Adam Smith

2 cards

1. 01

   The baker does not make your bread out of kindness but for his own profit — and that self-interest, through the market, ends up feeding the whole town.

   The Wealth of Nations · 1776

   Individual self-interest, coordinated by the market, produces collective well-being.

   Every seller wants to earn money, so they try to make good products at a good price so you choose them. Without anyone planning it directly, the whole town ends up fed, clothed, and supplied. Smith called this the invisible hand of the free market.

   “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.”

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2. 02

   When each participant pursues his own interest in a free market, the aggregate result can serve society better than the declared intention of any single actor.

   An Inquiry into the Nature and Causes of the Wealth of Nations · 1776

   Self-interest, filtered through prices, can produce a good no one intended.

   Smith argues that the price mechanism coordinates the decisions of millions of people who do not know one another. Each merchant picks suppliers and customers to make a profit, but in doing so allocates resources where demand is higher and costs lower. His classic example: the trader prefers domestic to foreign industry not out of patriotism but out of self-interest, and through that preference he supports the revenues of his own country. The invisible hand is not a promise that self-interest always produces public good — Smith describes conditions, not a miracle.

   “He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

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