Answer:
The heart of Smith’s economic philosophy was his belief that the economy would work best if left to function on its own without government regulation. In those circumstances, self-interest would lead business firms to produce only those products that consumers wanted, and to produce them at the lowest possible cost. They would do this, not as a means of benefiting society, but in an effort to outperform their competitors and gain the greatest profit. But all this self-interest would benefit society as a whole by providing it with more and better goods and services, at the lowest prices.
To explain why all society benefits when economy is free of regulation, Smith used the metaphor of the “invisible hand”. The “invisible hand” was Smith’s name for the economic forces that we today would call supply and demand, or the marketplace. He sharply disagreed with the mercantilists who, in their quest for a “favorable balance of trade”, called for regulation of the economy. Instead, Smith agreed with the physiocrates and their policy of “laissez faire”, letting individuals and businesses function without interference from government regulation or private monopolies. In that way, the “invisible hand” would be free to guide the economy and maximize production.
The Wealth of Nations goes on to describe the principal elements of the economic system. Smith turned to the pin industry to demonstrate how the division of labor and the use of machinery increased output.
Explanation:
