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Invisible hand

The “Invisible Hand” is the notion of the economist Adam Smith that efficient utilization of resources arises from a free market of individuals pursuing their own selfish agendas. The theory of the firm and consumer rationality is grounded in neoclassical economics and capitalism, stemming from the work of the 18th-century moral philosopher Adam Smith, who emphasized that a free-market economy should occur within a legal and moral framework. Smith argued that the capitalist system is based on managers’ honesty and integrity, without which the “invisible hand” would not work.

Economists do suggest that for business activity to benefit society, observance of minimal moral restraints is necessary (avoiding theft and fraud, observing contracts, etc.). Beyond this, they say, business managers need concern themselves only with maximizing profits. However, increasing profits via means such as pollution, bribery, tax evasion, and price-fixing harms society

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