The Invisible Hand

The Invisible Hand

Ano de publicação: 2013
Adam Smith
128 pages
Link for purchase: [Link]

The book "The Invisible Hand" by Adam Smith was published in 2013.
is composed of 6 chapters extracted from the most famous work of
author: "The Wealth of Nations" (1776), totaling 128 pages of
reading.
Within the 6 chapters, Smith discusses the nature of exchanges.
commercialandfinancial,proposingguidelinesfromtheperspectiveof
liberalism that benefits the development of the state and of
individuals.
Throughout the work, he explains how the market works and
introduces the term that is the title of the book: 'The Invisible Hand', which
itwouldbeanaturalinterventionthatensuresbalanceand
growthofsocietythroughself-interestofthe
individuals.

General assessment Main ideas of the book

3 characteristics of the division of labor that increased the
efficiency of processes;

8
9 Applicability The division of labor originated from people's own interests.
8 Inspiration in acquiring a product, producing something they knew to
8 Innovation to be able to exchange;

8 Impact on the result Money is always behind the goods, but the goods
9 Structure does not always seek money;
Taxing essential products raises the cost of living, increasing
cost of labor, resulting in a new increase in
goods;
Individuals without the influence of legislation tend to follow their

own interests, which in a way are the same as the

society;
Where little wealth circulates, there is little to be gained;

The injustice of rulers is ancient, to which the nature of

human interests will hardly find a remedy.

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 Who is this book recommended for?
In 'The Invisible Hand', the authorAdam Smith addresses the foundations and concepts linked to the mercantile system,
showing guidelines on how liberalism fits into this context.

Moreover, all this knowledge that the book offers allows us to inquire and reflect on the models
current economic issues, enabling the formation of an opinion on what we consider right and wrong.

If you want to learn more about this ideology and the benefits that, according to this genius of economics,
can generate for the industrial system, this book is for you!

Overview of the book

Overview: Division of Labor

The author Adam Smith begins his book 'The Invisible Hand' by explaining the concept of the division of labor and, to
Yes, give some examples from your time (1776) in order to show how this principle was fundamental for the
increase in industrial productivity.
One of them is with a pin factory from that time, where 10 people divided into production sectors
they could produce up to 4,800 pins per day, while if each of these employees tried
to make a whole pin, they could hardly produce 20 in a day.
To explain this increase in productivity, the author uses 3 key factors:

Increase in the fitness of each worker;

2. Time savings by not switching tasks;
3. Greater chance of discovering simpler methods and creating machines that facilitate production.

Men are much more prone to discovering methods more

easier and more attainable to reach any goal when the whole
your attention and your minds are directed toward a single goal.

The chapter concludes by showing the massive chain of dependency among the industries that is formed.
starting from the division of labor, ensuring that each one produces something that meets the need of
another, and so on.

Overview: The Principle of Division of Labor

In this part of the book 'The Invisible Hand', it is explained that the division of labor arose from interests.
individual's own desire to acquire something of their interest, and not from their kindness in wanting to help the
next.

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 The author Adam Smith makes this clear with the phrase: 'Give me what I want, and you will have what you want.'
exposing the need to show the benefits to the product holder so that the transaction can occur.
And it was this system of exchanges for interest that enabled the beginning of the division of labor, where each individual
produced something of interest to another person in order to obtain the product of their interest.

Overview: The Principle of the Mercantile System

Money has 2 meanings, one as a medium of exchange and the other as the value of things.
Thus, a person can be considered rich for having large amounts of gold, or rich for owning a
large amount of cattle, which can also be used as a tool for trade and a measure of value,
for example.
With this foundation, the author Adam Smith shows that the countries of his time, such as Spain, began to
accumulate gold as a synonym for state wealth, encouraging initiatives for it.
The great advantage of gold was that, unlike the vast majority of products, its transportation was easy,
making its price fluctuation in the market low.
Among the mentioned initiatives are the encouragement for export and the restriction on imports.
since export is important for other countries to owe it money, offering benefits for
for the merchant and the state.
Excessive imports can bring problems, such as currency devaluation.
Contextualizing with its time, Adam Smith gives the example of Great Britain, which restricted the
imports of live cattle and meat as a measure of support and strengthening of the domestic market.
According to the quote from the book 'The Invisible Hand':

Money necessarily goes after goods, but goods do not always or do not
they necessarily go after money.

This phrase explains very well the relationship between money and goods, that is, money is always
used to obtain things, but we do not buy goods with the aim of generating more money with
that, as is the case with self-consumption.

