brown on green, A Regular column about finances

The Invisible Hand

The Wealth of Nations, by Adam Smith, is considered the first book on economics. Published in Great Britain in 1776, it includes references to the “colonies” in America. Over a thousand (sometimes dense) pages deal with topics such as the division of labor, the origin and use of money, taxes and public debt, and many other broad topics. Reading even a portion of the book provides a new perspective on freedom and the reasons our ancestors were willing to risk everything to come to America and start a new life.

Almost all of the land in Great Britain was owned by a handful of lords, so acquiring property for a family farm or ranch was practically impossible. The idea of going to America and acquiring land was a dream almost beyond imagination. The dangers of an ocean voyage and fighting to get and keep the land they received did not deter these dreamers. Freedom to own land and make choices about how to use it was a magnet too powerful to resist.

In Great Britain, it was also difficult to start your own business. Professionals like carpenters, tailors, cobblers, and other small business occupations were highly regulated by local governments and trade organizations. For instance, if you wanted your own tailor shop, you were required to complete a long apprenticeship. After serving that apprenticeship, the new tailor could not just start a business anywhere he wanted. Trade organizations and local governments tightly controlled how many tailor shops could be located in a particular village or town. This created an irresistible appeal to start a new life in a new country where you could start any business, in any town you wanted, without interference.

Perhaps one of the most quoted passages is in a chapter about restraining imports. Smith refers to an “invisible hand” that leads people in their decisions. In the context of the book, he is referencing being led by the invisible hand to balance supply with demand, a fundamental principle of capitalism. Great demand and limited supply lead to price increases. Less demand and too much supply lead to price decreases. The “invisible hand” keeps demand and supply in equilibrium and thus prices are stable.

As a Christian, I certainly agree an invisible hand guides men, communities, and nations. That invisible hand is the hand of God who, in addition to keeping all natural systems functioning, also intervenes in our lives—even in the economic and financial aspects. Thank God for His invisible hand!

About the Columnist: David Brown, CPA, is director of Free Will Baptist Foundation. To learn more about the grants program, visit www.fwbgifts.org.