God and the Market: Adam Smith's Invisible Hand

Author(s): Paul Oslington

Source: Journal of Business Ethics , July 2012, Vol. 108, No. 4 (July 2012), pp. 429-438
Published by: Springer

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J Bus Ethics (2012) 108:429-438
DOI 10.1007/s 10551-011-1099-z
God and the Market: Adam Smith's Invisible Hand
Paul Oslington
Received: 18 March 2011/Accepted: 28 August 2011/Published online: 5 November 2011
© Springer Science+Business Media B.V. 2011
Abstract The invisible hand image is at the centre of
contemporary debates about capacities of markets, on
which discussion of many other topics in business ethics
rests. However, its meaning in Adam Smith's writings
remains obscure, particularly the religious associations that
were obvious to early readers. He drew on Isaac Newton's
theories of divine action and providence, mediated through
the moderate Calvinism of the eighteenth century Scottish
circles in which he moved. I argue within the context of
Smith's general providential account of markets, the
invisible hand operates restrain inequality and capital
flight, thereby stabilizing the market system. Such an
understanding of the invisible hand raises questions for
contemporary religious and secular discussions of the
capacities of markets in the wake of the global financial
crisis.
Keywords Adam Smith • Invisible hand • Isaac Newton
Religion • Providence
"Modern professors of economics and ethics operate in disciplines which
have been secularised to the point where the religious elements and
implications which were once an integral part of them have been
painstakingly eliminated ... [scholars] either put on mental blinders which
Earlier versions of this paper were presented at Australian National
University, Australian Catholic University, the Centre of Theological
Inquiry Princeton, University of British Columbia, the History of
Economics Society, the University of Edinburgh, and conferences in
Edinburgh and Oxford commemorating the 250th anniversary of
Adam Smith's Theory of Moral Sentiments. I thank participants for
many helpful comments.
P. Oslington (El)
Australian Catholic University, Sydney, Australia
e-mail: paul.oslington@acu.edu.au
URL: https://apps.acu.edu.au/staffdirectory/7paul-oslington
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hide from their sight these aberrations of Smith's thought, or they treat
them as merely traditional and in Smith's day fashionable ornaments to
what is essentially naturalistic and rational analysis... I am obliged to
insist that Adam Smith's system of thought, including his economics, is not
intelligible if one disregards the role he assigns in it to the teleological
elements, to the 'invisible hand'" Jacob Viner The Role of Providence in
the Social Order (1972, pp. 81-82).
Introduction
The invisible hand image is at the centre of contemporary
debates about the capacities of markets, and one of the
reasons in Stephen Darwall's words "why we should take
more than a scholarly interest in Smith" (1999, p. 140).
Discussion of many other topics in business ethics rests on
views of the capacities of markets. For the Nobel prize
winning economist George Stigler (1976, p. 1201) the
invisible hand idea was the "crown jewel" of the Wealth of
Nations, expressing Adam Smith's "one overwhelmingly
important triumph: he put into the centre of economics the
systematic analysis of the behaviour of individuals pursu
ing their self interest under conditions of competition". For
Deirdre McCloskey (2006, pp. 456-458) the hand recon
ciles private self-interested action with the common good.
Mark Blaug (2008) in a recent survey concluded that for
economists the invisible hand expresses three intercon
nected ideas: "the private actions of individuals can have
unforeseen and unintended social consequences", that
these are "harmonious in mutually promoting the interests
of all members of society" and they generate "order."
Even critics of mainstream economics such as Duncan
Foley (2006) interpret the invisible hand in a similar way,
though regarding it as summarizing the errors of the case
for the market economy; as Adam Smith's mistake which
has cursed subsequent economic analysis. Another Nobel
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 430 P. Oslington

Prize the Scottish Enlightenment, such as Josep

winner Hont and Ignatieff
as (1983) and Sher (1985), and the historical literature
understood by on m
not relation
between science and religion, such as Brooke
there.

