What Adam Smith Really Meant—and What John Nash Made of It

In popular economic debates, one often hears: If everyone pursues their own advantage, things will end up better for everyone—this is what Adam Smith supposedly said. And an “invisible hand” will make it happen. However, this notion is a modern invention, not Smith’s actual thinking.

Adam Smith and the Invisible Hand
Smith used the term “invisible hand” in his works only twice—and never as an economic law. In The Wealth of Nations (1776), he describes how a merchant who prefers to invest in their home country rather than abroad indirectly promotes the nation’s welfare through their self-interest. It is an observation, not a universal rule.

Far more important is Smith’s first work: The Theory of Moral Sentiments (1759). Here, he presents a vision of humanity shaped by empathy, sympathy, and moral judgment. Humans, according to Smith, are social beings who orient themselves by the views and judgments of others. It is not solely about self-interest but about mutual perception and consideration.

The reduction to “egoism leads to the common good” is an ideological oversimplification that distorts Smith’s thinking. According to Smith, the market requires ethical behavior, social feedback, and frameworks to function.

John Nash and Strategic Equilibrium
In the 20th century, mathematician John Nash revisited these ideas—but through the lens of game theory. His famous Nash Equilibrium describes situations where no participant can improve their own outcome if the others maintain their strategies.

What is often overlooked: Nash demonstrated that blind self-interest does not lead to the best result. Only by considering the strategies and needs of others can a stable, sustainable equilibrium emerge.

In the movie A Beautiful Mind, this concept is vividly illustrated: Nash realizes that it is unwise for all men to pursue the same beautiful woman. Only when everyone accounts for the chances of others do all benefit more. This equilibrium is neither altruistic nor egocentric—it is strategically considerate.

Conclusion: Between Invisible Hand and Visible Consideration
Adam Smith and John Nash speak from different eras and disciplines—but both show that truly stable human action requires more than self-interest.

• Smith emphasizes moral judgment in social interaction.
• Nash highlights the rationality of mutual consideration.

The idea that everyone simply needs to optimize for themselves so that everything turns out fine is a myth, not science. Perhaps it’s time to give the “invisible hand” a human face again.