Inquiry into the Nature and Causes
of the Wealth of Nations. Those two books together almost singlehandedly began the discipline
of political economy. Adam Smith called himself a moral philosopher.
For him, moral philosophy encompassed all of the investigation that had to do with human
behavior. So heís now principally known as the father of economics, and thatís because
of the book, The Wealth of Nations. If youíve heard anything about The Wealth of Nations,
the one phrase you may have heard of is ìinvisible hand.î Itís about halfway through the book. Itís 1,000 pages long, chock full of information.
About halfway through the book, he uses this phrase, ìinvisible hand.î And that phrase
is very important, because what Smith thought he had discovered was that commercial societiesómarketsócould
enable human beings who are seeking to satisfy their own self-interest to actually benefit
other people, even if unintentionally. Thatís really an amazing insight and one of the key
pieces of our understanding today of markets and commercial society. But what might be even more interesting, at
least to me, about that Wealth of Nations is at the beginning of it. Remember that the
title of the book was An Inquiry into the Nature and Causes of the Wealth of Nations.
So, what Smith was interested to know was, why are some places wealthy and other places
are not? Well, what Smith didnít say is almost as
important as what he did say. Itís not because of natural resources. Itís not because some
races are superior to others. Both of those are explanations that were available and heard
at that time. That wasnít it for him. What he thought the key to the difference between
wealthy and nonwealthy places was whether they allowed division of labor. Could a person
focus on something? Why would that matter? Because if you were
allowed to focus on a fairly narrow range of activities, this could unleash your human
ingenuity. For Smith, this was really the key to explaining why some places were wealthy
and other places were not. It was not those other factors. It was whether the society,
whether the community, whether the nation, allowed peopleís individual ingenuityóscopeóto
investigate, entrepreneurially figure out new ways to do things to satisfy their interests
better. Those societies that allowed individuals scope for their ingenuity, they succeeded;
they flourished. That was really the key to human prosperity.

78 thoughts on “Adam Smith: The Invisible Hand

  1. @KillerWhaleSFl You've chopped and screwed your quote sir. Not only that you've misinterpreted what it says. Amazing that someone could be as stupid as you and confuse it with being clever. Fail moar please, it makes us laugh.

  2. Thru this video and others, under the banner or "LearnLiberty", I have learn more about the economy then all the schooling I went to. Thank you LearnLiberty !!!

  3. @bryanlopez1084

    When Adam wrote that I think his invisible hand meant the hand of god.

  4. This is all BS.

    People have robbed the resources of others for thousands of years that’s how real wealth however you define that is acquired.

    So what happens when we create enough good technology so we don't have to work?

    Isn't that our goal?

  5. Empty seats in the background? Aesthetically pleasing, but why aren't the seats filled? What message are you attempting to convey with an emplty auditorium? In Freedmans videos from the 70's they simply showed lectures with student interactions. Seems like learn liberty should give these profs their own recording equipment and record what they ALREADY teach. Then LL could edit the footage however they wanted.

  6. funny, because unless you have the money to invest into your interests you're not going to be able to develop any of this "human ingenuity" you speak of. Every single thing has today been turned into a commodity for sale. How is a poor person supposed to develop any talents at all when they are struggling to feed themselves. Perhaps that's why the highest rates of innovation come from countries with large social programs. This channel is utter bullshit propaganda.

  7. LOLOL apparently human prosperity is a nation ran by money-hoarding corporate owners, WHO BARELY PAY TAXES, that through dumbshit politicians, make it completely obvious that they don't give a shit about the people who vote because the voters have been bashed to death by empty, stupid slogans and arbitrary political words like "liberty" to even have the fucking capacity to vote properly in the first place. jesus christ…

  8. @MrWolfenstein81

    Our economy is created by consumption, if we don't consume we have no economy. Peter Schiff is just another shill same as you.

    By the way you must of understood what I was talking about or you wouldn't have pointed out my bad grammer. So wheres that put you at?????

    Adam Smith could never of understood the technology we have today.

    Your a tool for a system that's out of touch with the world we live in today.

    FO

  9. @MrWolfenstein81

    Like I typed

    FO

    Your a boat anchor dragging the human race under.

  10. People should look up and thumbs up @xRA1D32x 's comment so others can se the actual truth.

  11. @Cubology Monetary Incentives destroy drive and ability when it comes to cognitive functions. Look up RSA animate "The Suprising Truth Behind What Motivates Us." People do things because they're interested in them. Why do you think people invest their own money to buy musical equipment or film equipment and become amazing at it with no incentive to make money off of it. Loads of people have hobbies, You don't need money to motivate.

  12. @StateExempt

    Not at all. Just someone that lives in the real world and sees it as it is. Who are U? What do U think about each day when U wake??

    I see our planet as it is today, how do U see it today???? I do not look into yesterday or the future because none of that can be.

    I see what it is today.

  13. So have any of U read the book, The Wheels of Commerce? Volume 1 and 2.

    U must have if you buy this BS.