All (1991). This new work

these on Smith's religious background
contem
Smith's picks
use up questions raised inof
Jacob Viner's (1927)the
classic
and paper, and largely neglected
Wealth of in the decades
Natiwhich
followed.3 in
meaning the or
omists This article examines Adam Smith's invisible hand in
perfectly le
usage in
the contextcontemp
of seventeenth and eighteenth century theology,
markets. especially Smith's scientific exemplar Isaac Newton's
Despite theories
the of divine action and providence. Its contribution is
invisib
threefold:
economists, its pla
remains obscure.2
First, to get the history right, so as to properly appreciate
are the place and meaning of the invisible hand image
particularly obs in
Smith's writings. This
emphasise is not an intellectual historical
the han
contemporary
paper, but attention to the historical contextwrit
is necessary to
obvious.
identifyFor Smit
the likely theological influences on his work.
Among Smith did not invent the invisible hand.4 What was novel
contempor
associations remain
sus about 3 Jacob Viner, their exa
after writing his classic paper for the Chicago
above. Alec Macfie, one of the editors of the OUP celebration of the 150th anniversary of the Wealth of Nations,
published little else on the topic. Two posthumously published works
Bicentennial edition of Smith's works, wrote that "the
(Viner 1972, 1978) give some indication of Viner's vast reading over
Invisible Hand is only one of many names given in the subsequent decades as he pursued the question of the religious
Moral Sentiments to the Deity" (Macfie 1970, p. 111). One background of eighteenth century political economy. The Mudd
of the most careful contemporary Smith scholars Gloria Manuscript Library at Princeton contains many kilograms of evidence
of his pursuit. Two scholars who took up Viner's questions were
Vivenza concluded her survey of contextual and rhetorical
Bitterman (1940), whose work reinforced Viner's conclusions and
analysis of Smith's invisible hand "it is almost unavoidable Coase (1976) who disagreed. Coase's conclusion "it seems to me that
to give it a teleological, if not theological, sense" (Vivenza Viner much exaggerates the extent to which Adam Smith was
2005, p. 52). Patricia Werhane's view (1991, p. 102) is that committed to a belief in a personal God" (1976, p. 554), if correct, is
about Smith's personal faith rather than the influence of theology in
the invisible hand as God's hand is "probably an incorrect
forming Smith's ideas, which was the more important question that
reading" because of immediate context though she accepts interested Viner. As Viner stated in correspondence November 3,
that such a view is consistent with Smith's other "meta 1965, responding to questions from Alec Macfie about Smith's
physical speculation." personal faith "I am not really interested in Smith's views re religion
except as items of intellectual history to be analysed if at all for their
Establishing its meaning in Smith's writings is not the
logical character and their relevance to his thought on other matters".
hopeless task as some commentators suggest (for instance
4 Commentators have speculated about where Smith might have
Samuels 2009). What is required is close attention to picked
the up the invisible hand language—ranging from straightforward
texts in their original context, including the religiousassociations
con with divine hands in the Bible to Emma Rothschild's
(1994) suggestion that it could be bloody and invisible hand of
text. Recent contributions along these lines include Macfie
Shakespeare's Macbeth.
(1970, 1971), Rothschild (1994), Winch (1996, 1997),
A recent thorough investigation of previous usage by the historian
Grampp (2000), Waterman (2004), Kennedy (2008), of science Peter Harrison (2011) shows that hidden and invisible
Brewer (2009), and Harrison (2011). All draw on valuable hands were frequently discussed in sermons, devotional works and
work on Smith's religious background, such as Ross Biblical commentaries in the seventeenth century. The idea usually
expressed is that God accomplishes his purposes in history in spite of
(1995), Vivenza (2001), Stewart (2003), Long (2002, 2009)
the intentions of human agents. It is an expression of the Christian
and Oslington (2011), which rests on the huge literature on doctrine of divine providential care for humanity. Smith seems to be
transferring the idea from history to the economy.
An intriguing discovery by Harrison is that the 1762 Glasgow
1 References to Smith's works will be to the Bicentennial editions
edition of Calvin's Institutes translates Calvin's Latin in Book 1 84 as
published by Oxford University Press during the 1970s (now Liberty
"But those things which appear to us to happen by chance, faith will
Fund) which will be abbreviated as TMS and WN. acknowledge to have been owing to a secret impulse of God. I grant
2 Various citation analyses of Smith's work have been undertaken,
there doth not always appear the like reason, but doubtless we ought
utilizing the electronic search facilities of Google Scholar and to believe, that whatsoever changes of things are seen in the world,
are brought about by the direction and influence of God's invisible
JSTOR. The current upsurge of interest in Smith began in the 1970s,
and references to the invisible hand in the early 1980s. This followed
hand". Harrison suggests that Thomas Norton's 1561 translation "the
neglect of his work for most of the twentieth century after his initial
secret starring of the hand of God" is truer to the original Latin and
rise to fame in the early nineteenth century. that the 1762 editor seems to have been influenced by the providential

