Is the invisible hand theory relevant in the 21st century?

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Adam Smith coined the phrase "invisible hand" to describe the way that businessmen and producers, if left to themselves (rather than being forced by mercantilist legislation), would actually make decisions that would benefit the overall national economy. He would do this not out of any sense of the overall common good, according to Smith, who wrote that the typical businessman "generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it." Rather, Smith wrote, businessmen were "led by an invisible hand to promote an end which was no part of his intention." In short, Smith was arguing that business owners were more likely to figure out how to invest their money in ways that benefited society than government policy-makers.

How is this eighteenth-century observation relevant to the twenty-first-century world? In several ways. Generally speaking, the degree to which the government should manage the economy is a key difference between liberals and...

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