Overview: Restrictions on Imports of Goods

In this chapter, liberalism, the ideology that guides the entire book, is analyzed and exemplified.
As previously mentioned, import restrictions have arisen to keep money within the country.
country, fostering the increase of the company's capital and consequently increasing the size of the
industries and the economy of the state.
However, for the author Adam Smith, state intervention in this area is not necessary, and for
to explain this phenomenon, it makes use of the expression used in the book's title: there is an 'Invisible Hand' that
produces an outcome that is not part of your intention.
To understand better, Smith says that people naturally tend to invest their money in places
close to where they live, this is due to a greater knowledge of the people and the legislation, the
which ultimately generates greater trust in the investor.
That said, it becomes clear how there is not much need for interventionism, promoting a strong idea of
liberalism, since people naturally tend towards this type of action which, consequently,
by the concept of the Invisible Hand, they end up benefiting society as a whole through interests
own to each one.

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 Furthermore, the author uses various phrases from his context to support his idea of liberalism, such as
for example:

Prohibiting, through a permanent law, the importation of foreign grains and livestock is actually
to sanction that the population and the industry of the country shall not exceed, at any time, what the production
"bruta from its own soil can maintain."

The chapter concludes with the issue of taxing essential products, which increases the cost of living.
of the population and increases the cost of labor, explaining to what extent it is appropriate to continue with the
free import or restore free import.

Overview: Irrationality of the Restrictions

Through the understanding of the natural flow of money between imports and exports, the author
Adam Smith explains that often extraordinary restrictions become irrational and unnecessary.
imports for countries that are commercially disadvantaged.
Continuing with the liberalist ideal, in the book "The Invisible Hand" it is shown that often a trade
Free and without pressure greatly increases the annual income of the local population compared to when there is
implementation of subsidies.
Trade should be a factor of friendship and union, but it has ended up becoming 'the most fertile source of
"divergence and animosity." This line of reasoning can be concluded by the following phrase from the work:

The violence and injustice of the rulers of humanity are an ancient evil, for which, I fear, nature
of human interests will hardly admit a remedy.

However, amidst these disputes over money, it is worth noting that the wealth of our neighbors can be
advantageous for commerce, but also dangerous, since a wealthy customer is a good thing, but a
not a rich competitor.
This competition for the market only benefits society, with the generation of lower prices and greater
diversity. It also highlights the importance of the local richness, as where there is not much flow of
money, there is little to add to you.

Overview: Agricultural Systems

There are two types of expenses, the sterile and unproductive expense and the productive expense.

To better explain these two concepts, the author Adam Smith uses the agricultural system of his time,
where the produced goods are primarily used for the subsistence of the workers (expenses of
company), and the excess production is sold to generate capital.
That is, the expenses with workers are considered productive, as they not only utilize their own
product to save on expenses, everything else is profit.
In this way, far more is produced than is merely replaced, increasing revenue and wealth.
society quickly, when compared to the manufacturing industry, where expenses are
considered unproductive.
This happens because the worker has to use their acquired capital to produce a manufacturing.
subsistence and survival. Your capital will only be increased through spending savings, not being of
natural form as mentioned above.

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 But both have their importance, as the agricultural system produces the basis of subsistence for the producer.
manufacturing, which in turn produces the necessary tools for the farmer to devote all
your time in production.
Thus, Smith again extols in his book, 'The Invisible Hand,' the guidelines of liberalism, explaining how the
Taxation and prohibition of exports can be detrimental to the economy of society.
An example of this is the 2 factors generated when creating a 'monopoly in the domestic market':

The real production value decreases, reducing profits;

2. It raises the profit rate of all other products, making agriculture disadvantageous.

What do other authors say about it?

In his book "Why the Rich Are Getting Richer", Robert Kiyosaki explains how the rich use
debts, market crises and taxes to generate more money.

In the book by Sam Walton and John Huey: 'Sam Walton: Made in America', it explains about the 3 main
factors that enable the success of the company.

Finally, in the work 'Misbehaving' by Richard H. Thaler, the behavioral concepts of

individuals, and how this impacts the economy.

Sure, but how can I apply this in my life?

With this summary, you can already get an idea of how rich in content this book is, right? Here it goes
more suggestions that can and will add a lot to your life:

Learn and understand more about the taxes charged and how it affects your product and business;
Invest and make the 'money circulate'. Where there is greater wealth, that is where the best is obtained.
results.
Stay alert to the laws and regulations of the state, assessing their impact on the growth of your business.

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