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 God and the Market 431

and interesting
Biographical evidence is helpful to identify the is
likely t
grappled with
religious the
influences on Smith's intellectual development. It d
teenth would be very strange if the religious Scotla
century context was unim
Second, portant in forming
to any scholar in the religiously saturated
clarify th
as an aid environment
to of eighteenth
those century Scotland. Adam Smith
dep
about the
was brought
capacities
up by his devout Calvinist mother after the o
invisible early
handdeath of his father, and like most of his Scottish
detrac
sions of contemporaries attended
the church regularly throughout his
capacitie
Third, to augment
life, associating with the moderate party in the Presbyterian o
relationships
Church. On taking up his between
Chair at the University of Glas
recovery gowof
in 1751 Smith Smith's
signed the Calvinist Westminster v
hand image. It
Confession before the Glasgow Presbytery, mod
and took the
groundedOath of Faith. Smith's lectures on moral philosophy in the
approach to
economics. This
early 1750s began with is
natural theology. A student John
Millar reported
important for that "His coursethe
of lectures... was deliv
fu
religion is
ered in four a
parts. The significa
first contained Natural Theology; in
which he considered the proofs of the being and attributes
of God, and those principles of the mind on which religion
Smith's isReligious
founded" (reproduced in Dugald Stewart's Account of B
the Life and Writings of Adam Smith, originally published
This paper
in 1790, now Smithis
1980, p. 274). about
These early lectures
writings,becamerather
the foundation of Smith's system, with than
the second
For one thing
part on moral philosophy becoming
wethe Theory of Moral
can
personal Sentiments published in 1759, andbut
faith, the final part being ev
that Smith was or was not of orthodox Christian faith developed into the Wealth of Nations published in 1776.
Smith
would not decide the issue of theological influences on his was reticent about religious matters in public, as he
work. The thought of many an avowed atheist has been
was about other matters likely to arouse needless contro
versy, and we have no evidence from correspondence or
deeply influenced by Christian theology, and it is possible
for sincere faith to leave little mark on one's intellectual contemporary reports of insincerity of his public profes
development.6 sions of faith. It is true that he was an intimate friend of
David Hume, but we cannot jump to the conclusion that the
Footnote 4 continued religious views of friends are identical or even similar.
associations of the invisible hand phrase. It is reasonable to suppose What then were the religious ideas that influenced his
Smith was similarly influenced by the common providential
economics? Some commentators have pointed to Stoicism
associations.
as the source of the religious language in Smith's works,
Another intriguing suggestion about the source of the invisible hand
noting that many Scottish Enlightenment figures including
image was made by Gloria Vivenza (2008). She notes that Adam
the young Smith were interested in Stoic ideas. For
Smith at WN V.ii.h.3 (p. 859 of the standard edition) cites Dion
Cassius on Roman inheritance law and mentions in a note the 1734 example, Raphael and Macfie's introduction to the standard
edition of the Theory of Moral Sentiments states: "Stoic
work of Burman de Vectigalibus. Examining this work, Vivenza
found a discussion of the hidden activity of Jupiter interrupting the
philosophy is the primary influence on Smith's ethical
normal course of events that connects with Smith's use of the
thought. It also fundamentally affects his economic theory"
invisible hand image in his early essay History of Astronomy. As
Vivenza points out, similar discussions in classical literature (Smith
abound, 1975, p. 5) and "Adam Smith's ethics and natural
and we cannot be sure this work was in fact Smith's source. theology are predominantly Stoic" (Smith 1975, p. 10). As
evidence they point to the importance of self-preservation
5 Some historical and philosophical aspects of the relationship
between economics and religion are dealt with in Oslington (2003,
in Smith, the importance of self command as a virtue,
2008) and the significance of religion for debates about markets by
Smith's commitment to a harmonious natural order, and his
Friedman (2005) and McCloskey (2006). Bishop and Douglas (1995)
notes the ubiquity of the currently dominant interpretation of invisible
hand for the moral case for free markets and self-interest, examining
Footnote 6 continued
its coherence in relation to issues in business ethics such as the
Princeton University questions the construction of a secular Smith by
exploitation of monopoly power, collusion, lobbying, etc. economists to suit mid-twentieth century American sensibilities.
6 I have no interest in constructing a pious Smith to comfort Recent views of Smith's personal faith range from Long's (2009)
people of
portrait
faith, or to advance certain religious agendas. The quotation aboveof Smith as an orthodox Christian believer, to Kennedy
from Jacob Viner (himself secular, after an orthodox (2008)Jewish at the other extreme, who suggests Smith had a hostility to
religionat
upbringing) and other material in the Mudd Manuscript Library which he succeeded in hiding from his contemporaries.