    These books and people that wrote them could never have imagined the technology we have today.

    It was not possible in their minds.

  14. @MrWolfenstein81 "there shall be no gods before me" -god. quotes mean nothing, and they are not arguments, they are appeals to populous or appeal to authority if used as an argument.

  15. But what gives a people the ability to focus on these things? Obviously if you live in a god-forasken desert you don't have the time for such endeavors (you're just going to spend 24/7 scrounging around for food). It seems rather naive to utterly disconnect a society's natural setting from the equation…

  16. What about the middle east, for example. they are hardly progressive by any means. Forget focus, its the natural resources that gives them wealth beyond our western imaginations. Compared to their wealth ours is nothing.

  17. @rao76 How do you explain Japan? Where are their natural resources? With an advanced society you don't need natural resources. You can trade.

  18. @JackGriffin2 To trade you need something to trade with. With natural resources, it is yours for free, like the Arab world. With Japan, there is innovation, as long as they innovate they can trade. But look at their stress level on the society which is represented by their high suicide rates.
    On the other hand, look at the middle east. They are lazy as hell, obnoxious and backward social values, but still rich. This is the difference.

  19. @rao76 Natural resources may help but are not sufficient or even necessary for a country to be wealthy. And the natural resources do not even help if the country is not sufficiently advanced. Their are plenty of poor economies with money gushing from the ground and plenty of wealthy economies with few natural resources.

  20. @xRA1D32x Are you referring all the large social programs Britain had when it started the Industrial Revolution?

  21. @StateExempt The latter applies to Paul Krugman as well as all of the other backwards pseudo-scientific economists. Monetary economics is a destructive cancer

  22. @JackGriffin2 No, modern times. Switzerland, Norway, Luxembourg. "ht tp :// blog . ted . com / 2011 / 10 / 24 / how-economic-inequality-harms-societies-richard-wilkinson-on-ted-com /" you'll have to fix the spaces between

  23. @JackGriffin2 Yes, but that is only the state of affairs as is today, and that is because of historical reasons, colonisations, world wars…there was a huge shift in wealth from one place to another. This is only temporary, you can see the balance setting back…its happening.

  24. How do you respond to Chomsky's criticism that Adam Smith believed division of labor made people more ignorant and was actually a negative thing?

  25. @xRA1D32x Evidence? I'm not willing to discount the lessons of history because we live in "modern times".

  26. @JackGriffin2 What lessons would those be? Did you even follow the link and watch the video?

  27. @xRA1D32x The lesson of the Industrial Revolution. It is a counterexample to your statement that innovation comes from countries with large social programs. You seem to dismiss that example because it wasn't "modern times".

  28. @JackGriffin2 The simple fact that human ingenuity exists in any system is not surprising at all; in fact that's what we humans are very good at. Yes, there were some great innovations during the industrial revolution, as well as during much of the history of the United States. However, when looking at the innovation rates (Patents per capita) of different countries it becomes clear that those with less income inequality have greater rates of innovation. Google Richard Wilkinson

  29. @xRA1D32x
    This says the US is number 3 in the world in patent apps per capita:
    "nation master.com /graph / ind_pat_app_res_ percap -patent-applications -residents -per -capita"
    (spaces added)

    As a side, I don't think it makes much sense to compare Luxembourg to the US. Luxembourg is the size of a small
    city and the US has the 3rd largest population in the world. Luxembourg just will not have the issues of a large country.

  30. "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice."

    Adam Smith, in this quote, seems to be saying "monopolies and trusts are OK with me." Does anyone have a different interpretation? Please give a thoughtful response.

  31. @newguy33X Yes, I agree with you! it's a warning.. A warning which I do not hear repeated by free-market advocates who use his name to bolster their credibility.

  32. @xRA1D32x – Austrian economist are some of the most informed. As the likes of Peter Schiff have made rather apparent to those willing to pay attention.

  33. What Adam Smith failed to realize is that the Invisible Hand never gives you the reacharound.

  34. I found this quote by some guy who was really concerned about the division of labor:
    "The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention… The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment,…

  35. Yup, the scope of going into a sweat shop and doing the same simple thing a million times for 12 hours straight with few breaks and then having your 8 year old son start working and doing the same thing. That allowed for a great deal of ingenuity? Sorry, that explanation is not satisfactory for me. Didn't Smith comment on how immoral division of labor was in the same book???

  36. @evilsoda00 Smith talked about a lot of things libertarians don't talk about. Another interesting thing that Smith talked about was how government needed to regulate the economy even with the invisible hand. I guess LL doesn't really want to talk about those little tidbits of info, they're inconvenient to their agenda.

  37. A response to his anwser to the question "Why are some countries wealthy while other nations are poor?" ….. China.

  38. a couple of you morons are equating "focus on one thing" with "menial labor". the two are not equal. menial labor is mundane tasks. focus means, you learn, research, study, understand and expound on a single niche, like combustion engines. If everyone in America had to farm, be a carpenter, plumber, electrician, smith, chef, baker, day to day to live, we wouldn't have combustion engines. Why? Because they'd be too busy surviving day to day.

