Adam Smith: under a policy of free trade no special solicitation or concern for the domestic economy is required for it to become as prosperous as possible

See On Smith’s Use in The Wealth of Nations of “Invisible Hand” by Don Boudreaux.

"Here’s a letter to National Review:

Editor:

In “Conservative Economics Can’t Ignore the National Interest” (August 4), Nate Hochman seriously misinterprets Adam Smith by asserting that “Smith’s point about the invisible hand was contingent on the capitalist’s ‘preferring the support of domestic to that of foreign industry.’”

It’s true that Smith’s lone use in The Wealth of Nations of the famous term “invisible hand” occurs when Smith notes that the self-interested investor is led by an invisible hand to support domestic industry. But Smith here was debunking the fallacious mercantilist superstition that adequate amounts of investment in home-country industries can be secured only through the use of protective tariffs. Smith observed that one of the advantages of investing in the home country is a better ability to supervise those investments (compared to investments far away). This observation was meant to bolster his argument that mercantilists err when they assert that failure to protect domestic firms from foreign competition will leave the domestic economy with an inadequate stock of capital.

Contrary to Mr. Hochman’s implication, Smith did not argue that the validity of a policy of free trade is contingent upon investors operating with some sort of special solicitation for, or patriotic interest in, the domestic economy. Mr. Hochman’s misinterpretation of Smith is highly ironic given that Smith’s core purpose, in the chapter from which Mr. Hochman quotes, was precisely to explain that under a policy of free trade no special solicitation or concern for the domestic economy is required for it to become as prosperous as possible."

Here is something I posted a few years ago. It shows that Adam Smith did not talk about the Invisible Hand only in the context of trade. Adam Smith on the value of self interest and the injustice of goverment trying to thwart it.

See Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Cannan ed.), in 2 vols. [1776] from Online Library of Liberty.

From Volume 1.

"Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. But the study of his own advantage naturally, or rather necessarily leads him to prefer that employment which is most advantageous to the society."

From Volume 2.

"It is thus that the private interests and passions of individuals naturally dispose them to turn their stock towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society, among all the different employments carried on in it, as nearly as possible in the proportion which is most agreeable to the interest of the whole society."

"To prohibit a great people, however, from making all that they can  of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind."