Adam Smith says that even if an individual pursues his own interest (thus behaving like selfish) is this a benefits for the society. For example, if a company wants to make a profit, should provide quality products. This creates satisfied customers and from the profits the company pays taxes etc. So the individual interest creates other positive effects throughout society, and thus creates societal welfare. This principle describes Smith as an invisible hand.
What is Invisible handThe invisible hand is the economic theory of Adam Smith, which says that there is a harmony between the interest of individuals and interest of society.
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Last update: 30.07.2016