Adam Smith wrote the Wealth of Nations in 1776 which reflected on the economics at the end of the 18th century and it presented the argument as to why a free market economy is so beneficial. Smith's theory of the invisible hand was used as a metaphor for self interest which was a key focus in the work of writing. Smith felt that when people tried to maximize their personal gains in a free market they would also be benefiting the economy more so than if they were to act for the good of others. "By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such manner as its produce may be of the greatest value, he intends only his own gain, and he is in this...led by an invisible hand to promote an end which was no part of his intention...by pursing his own interests he frequently promotes that of society more effectually than when he really intends to promote it.”1 With faith put in the driving force of self interest via the invisible hand theory it has been depicted by many economists to be the best way to steady an economy under laissez-faire conditions. Other than a brief showing in the later party of the 18th century the invisible hand theory made its presenc felt during the Industrial Revolution when many economists argued for the invisible hand which was very appropriate for the development of society at that time. However, recently, the theory invisible hand theory no longer leads to economic prosperity and innovation. The thought of rational self interest guiding economics to success is has little value in today's society because of obstacles such as inability to cooperate on a large scale, world crisis and human irrationality. “The natural force that guides free market capitalism through competition for scarce resources,"2 is what many economists believe the idea of the invisible hand means. With the theory as a sufficient guide it is insisted that regulation is not needed to ensure beneficial exchange of goods. A key idea in this metaphor is that del interest drives people to beneficial behavior. For example, produces will demonstrate efficient methods of production to maximize profits but they will also charge lower prices to maximize revenue. With that said, there are still holes in Adam Smith's theory that have become increasingly evident in modern day free market economies. Modern day economists have developed an idea that the invisible hand does not exist as self interest but as irrationality. The economists Dan Ariely, has studied the idea of the invisible hand in recent years has questioned how closely the theory can represent reality. He believes people are not driven by rational thought process but they re driven by an irrational thought process which can be problematic for any country's economy. This was seen during the devastating aftermath of the 2008 earthquake in China which resulted in some realizing that circumstances had become different and required more regulation for the stabilization of an economy rather than self interest provided. Former Federal Reserve chairman Alan Greenspan, wholeheartedly believed in the institution of the invisible hand until the 2008 financial crisis. He was thought to have "made a mistake in presuming that the self interest of organizations specifically banks and others, was such that they were best capable of protection their own shareholders."3 Irrationality which is not as invisible as the theory of the invisible hand, has taken a hold of economists ideas. Ariely believes, "In letting our emotions get the best of us or letting conflicts of interest and short term time horizon ruin the financial market, irrationality is certainly involved."4 The idea of irrationality comes in many forms, especially outside of economics. Yet, is the irrationality of many humans that can cause huge changes in the economy. For example in 2009 when the Swine Flu epidemic was on the world's hand, people stopped eating pork, suggested stoppage of travel to parts of the world such as Mexico and rapidly tried to find a way to be vaccinated. However with this irrational behavior many humans were unable to realize that over 30,000 people die from a source of the flu yearly. That is only one example that proves that Ariely's belief is true: irrationally shapes our behavior in my different ways and instead of pushing us on a path in line with whats best for the economy, it pushes us towards trouble. Irrationality comes into humans decisions everyday of their lives, it is inevitable that it will play a part in their economic decisions as well. Many experiments have been performed in the branch of economics known as "experimental economics"5 which focuses on the selfishness of people. These experiments have proven that the invisible hand does not really exist. Although economists like to think that they can predict the way they want people to act, they cannot predict how other people will actually act.Vernon Smith is a noble prize winner who's work provides a decent basis for how the invisible hand does not exist in todays society. Vernon Smith believes that regulation is at the base of actual human preferences. To prove this, he performed some of these experiments to asses human behavior. One of these experiment involved taking a group of individuals and giving them a task that required cooperation for completion. Most of these people played along and went to work with the intention of figuring out the best way to accomplish their task at hand. Few tried to "game the system"6 and find a way to cheat. When the cooperators had relayed that others were cheating they withdrew their cooperation as well. Mr. Smith believed that this proved regulation was required so that cooperation could be reached. After multiple experiments like the one mentioned it was found that humans have the ability to cooperate in small groups but functioning with cooperation in a large was not nearly as natural. This really had already been proven thousands of years ago when humans learned to survive as hunters and gatherers in very small groups until the creation and development of agriculture which gave complex civilizations the opportunity to develop. It was not human nature to function with others on a large scale but it was a human adaptation. With that said, it led to the belief that even though regulation comes naturally for small groups, humans must be engineered for larger groups in order to live cooperatively. Hurricane Katrina hit New Orleans Louisiana in 2005 and devastated tens of thousands of people and forced these people to seek refuge in the Mercedes Superdome. Limited food and water supplies, no electricity and thousands of people living together quickly created anarchy. “Others told of fights that broke out in food lines, and of a husband and wife who slugged each other in a wild argument...Several residents said they had heard of children being raped.”7 This conclude that when a large group of people were forced to live in rough conditions and come together after a disaster, many broke down and let frustration get the best of them. It caused these thousands of people to work in smaller strops and reach relative stability. The concept of no regulation in a society like ours, or the concept of self-regulation based off Adam Smith's theory of the invisible stand is virtually impossible. Canada is one country that is experiencing troubles because of the invisible hand. It is also an important example of a laissez faire economy that is experiencing problems. Canada as an entire country has one of the highest economic freedom levels in the entire world. It resembles the United States in its economic market system and the States patterns of production but it is more commanding in its practices. Canada's economy is one that follows closely the words of Adam Smith.Yet, many have found that without government intervention the country will not be as effective in promoting innovation and success opposed to if it had a higher level of intervention. The country's taxes are low and globalization is widely embraced as business is very free, but with a self-adjusting market set up the innovation and productivity is at its worst in the country's past. Jim Stanford, a Canadian economist, believes that Canada and other countries following in its spiral must "embrace the 'visible hand' of government intervention,"8and that markets work more productively when they are guided. This intervention called on by Stamford could exist in many forms such as industrial cycles, public ownerships of key firms, subsidies or trade interventions that must be balanced between large government and small government in order to reach their efficient potential. However, many believe the United States has a better balance between a market economy and a command economy there is proof that shifting further down the latter spectrum would be disastrous for an economy. Canada's economic system shows a key idea, that a balance always needs to remain between the two and it should be learned. The invisible hand, which was an idea proposed centuries ago by Adam Smith is no longer able to be applied in today's society for several reasons. Although people and even countries have tried to hold on to the idea that the invisible hand and its theory can promote success and innovation in society it has been proven by many others that the theory of the past has become nonexistent and insufficient. A way to keep the theory alive in the world today is to incorporate it with other regulating methods such as taxes and other incentives. Yet, moving past the invisible hand and accepting the idea that a sole market without regulation would never be the best way to run the economy of the United States.