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 432 P. Oslington

universalism. Jon
theology, and is often understood as a philosophical project
dominant influen
of proving of God's existence without reference to Scrip
influence on
tural revelation. Smith
However, the project of these early British
been too
scientists was
ready
not proving God's existence, but of deep
to
religious
ening understanding
language, of God's nature and activity through
study of creation.
influence. OneTheir project rested on the revealed
reas
treats doctrines of creation and providence. Natural theology
Christianit
when functioned
fact in Britain to legitimate
in they scientific activity, to a
the provide a common language and non-sectarian religious
Enlightenment
exclusively Stoic
basis for scientific work, and occasionally to suggest and Sm
system select theories.
which Natu
seems toAdam Smith
be adhered to thisaltoget
tradition as well as his
native Scottish Calvinism.8 We (Smit
philosophy" know Smith and other
conspicuous
Enlightenment Scots admired Isaac failur
Newton that he had a
economicthorough knowledge
deprivati of Newton's works, and he held up
A more importan
Newton's scientific methods in his History of Astronomy as
vinist a model for the future science advances.9 This essay cul
theological t
framework for
minates with a description the
of Newton's contributions, and
Scottishthe judgement
life in
that "the superior the
genius and sagacity of Sir
observedIsaac Newton,that
therefore, made the most happy, Sm and, we
may now say, the greatest
Confession of and most admirable
Faith improve
the ment that was ever made in Presby
Scottish philosophy" (Smith 1980,
sketched by
p. 98). Furthermore, David
early readers of the Wealth of Nations
theologysuch as Governor
of Pownall of Massachusetts
modera commented on
its Newtoniansim.10 The role of self-interest in Smith's
Enlightenment" a
creator and sustain
system was compared to the role of gravity in Newton's.
of the divine prese
A key part of the argument for reading Smith as a nat
this respect, the
ural theologian is that his works are full of the distinctive d
valid. The
language and thoughtbenefic
forms of British scientific natural
stressed.
theology. Religion
A couple of passages from the many that could c
When be cited:
purged of irr
exercises a cohesive
"All the inhabitants of the universe, the meanest as
and focus it offers
God has ordered the world so that its moral and scientific
well as the greatest, are under the immediate care and
protection of that great, benevolent ands all-wise
laws contribute to human welfare. The prospect of an
Being, who directs all the movements of nature; and
eschatological state in which virtue and felicity coincide,
who is determined, by his own unalterable perfec
moreover, provides further moral motivation". Smith fits
tions to maintain in it at all times, the greatest
this moderate Calvinist picture perfectly. The connections
quantity of happiness" (Smith 1975, TMS, p. 235).
between the Calvinist doctrine of providence and Smith's
economics have been noted by many scholars.7
In this paper, I will instead concentrate on the other
8 The connections with Calvinism and natural theology are discussed
main theological influence on Smith - the British tradition
further in Oslington (2011). Moderate Calvinism and the British
of natural theology (discussed at length by Brooke 1991)tradition of scientific natural theology were not in conflict. The
opening paragraphs of the Westminster Confession of Faith, the
which was the intellectual framework for the development
official statement of the Presbyterian faith in Smith's Scotland, which
of British science from the seventeenth till the early
Smith signed, explains that the God the creator is known to us by the
nineteenth centuries. This tradition includes Francis Bacon,
light of nature, though imperfectly.
Robert Boyle, Isaac Newton, John Ray, and William Paley 9 The History of Astronomy essay was probably begun by Smith in
with William Whewell perhaps marking the end point of the 1740s, polished in Edinburgh before reaching final form in the late
1750s. It was published in 1790 after Smith's death, and was one of
the tradition. Natural theology contrasts with revealed
the few items he asked be spared when his unpublished papers were
burned by his literary executors. Ross (1995, p. 99) discusses the
7 Harrison (2011) suggests that Smith's economics represents the dating.
extension of the doctrine of providence from history to the economy, 10 Montes (2003, 2008) discusses the influence of Newton on Smith's
and Harrison (2007) argues the doctrine of the fall shaped his system. methodology.

