In The Wealth of Nations, why does Adam Smith think that allowing individuals to pursue economic gain freely is advantageous to society as a whole?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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In The Wealth of Nations, Adam Smith argues that allowing individuals to pursue their own economic gains will help society as a whole because individuals will selfishly take actions that actually make society as a whole richer.  Smith, speaking of a man (in those days, there were no thoughts of treating women equally) who pursues his own economic interests, says

By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

But how does this work?  Think about the way our capitalist societies work.  Someone like Steve Jobs wants to get rich so he tries his best to invent something that will make him a lot of money.  He comes up with things like the iPhone, which help us all.  Even the average person helps out in this way.  Because I want to make money, I do my best at my job.  By doing well at my job, I help my firm make money.   This helps me and it helps my firm, and it even helps the people who buy our services.

In these ways, people who are pursuing their own private interests actually end up helping society as a whole.  This is the great benefit of having a capitalist system.

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