Joseph Stiglitz Against Adam Smith's Invisible Hand

Adam Smith only referred to the "invisible hand" three times. It was economics teachers 40 years after his death that referred to it at the "Invisible hand" I completely agree that this theory has been misinterpreted. It has been morphed by objective philosophies that "self interest is it." Bankers violated section 2 and 3 of the theory, and so are several business people who act in their own self interests, and then run greater fool theory against the market participants. An authentic capitalist will always try to increase the number of participants, and seek mutual gain. Adam Smith is good, but the temptation of people to cheat with mortgages and contracts is different than farmers growing food in an exchange for small potatoes in the late 1700's. 1. each participant selling the goods and services will try to maximize their own interests, 2. maximize the number of market participants 3. in the exchange of goods and services for mutual b

Adam Smith WoN 2.2.94: To restrain private people, it may be said, from receiving in payment the promissory notes of a banker, for any sum whether great or small, when they themselves are willing to receive them, or to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty which it is the proper business of law not to infringe, but to support. Such regulations may, no doubt, be considered as in some respects a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments, of the most free as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed.

There is no theory of the invisible hand in the Wealth of Nations. It a metaphor used once in the entire book in a discussion of domestic versus foreign investments. Most modern economists appear to be illiterate.