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