Tony Brewer:

'The WN invisible hand is 
>not only, not even mainly, about home investment 
>v investment abroad. Smith claimed that 
>investing where the return is highest 
>distributes capital between activities in a way 
>which maximizes the annual revenue of society.'


WN Chapter II on 'an invisible hand': Taking each numbered paragraph up to
the famous metaphor:

1	Restraints upon importation  - increase monopolies in home market

2	Protected home monopolies encourage protected industries at expense
of other domestic industries - overall the benefits or otherwise not
'evident'.

3 	General industry limited by the capital of society - no regulation
can increase society's capital; can only divert it.

4	Individuals seek most advantageous employment - this serves his
interests, but is also advantageous to society.

5	Merchants prefer home trade provided they can obtain 'ordinary, or
not a great deal less', profit, and consequently supports domestic industry.

6	[long paragraph]  Merchants prefer 'upon equal of nearly equal
profits' [elsewhere in Book IV Adam Smith shows colonial trade was more
profitable than domestic trade] the 'home' trade to 'foreign' trade of
consumption, and to 'carrying trade' (shipping).  Explains in detail why
home trade preferred (explicitly lower risks of domestic versus foreign
trading); knows local people 'better', knows laws better.  Repeats (twice)
the condition for preferring domestic trade on 'same or nearly same'
profits, and 'saves himself the risk and trouble pf exportation'.

7	Individuals who support domestic industry necessarily direct
industry to produce greatest value.

8	Individuals will seek to increase profits and directs capital to the
industry likely to produce greatest profit.

9	Individuals [for reasons explained earlier] in supporting domestic
industry for the 'greatest value' to their own capital, necessarily raise
society's annual value.   He does not intend to promote society's interests,
only his own. 'Intending' his own 'security' [risk avoidance] he 'intends
his own gain' and [same sentence] 'he is in this, as in many other case, led
by and invisible hand to promote an end which was no part of his intention'.

The supporting argument is deep in the context of the home versus foreign
trade, and it is even mentioned in the sentence that contains the metaphor
of the invisible hand.   

The risk-avoidance issue is major, not en passant.  The consequence is
simple arithmetic: if parts of industry make large profits from individual
motivations, then it follows that the whole industry profits are larger.

Gavin Kennedy