What are real world examples of "the invisible hand"?

Question

Adam Smith's Invisible Hand therory. What real world examples of his therory are in the world today?

Answer 1

The modern "Invisible Hand"
Nowadays, something much more general is meant by the expression "invisible hand". An invisible hand process is one in which the outcome to be explained is produced in a decentralised way, with no explicit agreements between the acting agents. The second essential component is that the process is not intentional. The agents' aims are not coordinated nor identical with the actual outcome, which is a byproduct of those aims. The process should work even without the agents having any knowledge of it. This is why the process is called invisible.

The system in which the invisible hand is most often assumed to work is the free market. Adam Smith assumed that consumers choose for the lowest price, and that entrepreneurs choose for the highest rate of profit. He asserted that by thus making their excess or insufficient demand known through market prices, consumers "directed" entrepreneurs' investment money to the most profitable industry. Remember that this is the industry producing the goods most highly valued by consumers, so in general economic well-being is increased.

One extremely positive aspect of a market-based economy is that it forces people to think about what other people want. Smith saw this as a large part of what was good about the invisible hand mechanism. He identified two ways to obtain the help and co-operation of other people, upon which we all depend constantly. The first way is to appeal to the benevolence and goodwill of others. To do this a person must often act in a servile and fawning way, which Smith found repulsive, and he claimed it generally meets with very limited success. The second way is to appeal instead to other people's self-interest. In one of his most famous quotes:

Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me what I want, and you shall have this which you want, is the meaning of every such offer; and it is the manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love.
For Smith, to propose an exchange is to attempt to show another that what you can do, or what you have, can be of use to the other. When you carry out the exchange, it means the other person recognises that what you can do or that what you have is of value. This is why so much of a person's self-esteem is bound up in their job - a well-paid job is supposed to be a sign that others value your contribution and find it worth exchanging their own resources for.

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Answer 2

Invisible Hand Example

Answer 3

I don't really do research on Muslim charities, because I don't need to see things to believe that someone from a religion can be good. Moreover, except the Middle East, most muslim countries are the ones in need of aid, they don't have the money to do charity on an international level. You should watch Al-Jazeera, you'll get actual information on the Islamic world there. They reported on a Muslim aid organisation once, which BBC and CNN all refused to broadcast. I can give you an example of a muslim state though. I live in one, where there is about a 2% minority of Christians, Hindus, Jains, Buddhists, and other religions. Everything from Eid to Buddha Purnima gets a national holiday here, and the constitution, aids, healthcare, taxes, is all equal for everyone. Absolutely no bias. Of course, fundies emerge now and then, but its not only from the Muslim side, and the govt always manages to take care of it. Edit: if your going to ignore posiitive comments just because there are no sources or links provided, maybe you should do your own research, instead of asking people on an answers forum.

Answer 4

There are many. It just refers to the movement of people and capital in response to changes in demand that result in wages and profits rising and falling. Simple example: people moving to Alberta Canada because of the booming economy.

The alternative is central planning of the economy. It has been tried, in Russia and China, and it just does not work. Market forces are far more efficient, although government must play the role of referee and make sure business 'plays fair' and does not employ children, pollute the environment without cleaning it up, or engage in price fixing with rival companies.

Answer 5

Well, take a look at American farming. In the 19th century, people from all over the world rushed to the American Midwest, lured by the promise of free land. So there were plenty of individuals who endeavored to employ their capital so that its produce may be of the greatest value.

Hundred years later, the vast majority of those farmers' descendants live in cities and have nothing to do with farming; food prices have been continuously falling relative to incomes. Three percent of the U.S. population engaged in farming are capable of feeding the entire country and export food while they are at it, but their standard of living is generally below that of the city dwellers. So by working hard, innovating, and maximizing their output, American farmers have actually promoted affordability of food for city dwellers and lower living standards for themselves compared to city dwellers, an end that was no part of their intention...

Answer 6

outsourcing of american jobs and the inporting of chinese goods. there are thousands of freight crates piling up in los angeles due to the invisible hand.
they are starting to use them to build houses to get rid of them and save money on construction materials.

Answer 7

Garbage collectors in Chicago - they make nearly 6 figures all because they get up in the morning, early, and pick up someone else's refuse.

No one wants this job - it stinks, it's dirty, it's messy, it's disgusting. But it's essential to sanitation, and so they are well-paid for it.

Answer 8

I was wondering much the same question

Answer 9

This was bugging me too