Adam Smith's invisible hand, explained
The short answer
Adam Smith opens The Wealth of Nations with a pin workshop where ten men split about eighteen operations and made about 12 pounds of pins a day: 48,000 pins, or 4,800 for each man, where alone none could make twenty. He credits skill, no time lost switching tasks, and machines. A trader seeking only his own gain is, in his phrase, led by an invisible hand to promote an end which was no part of his intention.
Chapters and transcript
- 0:00
Alone, an untrained worker could scarcely make one pin a day, Adam Smith wrote.
Smith opens The Wealth of Nations (1776) with a pin-maker: a workman new to the trade could scarcely make one pin a day, and certainly could not make twenty.
- 0:12
Making a pin takes about eighteen distinct operations.
In his account, making a pin is divided into about eighteen distinct operations.
- 0:20
One man draws the wire, another straightens it, a third cuts it, a fourth points it.
One man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds the top for the head; heading, whitening and papering the pins are trades of their own.
- 0:31
In one small workshop, ten men split the operations between them.
Smith saw a small workshop where only ten men were employed, so some of them performed two or three of the operations. The split shown in the film is one possible split.
- 0:39
They made about 12 pounds of pins a day, over 4,000 pins to the pound.
Poor and short of machinery, they could still make about twelve pounds of pins a day, and a pound holds upwards of four thousand middling pins.
- 0:47
12 × 4,000 = 48,000 pins a day.
Twelve pounds at four thousand pins each is 48,000 pins a day, computed in the film.
- 0:56
That is 4,800 pins for each man.
Shared among ten men, that is 4,800 pins each a day.
- 1:03
Alone, none could make twenty: 4,800 is 240 times twenty.
Working separately, Smith says, none of them could have made twenty pins a day, perhaps not one: the workshop does at least 240 times, perhaps 4,800 times, as much.
- 1:12
Smith's three reasons: skill, no time lost switching, and machines.
He gives three reasons: each worker's dexterity grows, no time is lost passing from one kind of work to another, and machines let one man do the work of many.
- 1:23
We expect our dinner from the baker's own interest, not his kindness.
In the next chapter: it is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest.
- 1:31
Seeking his own gain, a trader is led by an invisible hand.
In Book IV, a trader who intends only his own gain is, in Smith's phrase, led by an invisible hand to promote an end which was no part of his intention.
Sources
Every figure in the film comes from these. The animation is illustrative.
- Adam Smith, The Wealth of Nations, Book I, chapter I: the pin factory (one pin a day alone, about eighteen operations, ten men, twelve pounds a day, 4,000 pins to the pound, 4,800 each) and the three reasons
- Adam Smith, The Wealth of Nations, Book I, chapter II (the butcher, the brewer and the baker) and Book IV, chapter II (the invisible hand)
- Wikipedia, The Wealth of Nations: first published 9 March 1776