Question

Economics since Adam Smith has tried to show that a particular assumption about human nature leads to a particular outcome for society. (a) What is this particular assumption about human nature? (b) What is the suggested outcome for society, and (c) what was Adam Smith’s anatomical metaphor for this phenomenon?

Answer 1

Adam Smith,the father of the economics, in his epoch-making book " an inquiry into the nature and causes of the wealth of nation" has postulated that the self-interest of the economic agent and its outcome in the economy. To quote Smith " it is not from the benevolence of the butcher, the brewer, or the backer, that we expect our dinner, but from their regard to their won interest". Economic agent should stick to their self-interest while making decisions and there would be efficiency in all economic outcome like production , employment etc. The market will give its best when it set free and the government intervention is least needed. So this process works through the concept of invisible hand which Smith used as a metaphor to show how the self-interest via invisible hand leads to efficient decision and outcome in the economy