Concept of the Invisible Hand in a Laissez-faire economy 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 it. Adam Smith, Inquiry into the Nature and Causes of the Wealth of Nations 1776. What business does a government have in commerce and trade? Why would a government want to interfere between two countries benefiting from each other by trade? What right does the government have in two individuals wanting each others products or services? According to some, commerce and trade should be permitted to operate free of controls of any kind; there should be no tariffs or other barriers. This is where the term laissez-faire is introduced. Its direct translation in French, leave alone to do, is self-explanatory. A strong believer in this type of economics is Adam Smith, both a philosopher and an economist. Born on 1723 in Kirkcaldy, Fife, he studied at Oxford, and became a professor of logic at Glasgow (1751), but took up the chair of moral philosophy the following year. In 1776, he moved to London, where he published An Inquiry into the Nature and Causes of the Wealth of Nations (1776), the first major work of political economy. This examined in detail the consequences of economic freedom, such as division of labor, the function of markets, and the international implications of a laissez-faire economy. Adam Smith is most remembered today for his explanation of our market system. A majority of people saw confusion when they observed economic activity in England during the middle of the 18th century. They saw everyone doing whatever they pleased and deemed necessary. Businesses produced whatever they wanted to…
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