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 God and the Market 433

"Inevery
was also fond ofpart
the analogy that God could of move the t
universe
adjusted with as we move our bodies,the although he rejected ni
they are
pantheism intended
that made God the soul of the universe (Brooke
everything is
1988, p. 169). In Query contriv
31 of the Optiks Newton describes
purposes Godof nature,
as a "powerful ever-living Agent, who being in all t
the propagation of
places is more able by his will to move the bodies within
leads us histo admire]
boundless and uniform sensorium, and thereby to
reality is the
reform the parts of the universe, than we wisdo
are by our will to
p. 87). move the parts of our own bodies" (Janiak 2004, p. 138).
Another example of this body imagery is a 1692 letter to
Bentley where Newton describes a "divine arm" placing
Newton on Providence and Divine Action planets (Janiak 2004, p. 100).
So a divine hand acting irregularly to maintain order
seems perfectly legitimate within the Newtonian view of
Within the British tradition of scientific natural theology,
divine
Isaac Newton' theories of divine action and providence are action, and the arm-hand imagery has precedents in
Newton's own discussion of the planetary system.
the specific background to the interpretation I am offering
of Smith's invisible hand.11
Newton affirms a strong version of the doctrine of
The
providence. In his universe everything that happens is in Invisible Hand Passages
some sense an act of God. For scientific work to be fruitful

God's activity must be reasonably regular or law like, and Now turn to the passages. The interpretation I am offering
Newton believed his success in explaining universe in of Smith's invisible hand is that it expresses the doctrine of
terms of regular laws made divine involvement more rather providence. Others have pointed out the connections
than less plausible. A clockwork universe demonstrated the between the doctrine of providence and Smith's ideas
wisdom and power of God. about self-interested behaviour mediated through market
Newton followed the theological tradition in distin institutions working for the general good (notably Viner
guishing between general providence—God's care 1927, and more recently Waterman 2004). The crucial
expressed in the regularity of the universe—and special nuance I'm adding to make sense of the invisible hand is
providence—God's irregular acts. He sums this up nicely the distinction between general and special providence.
in correspondence: "[God is] constantly cooperating with The invisible hand metaphor is Smith's acknowledgement
all things in accordance with accurate laws, as being the of the possibility of special providential divine action in the
foundation and cause of the whole of nature, except where economic system to guarantee its stability. In Smith's
understanding of the divine economy the special provi
it is good to act otherwise" (MS245 folio 14a, Library of
the Royal Society London, quoted in Force 1990, p. 87). dential invisible hand balances the general providential
There is no sense in which any irregular actions of God activity of God in markets.
undermine God's regular action. General and special
providence are both part of the divine economy of nature. History of Astronomy
For Newton it is not just that special providential action
is allowable, but that God has willed a universe where such The first of the three appearances of the invisible hand in
action is required (Brooke 1991, p. 147). In the PrincipiaAdam Smith's work is his early essay The History of
Newton writes of the orbits of planets needing periodic Astronomy, section III "Of the Origin of Philosophy"
adjustment, and of comets tails restoring matter lost by the(Smith 1980, pp. 48-50 in the standard edition of Essays on
Sun and planets (discussed Brooke 1991, p. 148, and alsoPhilosophical Subjects).
commented on by Smith in History of Astronomy). Newton The passage is part of an argument about how philoso
phy (which for Smith and other eighteenth century authors
includes what we would now call science) originates in
11 Providence is one the core doctrines of Christianity, with a long
wonder and curiosity about the irregularities of nature.
history. It is distinguished from the doctrine of creation, God's
finished work, in that God's providential care for the world continues. Smith begins the section describing how savages view
It also differs from creation in that the created order is good, while the events in nature which attract their attention as products of
present order under God's care is not. Providence is also distinguished an "invisible and designing power" "whose operations are
from the doctrine of redemption, God's restorative activity through
not perfectly regular" (Smith 1980, p. 49). It is the irreg
Christ, as providence has more modest maintenance role. Helm
(2003) discusses the doctrine of providence more fully, along ular events, Smith emphasises, which attracted the atten
Calvinist lines. tion of the savages and ancient polytheists, and were

