Capitalism & Its Critics

The man who wrote the founding text of capitalism was not a businessman, a banker, or a factory owner. He was a Scottish moral philosopher who had never turned a profit in his life.

The phrase people remember is "invisible hand." Smith used it exactly three times across his entire body of work. In The Wealth of Nations, it appears in a passage about domestic versus foreign investment: the merchant who invests at home rather than abroad, seeking to minimize his own risk, is "led by an invisible hand to promote an end which was no part of his intention" — the public good.

Smith was not arguing that selfishness was a virtue. He was making an empirical observation: in competitive markets, the pursuit of individual gain tends to produce outcomes that benefit others, because the only way to profit in a genuinely competitive market is to offer something people want at a price they are willing to pay.