According to Adam Smith, the "invisible hand" refers to which of the following?
A) The "best interests of society (public interest) will occur as an outcome of the market process coordinating the self-interested interactions of buyers and sellers (private interest).
B) Government interference is the invisible hand of inefficiency.
C) Bribes and graft is the invisible hand of inefficiency.
D) The "best interests of society" will occur as an outcome of careful guidance by government authorities in allocating scarce goods and services.

Question

Quizplus · Accepted Answer

Adam Smith introduced the concept of the "invisible hand" to describe how the market forces of supply and demand, operating in a free market economy, can lead to the optimal allocation of resources and promote the overall well-being of society without any central direction. This occurs because individuals acting in their own self-interest are compelled by the market to respond to the desires and needs of others through the price mechanism, which signals what goods and services are in demand and at what price. Thus, the invisible hand represents the idea that the pursuit of individual self-interest can be aligned with the public interest.

According to Adam Smith, the "Invisible Hand" Refers to Which