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 434 P. Oslington

ascribed to
In my view, gods.
Smith in this early work is playing with the
invisible hand
observed, image, and the issue ofin
that regular versus al
as well as
irregular divine
in action that he
the
will develop further inea
his
mature works. events
irregular of
agency and power
He thenTheory of Moral Sentiments
introduces
gods are not percei
the The second invisible hand passage
regular events is in the Theory of
and water refresh
Moral Sentiments Part IV section I (Smith 1975, p. 185). It
is a discussion of how
substances the rich man endowed with
fly upw insa
ure; nor tiable desires has a stomach ofthe
was limited capacity, so thatin
in
to be the end the rich man consumes only as much
employed in as a poor t
storms and
man. Smith observes thatsunshin
in this way the rich "in spite of
ascribed to his favour, or his anger" (Smith 1980, their natural selfishness and rapacity" are "led by an
pp. 49-50) invisible hand to make nearly the same division of the
To reinforce the point Smith adds "intelligent beings, necessaries of life, which would have been made, had the
whom they imagined, but knew not, ...did not to employ earth been divided into equal portions among its inhabit
themselves in supporting the ordinary course of things, ants, and thus without intending it, without knowing it,
which went on of its own accord, but to stop, to thwart, and advance the interest of the society."
to disturb it. And thus, in the first ages of the world, the Elsewhere in the Theory of Moral Sentiments self
lowest and most pusillanimous superstition supplied the interest, including that of the rich, has a providential role in
place of philosophy" (Smith 1980, p. 50) a market economy. This passage does not express that idea;
Then Smith goes on to suggest that as law and order take instead, the divine hand is working against the greed of the
hold and wealth grows, philosophy develops and the reg rich, levelling out consumption, and maintaining the sta
ular events also come to be ascribed to this divine power. bility of the market system. Smith understands that stability
The text is: "But when law has established order and depends on adherence to the rules of justice and a not too
security, and subsistence ceases to be precarious, the
obscenely unequal a distribution of consumption. This is
curiosity of mankind is increased, and their fears
whyare
the divine hand restraining the consumption of the rich
diminished. The leisure which they then enjoy renders
serves to maintain the stability of the market system.
them more attentive to the appearances of nature, more
The hand appears, I speculate, because Smith, observing
observant of her smallest irregularities, and more desirous
the beginnings of a modern market economy in eighteenth
to know the chain which links them all together.
century Scotland saw the importance of the question of the
....Wonder, therefore, and not any expectation of advan
long-term stability of such a system. Perhaps, like Newtons
tage from its discoveries, is the first principle which
planetary system, a market economy cannot generate
prompts mankind to the study of Philosophy, of that sci itself the conditions for its own stability. The hand
within
ence which pretends to lay open the concealed connections
stands for something outside the system, like God, able to
that unite the various appearances of nature" (pp. 50-51)
ensure its stability.
Smith is suggesting in the passage that after the riseTo ofsummarise, I am drawing on the biographical and
philosophy the irregular events as well as the regular contextual
events evidence about Smith's religious background,
(not instead of the regular events) are ascribed to theand
gods.
previous interpretations of the hand of the Theory of
This is indicated by the structure of the passage, Smith's
Moral Sentiments as divine.13 My interpretation adds the
statement that for the ancients "only'' the irregular events
(p. 49) are attributed to the gods, and his gentle deprecia
13 Some of the interpreters who see the hand as divine were
tion of the ancients inability to perceive divine activity in
mentioned in the introduction, notably Viner (1927). The literature
regular events of nature.12 specifically on the invisible hand passage in Theory of Moral
Sentiments is not extensive, with the two substantial treatments being
Macfie (1970) and Brewer (2009). Macfie called attention to the
12 In the literature the most important discussion of the History of
natural theological background of the passage, then concentrated on
Astronomy passage Macfie (1971), who finds the reference toStoic the natural theologies, though he ended up puzzled by the
invisible hand in the History of Astronomy puzzling, especially inconsistencies
the with the other invisible hand passages, and called
for further investigation of the natural theological background.
way irregular events are attributed to the gods, seemingly contradict
ing the other invisible hand passages which he believes are about Brewer's contribution was to examine the passage against the
background
providential activity in regular events. In the end Macfie suggests this of eighteenth century debates about luxury, and argued
early and somewhat ambiguous reference should not overshadowthe
thepassage makes the point that while income and consumption may
later "classic" expressions of the invisible hand idea. be unequal, the consumption of necessities such as food is equalised,

