Briefly explain Adam Smith's concept of invisible hand as a justification to capitalism.business ethics and value
Modern readings of capitalism have hit capitalism in a forceful manner with the paradigm of fear. How can the market regulate itself? How will it account for all voices that participate within it? What will ensure profitability for all who invest in the system? The concept of "the invisible hand" is of critical importance to Smith and the economic theory of capitalism:
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 not 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. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
The "invisible hand" is the mechanism that allows capitalism to ensure functionality in the midst of each "pursuing his own." The invisible hand has been used by many to justify the "laissez faire" philosophy of leaving well enough alone for the economic systems of capitalism. When Smith writes against protectionism and tariffs, he uses the argument of the invisible hand as the tool to explain how the system can regulate itself without the need for external interference. If each consumer and party is given freedom of choice and allowed to partake without coercive action, the invisible hand of the market will ensure results for all.
The invisible hand theory has been used to justify the lack of government action or regulation. It would be interesting to see how Smith would view the metaphor in the current economic/ political environment. Smith uses the invisible hand justification in the understanding that the business playing field has a level of fairness within it, and open to all, without anyone subverting it. Essentially, Smith is understanding it as a realm free from government action, and certainly devoid of government collusion. The question would be if Smith would still embrace the metaphor's use if proven that there was collusion between business and government or a type of "rigging" or illicit configuration of the marketplace. In these settings, there can be a very healthy debate as to whether or not Smith would still employ the metaphor or if he would modify it in the modern context.