Scribd
Upload
32 views

Development Theory Review 1

The chapter analyzes Adam Smith's view that self-interest can be compatible with society. It discusses Smith's concept of the "invisible hand," which is the idea that individuals acting in their own self-interest can unintentionally promote the greater good of society. The chapter also examines Smith's views on the division of labor and specialization, which he believed increased productivity and lowered costs, benefiting even the poorest members of society. Finally, it outlines Smith's redefinition of a nation's wealth as the total value of all useful goods produced, rather than just gold reserves as mercantilists had argued.

Uploaded by

Girish Chandankar
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
32 views

Development Theory Review 1

The chapter analyzes Adam Smith's view that self-interest can be compatible with society. It discusses Smith's concept of the "invisible hand," which is the idea that individuals acting in their own self-interest can unintentionally promote the greater good of society. The chapter also examines Smith's views on the division of labor and specialization, which he believed increased productivity and lowered costs, benefiting even the poorest members of society. Finally, it outlines Smith's redefinition of a nation's wealth as the total value of all useful goods produced, rather than just gold reserves as mercantilists had argued.

Uploaded by

Girish Chandankar
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

Review 1

Chapter 6 : The Invisible Hand

The chapter six The invisible hand of the book Little history of economics describes the
philosophies of Scottish philosopher Adam smith in his book The Wealth of nations. In this
chapter author analyses whether self-interest of people is compatible with the society and
talks about a force which drives the economy. He also talks about division of labour and its
impact on economy and understanding about nations wealth.

Self-interest good or bad?

Adam smith argued that the idea of society as team which works towards interest of society
leaving personal glory aside does not work; instead he said society does well when people act
in their own self-interest and this leads to harmony and not chaos. Todays modern world
runs on this theory only.

The Invisible hand

Societies unlike football teams are not managed by any managers but is guided by a force,
Adam Smith came with a phrase Invisible hand for this force. The Invisible hand about
which he is talking is nothing but self-interest of the people. Many interpret idea of invisible
hand as greed is good but it would be incorrect to do so because society is not formed only on
basis of economy but also on good human values. Economy will not function smoothly if all
were selfish and shrewd.

Division of labour

The freedom of decent and honest people to exchange goods with each other makes a way for
division of labour in the society which is in turn based on skillset of people. Division of
labour enhances the efficiency and productivity of the society and lowers the cost of goods
which helps the poorest. Author pointed out that specialization deepens when markets expand
and all these transaction are governed by nothing but the invisible hand.

Wealth of the Nation

Smith developed a new insight about what wealth itself was. For Mercantilists only gold was
the wealth of the nation but Smith proposed that total value of entire amount of useful goods
that country make is the wealth of that nation. In todays world we use same terminology i.e.
Gross domestic product for measuring the wealth of the nation.

Finally author attacks Mercantilist system and supports free movement of goods within
market. He also laid emphasis on division of wealth within different sections of the society
and impact of division of labour on workers, making them stupid and ignorant.

Name: Girish Ramesh Chandankar


Roll no : 173350024
Work count: 394

You might also like