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 God and the Market 435

twist that and who accordingly

the have, upon many occasions,
hand both
general deceived and oppressed it (Smith 1976, WN, p. 267).
providential f
Bishop then resolves the contradiction by restricting the
Wealth of Nations applicability invisible hand to the investment of capital:
"merchants and manufacturers benefit society when they
The third and most quoted invisible hand passage is from invest their capital for maximum profit; they harm society
when they combine to form monopolies, or when they
the Wealth of Nations IV ii (Smith 1976, p. 456). It is part
of a chapter on restraints on foreign trade where Smithdeceive legislators into granting monopolies to them." This
discusses merchants seeking the greatest return on their argument has merit but in my view a more fundamental
capital, against the general background of self-interestedreassessment of the dominant interpretation is required.
behaviour in a market economy. William Grampp (2000) in a major article on the
In the passage the Scottish merchant weighs the greaterinvisible hand in the Wealth of Nations raises different
security of investing in domestic industry against the posobjections:
sibility of greater profits abroad, and is led by an invisible
(1) Nothing is said in the passage about the price
hand to invest domestically. The text is "By preferring the
mechanism or competition or any of the other things
support of domestic to that of foreign industry he intends
the hand supposedly stands for.
only his own security; and by directing that industry in
(2) There is no mention of the hand in the earlier sections
such a manner as its produce may be of greatest value, he
of the Wealth of Nations that discuss markets,
intends only his own gain, and he is in this, as in many
competition and the price mechanism. If the hand is
other cases, led by an invisible hand to promote an end
part of his argument about markets why does he only
which was no part of his intention" (Smith 1976, WN,
use it once, and why does he wait several hundred
p. 456). Smith comments "by pursuing his own interest he
pages, and bury it in a passage about foreign trade?
frequently promotes that of the society more effectually
(3) Too much weight has been put on this phrase, "in
than when he really intends to promote it. I have never
this, as in many other cases" in making the hand into
known much good to be done by those who affected to
a general law. Smith simply suggests there are other
trade for the public good" (Smith 1976, WN, p. 456) before
cases, not that the operation of the hand can be relied
returning to the theme of domestic vs foreign industry.
on in every case.
The usual view of this passage is that it expresses
(4) Too much weight has also been put on the "as if'
Smith's theory of the market transforming self interest into
qualification of the invisible hand that is not in the
unintended benefits for all (perhaps even maximising
passage.14 Smith suggests the action is actually by
national income) has been challenged by number of recent
some hand, not a diffuse process.
authors.

Bishop (1995) focuses on the inconsistency between On the basis of these objections to the dominant view,
Smith's strong criticism of merchants and manufacturersGrampp (2000) seeks another interpretation that is truer to
and the dominant interpretation that the invisible handthe actual context and wording of the passage. For him the
validates the pursuit of self-interest. He quotes some of invisible hand in the Wealth of Nations is "simply the
Smith's denunciations, including the following: "The inducement a merchant has to keep his capital at home,
interest of the dealers, however, in any particular branch thereby
of increasing the domestic capital stock and enhanc
ing military power" (p. 441). The end which is no part of
trade or manufactures, is always in some respects different
from, and even opposite to, that of the publick.... The
the merchant's intention is maintaining the Scottish capital
proposal of any new law or regulation of commerce which stock.

comes from this order, ought always to be listened to with I agree with Grampp's objections to the dominant view
and his reading of the passage that the invisible hand
great precaution, and ought never to be adopted till after
operates to restrain capital flight from Scotland. However,
having been long and carefully examined, not only with the
most scrupulous, but with the most suspicious attention. his
It close reading of the text ignores the religious back
comes from an order of men, whose interest is never ground of the invisible hand which Smith and his readers
exactly the same with that of the public, who have gener would have had their minds.
ally an interest to deceive and even to oppress the public, Both these authors open the way for the reinterpretation
I am offering of the invisible hand as the special provi
Footnote 13 continued dential hand of God.
and perhaps the rich are no happier in the end than the poor. Brewer's
interpretation is compatible with mine. Considering the theological
14 It is incredible how often the passage is quoted to include "as if'
background allows us to see how the equality-maintaining invisible
hand fits into Smith's larger conception of divine activity. by an invisible hand. Stiglitz (2002) is one among many examples.