  39. Smith said himslef and i quote "It is due to the rapid improvement of production and technology which has led to the rapid advancement of Capitalism".

  40. Adam Smith never said what this said. Here is the exact quote: "by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain;
    and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." The "invisible hand" is all about unintended consequences.

  41. "Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.'' — Adam Smith, The Wealth of Nations

  42. To reiterate, the quote actually says beware of your economic assumptions. You could be dead wrong. For example, there were certain economic assumptions about free trade before Reagan signed the first FTA. Well, the "invisible hand" struck and showed the truth. Free trade does NOT create equal or better jobs than the ones lost due to FTAs. The list goes on of economic assumptions in which the invisible had struck.

  43. i…do not agree totally. what about imperialism, colonialism, external controls of the market through selective buy and sell, economic methods of suppression and coercion. there's many more reasons why some nations are poor and others are rich.

  44. The one phrase I heard was fiat, actually. I often tend to think of fiat as a sort of whip, a tool myopic morons rarely have to "spend" much genuine effort cracking, often not really burdened with directly witnessing short and long term pains or joys created by use of it. "It" being human. If such power wasn't abused so extensively, or even bound to fates of rewards for fair, productive and/or heroic efforts… Lasting "value?" Security? Hope? Trust? Or anger, sadness, fear, tyranny, angst…

  45. Adam Smith was not focusing on every factor, and more or less was comparing the bigger nations. For example, The quality of life for people went up as a result of the innovations of individuals during the industrial revolution in Britain, which created efficient production of goods. Imperialism and colonialism expand the benefits more, by promoting international trade through the removal of tariffs and tolls, which allowed other nations to enjoy the benefits. For example, Japan closed its

  46. markets through high tariffs and Japans policy of seclusion at the time. In the 1800's, United states sent Commodore (forgot his name) to invade Japan. It opened some port, which allowed trade to begin. As a result, Japans policy of seclusion was abolished, and allowed Japan to grow economically and militarily. We've seen the effects that has had in the 20th century with Japan invading many Asian nations. Basically, higher free trade means the invisible hand of supply and demand can work at it

  47. its fullest potential. It creates an environment which allows people to focus on a specialization; as a result, people would create innovations within their specialization, and the population would benefit. Of course, part of the benefit comes from competition and a bunch of other stuff i'm too lazy to type down.

  48. Also, the point of talking about how Japan invaded other nations was for me to demonstrate the successes that allowed Japan to do that.

  49. To Adam " scunner " smith the concept of limited liability companies was anathema. Even he for saw that managers, divorced from the interests of shareholders, would take mad risks with other peoples money to maximise their own rewards. Why is this a secret ?

  50. That was lame!

    Only idiots will tune to that garbage. Unfortunately.

  51. How does the invisible hand protect us against the overuse of antibiotics resulting in very resistant viruses?

  52. The second part in thr video
    ' allowing focus on specilised work to bring out the best of humsn ingenuity' was orginally the idea of Cast system in Hinduism circa 5000 BC. In fact the word cast system misnomer while correct ssnskrit word for it is 'naipunya' which means specialised skill.

  53. These explanations are not quite accurate. This is what Smith really said… https://youtu.be/eaZORYaygo0

  54. Here is the Original quote from Wealth of Nations. The ONLY quote where invisble hand is mentioned.
    "By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."

  55. Adam Smith was a compassionate enlightenment
    thinker.  However, he was betrayed by the
    neoliberals.  According to Noam Chomsky,
    his work has been “grossly misinterpreted”. 
    Apparently, Adam Smith condemned the division of labor sharply but this
    information was “removed” from the origin text Wealth of Nations…

    “In the
    process of division of labour, the employment of the far greater part of those
    how live by labour, that is, of the great body of people….The man whose whole
    life is spent in performing a few simple operations, of which
    the effects are perhaps always the same, or very nearly the same, has no
    occasion to exert his understanding or to exercise his invention in finding out
    expedients for removing difficulties which never occur. He naturally loses,
    therefore, the habit of such exertion, and generally becomes as stupid and ignorant as
    it is possible for a human creature to become.”

    Thus, Smith despised the division of labor. 
    The US elites perniciously lied to us all and bastardized Smith’s
    legendary work to force us to accept neoliberalism (Washington Consensus).  Here is the proof:

     Smith. An
    Inquiry into the Nature and Causes of the Wealth of Nations. Ed. R. H. Campbell
    and A. S. Skinner. 2 vols. Glasgow Edition of the Works and Correspondence of
    Adam Smith 2. Oxford U. Press, 1976.

    https://elpidiovaldes.wordpress.com/2017/12/21/4014/

    Chomsky’s Explosive Revalation….

    https://www.youtube.com/watch?v=cmjfgfU-I1M

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