Invisble Hand Of Adam Smith

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The Invisible Hand One of the main points of Smith's Wealth of Nations is the use of the invisible hand theory. Smith believes that there is an "invisible hand" that make humans work and make money. This theory as he describes is "every man working for his own selfish interest will be led by an invisible hand to promote the public good." The invisible hand is a cycle in which society operates. People make products in order to make money so that they can buy products that they need, this in turn repeats over and again. This invisible hand generates from self-interest of seeking a life beyond subsidies, which in turn creates competition. Therefore, increasing the sum total of human happiness via the mechanisms of exchange and division of labor.

According to Smith, labor is the origin of wealth. However, to gain most from the productive powers of labor, Smith emphasizes on the division of labor.

In this theory, he argues that when a labor's work is divided among many workers into particular tasks, then the workers use their skills efficiently. Adam Smith was attracted to the fact that the jobs where split up among workers to where each worker became an expert on his part of the task. Smith decided that specialization and division of labor brought about increase of productivity. He gives an example of a pin factory. In this factory jobs were split up to maximize time. For instance more pins would be made when people worked in a line where each person did a part to make a pin. Example: "One man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head: to make the head requires two or three...