Question

According to adam smith's invisible hand principle, productive actions that promote the general welfare of society will be undertaken when

Answer 1

Adam Smith theories promote individualism in the sense that they state that, when each economic agent (households, business, or public entities) pursue their own interests selfishly, the outcomes generated by their economic activities will optimize the social welfare.

The incentives behind working for the own profit are much higher, and make individuals more productive and more sensitive to mistakes, therefore they are keen on improving their practices constantly. In turn, the incentives of working for the common interest are more vague, and such situations lead to sharp productivity declines. It is more likely that societies with greater productivity are able to produce efficiently enough goods and services to cover the needs of all its citizens. Therefore those societies end up maximizing the social welfare. These are the main arguments which support the invisible hand principle coined by Adam Smith.