The Invisible Hand

Philosopher Adam Smith used the metaphor of an ‘invisible hand’ to describe how individuals making self-interested decisions can collectively and unwittingly engineer an effective economic system that is in the public interest.

Narrated by Aidan Turner. Scripted by Nigel Warburton.

From the BBC Radio 4 series about life's big questions - A History of Ideas.

This project is from the BBC in partnership with The Open University, the animations were created by Cognitive.

[MilciadesAndrion]

I understand the 'invisible hand' as benefits for society based on individual decisions in a free market. It helps the supply and demand of goods to reach equilibrium.

[joshi]

great imagery hope you pay the animator well

[Esor]

Another excellent animation of a complex idea!

[ridoanuddin]

It is an invisible boot from what I experienced.

[SebbyNilsen]

Poldark and his servant in the right corner. 0:43 With the wheat/grass.

[Ral]

[01:11] People should self-improve. With the same treatment than it is given to grain [00:24] should be given to workers. The advantage of the worker is that the worker can self-improve, by learning something new and/or acquire a new ability.

[MathieuDeflem]

This is the only video in the series to conclude with a critique of the idea that is introduced.

[fathimanisma]

such an awesome video! neatly explained! Thank You!

[karlstriepe]

The impulse in these videos to introduce criticisms at the end is misleading; in this case, Smith was obviously aware of the problem of labor exploitation and devoted several chapters to it in "The Wealth of Nations, " such as Chapter 8 of Book 1.

[totalbadass]

After watching a few videos this is the one that made sense. Thank you!

[Donteatacowman]

I like Smith's "Erm, you are twisting the context slightly!" in the corner lol. I know there's a ton of invisible-hand discourse lately, but I think that's about seeing the "hand" as an unquestioned good instead of being critical of the forces it produces, as if the hand was some kind of conscious creature with our good in mind. (The video portrays this idea well.) Let me look up some of the critique on this. I'm guessing that the issue is "if the invisible hand is always good, why does poverty exist and wealth disparity grow when capitalism has fewer regulations?"

I was taught as a kidlert that the invisible hand was always good and that any market regulations would do more hurt than good. Example - raising the minimum wage increases employer costs, making them raise prices, and directly increases inflation and layoffs. As an adult I realize that this idea is flawed because employers do not act robotically in response to legislation AND they have options other than increasing prices. Some of these options are good and are what an increased wage would do-shrink the CEO/company's wealth hoarding, decreasing their annual pay while offering more benefits and better quality of life to their employees. However... companies will also try to offset the cost more duplicitously, using the minimum wage raise as an excuse to lay off some employees and overwork the other ones (who, if all the companies in the industry are doing this simultaneously, can't leave for a better job) while keeping their CEO wages the same or even increasing them thanks to the hardship they've had to manage. So, with all things, it's complicated. But the answer isn't to let minimum wage workers starve in parking lots and live on food stamps because the CEO wants a bigger pool. If anything, this scenario argues for higher regulation on companies -- wage caps for CEOs or higher taxes on companies or universal basic income and health care or mandatory benefits... but good luck passing THOSE until we outlaw lobbyists I guess lol.

Let's see... Looks like critics of the "invisible hand" model say the following-

The phrase is not actually a big focus of Smith's writing; economic theory about its importance developed afterwards
Smith spoke more about the tragedy of wealth inequality, but that capitalists who invest in local industry will accidentally benefit the poor
It models the French industrialist economy only
It simplifies many different forces that may or may not be regulated
It only makes sense in a narrow set of circumstances

[liampovey]

This is not quite right. In Wealth of Nations the expression "invisible hand" is only used for a very different concept. Smith feared that in the full realisation of his theory England would suffer because people from England would stop buying english products and start buying cheaper products elsewhere. He tries to solve this dilemma by proposing that someone from a particular country would be more compelled to buy products from there own country as if they were guided by an invisible hand. That is the only time Smith mentions the invisible hand. He also says industrialism and division of labour will lead to slavery. A shame no one mentions these things about him

[yoursubconscious]

this video was beyond its time in graphics and delivery. However, it is one thing: evergreen!

[MaartenvanRossemLezingen]

The invisible hand kind of falls flat on its face when large corporations start utilizing power at the expense of the consumer. This is how cable companies charge more for their internet packages than they're actually worth, not to mention pharmaceutical companies and bankers, who make millions of dollars for contributing barely anything to society. This of course happens mostly in the US. Just because a power with particular interests isn't called a government doesn't mean it can't have a negative effect on the economy.

[shamanthjilla]

Did either Adam Smith or Hayek claim that the invisible hand was benevolent?

[kellykitkat]

Adam Smith may have gotten his idea from
Hesiod's Works and Days 11–24, in which
two different goddesses named Eris are
distinguished:

So, after all, there was not one kind of Strife alone, but all over the earth there are two. As for the one, a man would praise her when he came to understand her; but the other is blameworthy: and they are wholly different in nature. For one fosters evil war and battle, being cruel: her no man loves; but perforce, through the will of the deathless gods, men pay harsh Strife her honour due.

But the other is the elder daughter of dark Night (Nyx), and the son of Cronus who sits above and dwells in the aether, set her in the roots of the earth: and she is far kinder to men. She stirs up even the shiftless to toil; for a man grows eager to work when he considers his neighbour, a rich man who hastens to plough and plant and put his house in good order; and neighbour vies with his neighbour as he hurries after wealth. This Strife is wholesome for men. And potter is angry with potter, and craftsman with craftsman and beggar is jealous of beggar, and minstrel of minstrel.

The actress Kim Cattrall named her own character in Star Trek II after the Goddess Eris, .. which name was then "vulcanized" to Valeris. ... hmm, the tree of knowledge of... lust versus love... what motivates a person to do what he does ? The dominatrix, or the goddess, which does he choose to serve? Lust, or love? Self-interest, in regards to short-term (earthly temporal pleasure) or long-term (day of judgement, heaven or hell) thinking? Economics is value neutral. Morality (moral compass) and ethics (social acceptance) is for political consideration : Sex in the City.

[robhuhges]

Better than a boot stamping on a human face forever.

[mace]

Why is the BBC, which purports (however laughably) to maintain a remit to educate its listeners, lying to them directly? Adam Smith made no such use of "invisible hand". His use of the phrase was to describe how a supposed preference for domestic investment amongst the owners of capital would ensure domestic industry was protected. He does NOT use it for the purpose you indicate. What a sad and pathetic institution the "BBC" has become. It is no wonder many are refusing their begging of a "fee".

When sellers start hoarding goods for larger profit, form cartels to artifically deive up the prices and control the market and government with that will start realizing that we needed to regulate hoarding ! Government that regulates hoarding and cartels functions better than your invisible hand.

[franbonner]

The new description of this is trickle-down economics the same distraction that was used to take advantage of the teaching of a brilliant man and to cover up the greed of the entitled ones I never thought people to be lazy just disillusioned whit the systems of wealth distribution