Invisible Hand

The idea that individuals pursuing their own self-interest unintentionally benefit society as a whole.

Coined by Adam Smith, the invisible hand describes how free markets can channel self-interested behavior, buyers seeking the best price, sellers seeking profit, into efficient outcomes without central planning. Prices act as signals that coordinate supply and demand, guiding resources to their most valued uses.

The economics professor used the bakery down the street to explain how the invisible hand sets prices without anyone planning it.