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| In his "Wealth of Nations" Smith argues that a social order can be maintained by letting the natural forces operate freely.
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| -he argues that the division on labor is not "the effect of any human wisdom which foresees and intends the general opulence to which it gives occasion" (The Wealth of Nations p 25)
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| -believes that a central legislator cannot have the knowledge individuals have at their "local situations", and which is maximized in their pursuits of liberty
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| '' "..every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. 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. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good" '' Adam Smith, The Wealth of Nations
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| The invisible hand mechanism argues that members of a society do not coordinate their actions towards achieving a pre-specified outcome. Their behavior is not guided by an explicit agreement; however, the results of their spontaneously coordinated actions will translate into the the achievement of an aggregate outcome, which seems to be the product of an omniscient mind. Smith argues that centralized legislators cannot possess the knowledge those "on the spot" have, as in their pursuit of liberty, individuals will maximize their knowledge of their local situations. He also argues that interventions in the market are inefficient as "no regulation of commerce can increase the quantity of industry in any society beyond what its capital can maintain. It can only divert a part of it into a direction into which it might not otherwise have gone"
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| The explanation of social patterns lied in an "invisible hand" mechanism, ------"men is lead to promote an end which was no part of his intention" --
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Latest revision as of 17:44, 4 September 2008
