Critiquing Adam Smith's 'Invisible Hand' Theory

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“Every individual necessarily labors to render the annual revenue of the society as great as he can. He ... neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. (Smiths 1776: 246) Adams Smith theory of “Invisible hand” has been criticized and/or applauded by many Economists who came after him, based on the scope of this work, some of these Economists and their theories will be analyzed. Adam Smith and His invisible hand Theory …show more content…

They are not a form of fundamentalism, but an essential tool of social science. PRODUCTION AND CONSUMPTION “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer” (Smith, 1776: 363) This statement by Adams is an obvious statement of fact. If a product at the end of production does not have a consumer, there is actually no need for production of the goods or services. According to BusinessDictionary.com, “Production is the processes and methods used to transform tangible inputs (raw materials, semi-finished goods, subassemblies) and intangible inputs (ideas, information, knowledge into goods or services. Resources are used in this process to create an output that is suitable for use or has exchange value”. While “Consumption is the process in which the substance of a thing is completely destroyed, used up, or incorporated or transformed into something else. Consumption of goods and services is the amount of them used in a particular time period”. Production Process of a Producing

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