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Chas Anderson wrote 
 
>Sounds like what you're describing would today be called economic efficiency, the
maximization of net social benefits, say. One problem, though, in the quote where Smith is
detailing the actions which give rise to the invisible hand, he states "By preferring the
support of domestic to that of foreign industry, he intends only his own security". Is
this a lapse in judgment on the part of Smith or does he perceive the invisible hand as
being something less than free of invisible bruises and blemishes?
> 
 
I don't follow, Chas. My answer to your question is that this clause represents neither a
lapse nor an exception to the "invisible hand" assertion. Here is the complete quote
again. Sorry for the reposting, but you are raising a question of how this passage should
be interpreted yet you only extract a piece of it.
 
"But the annual revenue of every society is always precisely equal to the exchangeable
value of the whole annual produce of its industry, or rather is precisely the same thing
with that exchangeable value. As every individual, therefore, endeavours as much as he
can, both to employ his capital in the support of domestic industry, and so to direct that
industry that its produce maybe of the greatest value; every individual necessarily
labours to render the annual revenue of the society as great as he can. He generally,
indeed, neither intends to promote the public interest, nor knows how much he is promoting
it. By preferring the support of domestic to that of foreign industry, he intends only his
own security; and by directing that industry in such a manner as its produce may be of the
greatest value, he intends only his own gain; and he is in this, as in many other cases,
led by an invisible hand to promote an end which was no part of his intention. Nor is it
always the worse for the society that it was no part of it. By pursuing his own interest,
he frequently promotes that of the society more effectually than when he really intends to
promote it. I have never known much good done by those who affected to trade for the
public good. It is an affectation, indeed, not very common among merchants, and very few
words need be employed in dissuading them from it."
 
 
Smith seemingly aims to make three points in the sentence about the invisible hand. The
first is about security; the second is about what we would probably today call maximizing
profit; the third, which also serves to introduce the rest of the paragraph, is about how
maximizing profit promotes the "society's interest" or "the public interest."
 
Again, I don't see your point. Perhaps you are thinking that he has slipped in an anti-
free international trade argument (which, by the way, need not be related to the invisible
hand assertion, although I suspect that in Smith's mind it was.) I doubt it, since other
parts of this book make his views on free trade clear and since there is nothing in the
context of the clause that you quoted to suggest that he was interested in international
trade here. All he seems to be writing about in this clause is that a capital owner who
uses his capital abroad, other things equal, encounters greater risk of loss, presumably
because he is not a citizen of that other country, because he is not familiar with the
norms and laws of the country, or because of communication and transportation costs.
 
Pat Gunning 
 
 
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