Invisible Hand in the Age of Algorithms: Revisiting Smith’s Wealth of Nations

Darshan Mangave

MPRA Paper from University Library of Munich, Germany

Abstract: This paper observes at Adam Smith’s idea of the “invisible hand” and ask how it works in today’s world of algorithms and digital platforms. In the Wealth of Nations, Smith explained that when people act in their self-interest then markets balance themselves and society benefits. But now, in this century many economic choices are not made only by people. They are guided by algorithms. For examples, this can be seen in Amazon’s product rankings, Uber’s surge pricing, Google’s search results, Netflix’s recommendations, and AI trading in stock markets. These algorithmic systems connect buyers and sellers quickly, but they also create new problems like reduced competition, unfair pricing, manipulation of consumer choices, and market instability. The paper argues that the invisible hand has not disappeared, but it now takes the form of an “algorithmic hand.” For this hand to truly serve society, there must be careful attention to ethics and policy.

Keywords: Adam Smith; Invisible Hand; Wealth of Nations; Algorithms; Digital Economy; Market Competition; Consumer Behaviour; Algorithmic Pricing; Platform Capitalism; Economic Policy. (search for similar items in EconPapers)
JEL-codes: B12 D47 K23 L17 L86 O33 (search for similar items in EconPapers)
Date: 2025-09-14
New Economics Papers: this item is included in nep-com and nep-hpe
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:126154

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