The invisible hand theory is a concept in economics that describes the unseen forces of self-interest and competition that guide the free market economy towards equilibrium without the need for government intervention. The theory was first introduced by economist Adam Smith in the 18th century, who believed that individuals acting in their own self-interest would ultimately benefit the economy as a whole. The invisible hand is a metaphor that describes the mechanisms through which beneficial social and economic outcomes may arise from the accumulated self-interested actions of individuals, none of whom intends to bring about such outcomes.
The invisible hand theory is closely related to laissez-faire economics, which proposes that government interference in the economy should be minimal and that the market should run its own course. The theory is often used as a backbone to support the idea of a free market, though some have said in the past that the idea is taken out of context.
The invisible hand theory is an important economic concept that helps explain hidden economic forces in the market. It is a foundational concept for rational choice theory, which states that people will make decisions based on their own personal self-interest and benefits. The metaphor of the invisible hand is used to describe the underlying forces that we dont see that have an impact on peoples economic choices.
