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Introduction(1)
It is common practice in the business world today to justify pursuing profits and self-interest by quoting Adam Smith's invisible hand argument. Pursuit of one's own interests is morally justified, it is said, because the invisible hand of the market place will ensure that this will result in the general good of society. An empirical study of the ethical thinking of sixty top managers found that the majority "explicitly or implicitly rely on the 'invisible hand' of the market." ("Ethics and Economic Success", p. 3). This result will surprise no one; the invisible hand argument is ubiquitous.
But what did Smith really say about the invisible hand? And what did he say about the morality of self-interest? These questions are well worth investigating, for Smith was a moral philosopher by profession, and his writings deal with ethics as much as economics.
This paper is an attempt to examine three issues. Firstly, we will consider how Smith used the invisible hand argument, and how this compares with the use of the argument today. Secondly, we will have to deal with a major problem with the invisible hand argument in Smith's writings. There are numerous passages in The Wealth of Nations in which Smith directly states that the interests of business people (merchants and manufacturers as he calls them) are in fundamental conflict with the interests of society as a whole, and that business people pursue their personal goals at the expense of the public good. These passages seem blatantly to contradict the invisible hand argument; is Smith guilty of a major contradiction? Thirdly, I want to examine the important question of what, exactly, are the moral implications of the invisible hand argument. Regardless of Smith's view of the argument, discussing his writings highlights the fact that the invisible hand argument does not justify what many contemporary users of the argument think it justifies. Part three of this paper examines which self-interested actions are, and which are not, compatible with the invisible hand of the marketplace.
This paper will not be proposing any new interpretation of Adam Smith's writings; my concern is more with the invisible hand argument as an argument than with analysing Smith's writings at great length. All the issues of Smith interpretation dealt...