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436 P. Oslington

Smith sees God providentially watching over Scottish would not expect it to be popping up everywhere in Smith's
society, and if too much Scottish capital went abroad works.

seeking higher returns, then Scottish economic develop
ment would be compromised. The providential hand
operating through the mechanisms of merchants fear of the
risk of overseas investment, which may or may not be
illusory, works to keep Scottish capital at home.
A Plausible Interpretation?
Sixth, it deals with the ironic, almost joking tone which
Rothschild sees in the passages. This tone expresses
Smith's ambivalence about special providence; divine
intervention to maintain the stability of the system is for
Smith a wistfully expressed hope, rather than a certainty.
Such a tone is appropriate as special providential action is
by definition rare and unpredictable.

How plausible is to interpret the invisible hand as the Conclusions

special providential hand of God, which works to maintain

the stability of the system; a hand operating to balance the In the introduction I suggested that there possible contri
general providential hand of God operating through the butions of the paper.
market mechanism. First, in relation to resolving the meaning of the invis
This interpretation has a number of attractions. ible hand in Smith work, the case for the interpretation
First, it gives due weight to providential aspects ofoffered here comprises the argument for the Calvinist and
Smith's work identified by many scholars, adding a nuancenatural theological background to Smith's work, the read
in the distinction between special and general providence.ing of the passages against this background, and the rea
Such a distinction is well grounded in Smith's philosoph sons given in the previous section for its superiority to
ical and theological context. previous interpretations. The meaning of invisible hand is
Second, it offers a plausible account of where Smith's an intellectual puzzle worth resolving, and I hope that the
hand language comes from the providential associations of
interpretation offered here will be seriously considered, and
the invisible hand language in Smith's Scotland, and perhapseven if found to be in need of modification. I hope it will
specifically Newton's discussion of God moving parts of thestimulate deeper study of the theological background of
universe as parts of a body. It is plausible because of the Smith's work, including Smith's theodicy, the role of
strong link between Smith and Newton, and Smith's first usehuman ignorance and folly, and the role of the future life in
of the hand image being in a work which discusses Newton'shis system.
scientific approach. Of course, it is always difficult to iden Second, unlike some other intellectual puzzles, the
tify sources with certainty, and I would not want to be dogmeaning of the invisible hand matters greatly for argu
matic about this. ments about free markets and ethical behaviour in business.
Third, the interpretation fits each of the three invisible It must be one of the most used yet least understood
hand passages. Some of the other proposals, such as phrases in contemporary ethical discourse. Often, invoking
Grampp's, fit only one of the passages and create consid the invisible hand is a lazy substitute for an argument for
erable interpretative problems for the other passages. These markets and selfishness, which undermines rather than
interpretive problems can only be avoided by the implau assists the argument. The interpretation offered here deta
sible suggestion that Smith's three references to the ches the invisible hand from the general case for markets—
invisible hand are unrelated. Smith's invisible hand expresses something different, but
Fourth, it gives a plausible account of the develop ultimately consistent with his general case for markets.
ment of the idea over time in Smith. In each of the three Public policy and business ethics discussions would be
passages the divine hand is acts against general provigreatly improved by carefully making the theoretical and
dential market forces to maintain the stability of theempirical arguments for markets in particular circum
system. As we move through the three passages the stances without the discussion being clouded by references
description of the action of the hand becomes clearer,to the invisible hand.
though it must be conceded that even in the Wealth of Third, the paper contributes to a more reasonable dis
Nations discussion of merchants balancing security andcussion about the relationship between economics, ethicists
profits there is nothing as detailed as the Newtonianand religion scholars. Economists and theologians get on
description of the mechanism of comets shifting matter notoriously badly; mutual misunderstanding and acrimony
around the universe. unfortunately has been the norm. Grounding the discussion
Fifth, this interpretation makes sense of the lack in
ofhistory, as this paper has done, provides neutral territory
for economists, philosophers and theologians to meet, as
prominence of the invisible hand in Smith's writings. If the
well as some common reference points.
hand represents irregular special providential action, then we

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 God and the Market 437

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