Did You Know Adam Smith Used The Term "Invisible Hand" Once
In May of 2006, Paul Krugman, an Op-Ed columnist for The New York Times, commented on David Warsh’s novel Knowledge and The Wealth of Nations: A Story of Economic Discovery which “tells the tale of a great contradiction that has lain at the heart of economic theory ever since 1776, the year in which Adam Smith published The Wealth of Nations.” (Krugman). According to Krugman, Warsh depicts it as the struggle between the Pin Factory example in Smith’s opening chapter “Of The Division of Labor” and the infamous economic theory of the Invisible Hand. While Alan B. Krueger, writer of the introduction of Smith’s book in 2003, ironically points out that “this reference occurs only once in the book” (Smith, xvi). However, Warsh’s point is that
“on one side, Smith emphasized the huge increases in productivity that could be achieved through the division of labor, as illustrated by his famous example of a pin factory whose employees, by specializing on narrow tasks, produce far more than they could if each worked independently. On the other side, he was the first to recognize how a market economy can harness self-interest to the common good, leading each individual as though “by an invisible hand to promote an end which was no part of his intention.’” (qtd in Krugman)
Thus, while Smith is commonly associated with both theories, it can also lead an individual to question whether or not Adam Smith and Karl Marx would agree on economics; the undeniable notion that Smith “supported universal government-financed education - not for the reasons of efficiency or redistribution but because he believed the division of labor destined people to perform monotonous, mind-numbing tasks that eroded their intelligence” (Smith, xix) brings into question what he truly supported. However, Warsh’s depiction of Smith's writings are valid in that both theories are developed in The Wealth of Nations and while they can frequently be misunderstood or misconstrued by the general populous, it also needs to be noted that Smith held a complex ideology involving economics and the ways to produce greatest efficiencies within an economy. The development of Smith’s narrative-like book, is his fascination with the production of simple products such as a worker’s wool coat and the effort in which it takes to produce just one worker’s wool coat. Meanwhile, Smith also understood that the market has an inevitable involvement with an individual’s self-interest, hence, “the invisible hand”.
Krugman, Paul. “The Pin Factory Mystery”. The New York Times, 07 May 2006, late ed., p. 14.
Smith, Adam. The Wealth of Nations. Bantam Classic. 2003.