Adam Smith and Carl Menger: Who Invented the Invisible Hand?

Adam Smith is often said to have used the metaphor of the “invisible hand” to characterize the coordination of the individual interests of members of a society through the market system. This could then lead to the emergence of an order of society that is, in some specific sense, “best” from the point of view of everybody’s interests. We show that this idea is not as essential for Smith’s moral and economic theories as is frequently claimed. Later, conversely, Carl Menger developed an elaborate methodology relating to the concept of the unintended societal consequences of individual actions and interactions as a starting point for a theory of coordination corresponding to the idea of an “invisible hand.” We sketch a research program aiming at a theory of society based on the unexpected and unintended consequences of the individually rational behavior of economic agents based on Menger’s instead of Smith’s theory.