It was originally put forward by Jean-Claude Darren, the foreign minister of Louis XV of France, as a slogan. Later, Quesnay and others confirmed that there is a natural order independent of human will in society, which dominates the development of society.
Adam Smith advocated the principle of "an invisible hand" and further developed the idea of economic freedom. "
The "invisible hand" is a metaphor used by Adam Smith to describe a principle, that is, the social order that can produce good results appears as the unintentional result of personal behavior.
Adam Smith put forward in The Wealth of Nations.
The original intention is that individuals only consider their own interests in economic life, driven by the "invisible hand", that is, through the division of labor and the role of the market, to achieve the goal of national prosperity.
Later, "invisible hand" became an image term to express the perfect competition mode of capitalism.
The main characteristics of this model are private ownership, everyone is for himself, everyone has the freedom to obtain market information, free competition, and economic activities are not interfered by the government.
Adam Smith's successors completed an accurate analysis of the market mechanism of perfect competition in the form of equilibrium theory. Under the condition of perfect competition, production is small-scale, all enterprises are operated by business owners, and a single producer has no influence on the market price of products. Consumers use money as a "vote" to decide the output and quality. Producers pursue profit maximization and consumers pursue utility maximization. Price freedom reflects the change of supply and demand, and its function is to allocate scarce resources and distribute goods and services. Through the invisible hand, entrepreneurs get profits, workers get wages determined by the supply of competitive labor, and landowners get land rent. Supply automatically creates demand, and savings and investment reach a balance. Through free competition, the whole economic system reaches a general equilibrium, and the principle of laissez-faire is followed when dealing with international economic relations. The government does not control foreign trade. The "invisible hand" reflects the economic reality in the era of free competition in early capitalism.
The invisible hand reveals a paradox in the laissez-faire market economy. It is believed that the market system will bring benefits to all participants in the process of pursuing their own interests, just like an invisible hand of charity, guiding the whole economic process.