Works Cited

Ariely, Dan. "Irrationality Is the Real Invisible Hand," Predictably Irrational, May 8, 2009,
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Frank, Robert H. "The Invisible Hand Is Shaking." New York Times, May 25, 2008.
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Stanford, Jim. "'Invisible Hand' a Visible Failure." Globe & Mail, November 23, 2011. Custom Newspapers.

Stiglitz, Joseph. "There Is No Invisible Hand." Editorial, The Guardian, December 20, 2002. "http://www.guardian.co.uk" http://www.guardian.co.uk.

Wilson, David Sloan. "The Invisible Hand Is Dead. Long Live (Self) Regulation." Editorial, The Huffington Post, September 21, 2008. "http://www.huffingtonpost.com" http://www.huffingtonpost.com.

Andrews, Edmund L. "Greenspan Concedes Error on Regulation." The New York Times, October 23, 2008. Accessed January 5, 2012. "http://www.nytimes.com" http://www.nytimes.com.

Hamilton, Allan. "Swine Flu: National Irrational' ." From the Scalpel to the Pen (May 2009). Accessed January 9, 2012. "http://allanhamilton.com" http://allanhamilton.com/worldpress.

Norris, Floyd. "Since Alan Failed, the Job Must Be Impossible ." The New York Times, March 30, 2011. Accessed January 5, 2012. "http://www.nytimes.com" http://www.nytimes.com.

"North America: Canada." Central Intelligence Agency . Accessed January 7, 2012. "http://www.cia.gov" http://www.cia.gov.

Treaster, Joseph B. "Superdome: Haven Quickly Becomes an Ordeal." The New York Times, September 1, 2005. Accessed January 9, 2012. "http://www.nytimes.com" http://www.nytimes.com.

Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations., 319. Hartford: Cooke & Hale, 1818. Accessed January 7, 2012. Google Books. Adam Smith, The Wealth of Nations (Hartford: Cooke & Hale, 1818), 319 InvestoWords.com, HYPERLINK "http://investowords.com" http://investowords.com (accessed January 7). David Sloan Wilson, “The Invisible Hand is Dead. Long Live (Self) Regulation,” The Huffington Post, September 21, 2008, HYPERLINK "http://www.huffingtonpost.com" http://www.huffingtonpost.com (accessed November 8, 2011). Wilson, “The Invisible Hand is Dead. Long Live (Self) Regulation.” Wilson, “The Invisible Hand is Dead. Long Live (Self) Regulation.” Wilson, “The Invisible Hand is Dead. Long Live (Self) Regulation.” Joseph B. Treaster, “Superdome: Haven Quickly Becomes an Ordeal,” The New York Times, September 1, 2005, HYPERLINK "http://www.nytimes.com" http://www.nytimes.com (accessed January 9, 2012). Treaster, “Superdome: Haven Quickly Becomes an Ordeal.”