the "invisible hand"

After class I realized that when I explained the metaphor of the invisible hand, I never actually explained what the phrase "invisible hand" is supposed to mean.  So I figured I'd do it on the blog.  

Recall that the idea is that, in the proper social setting (typically taken to center on a free market), narrow aims can result in broader benefits.  In class I gave the example of wanting money.  How do you make money?  By providing goods or services that people are willing to pay for.  But people pay for things they want.  So the more money I want, the more I have to provide people with what they want.  I might do that by creating some device that really adds to the sum of human happiness, like all the great technology we have today (I can listen to whatever music I want pretty much wherever and whenever I want?  how cool is that?). So my self-interested motives can result in broader social benefits.  

Here's Adam Smith: “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 self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages.”  In short, when you go to the market and there's all that great food available, it wasn't wasn't made available to you because the people who put the market there care about you (except derivatively).  

The idea of the "invisible hand" is meant to make vivid the fact that the social benefits aren't what the agents producing them are ultimately after.  Their ultimate focus is on themselves, or at least something narrower than society. But it is as if an invisible hand is guiding them to do what benefits society.