Adam Smith mentioned the 'invisible hand' just once in The Wealth of Nations.
The invisible hand is shorthand for the idea that free markets turn self-interest into public good. Yet Adam Smith used the phrase only once in The Wealth of Nations, and once in an earlier book, in two quite different arguments. Its modern meaning owes a great deal to a 1948 economics textbook.
In The Wealth of Nations, published in 1776, the invisible hand appears in a chapter about capital investment, not free trade in general. Smith argued that merchants, wanting their capital secure, tend to invest close to home even for slightly lower returns, and in doing so help their own country's economy without meaning to. They are, he wrote, led by an invisible hand to promote an end that was no part of their intention.
His earlier use, in The Theory of Moral Sentiments of 1759, is about something else entirely: a selfish landlord who cannot eat his whole harvest and so ends up sharing it, through wages, with those who serve him. Here the phrase seems close to Providence. Tellingly, in an essay on astronomy Smith had described explanations that invoke invisible hands as the kind of thinking people fall back on before science. Some scholars, such as Emma Rothschild, think he was being ironic.
The phrase was not common among economists before the 20th century. Neither Alfred Marshall nor William Stanley Jevons used it. Paul Samuelson's bestselling 1948 textbook popularised it with a broader meaning: that self-interest in a free market leads to the best outcome for all, so government interference is almost always harmful. Samuelson himself called that conclusion unguarded and said it had done almost as much harm as good. Later economists linked the idea to formal results showing that competitive markets can be efficient.
Smith did generally favour less government intervention and more free trade, but his arguments were case by case, not absolute. The economist Gavin Kennedy argues that the modern symbol cannot be reconciled with Smith's modest use; Daniel Klein argues it can. Stephen Marglin called it Smith's most enduring phrase and also his most misunderstood.
Source: Wikipedia — Invisible hand · Text summarised from Wikipedia (CC BY-SA 4.0)
