Pins, Pencils, and the Invisible Hand
Objective
The “invisible hand” might be the most famous metaphor in economics, but Adam Smith only used the phrase twice in his books.
At the end of this lesson plan, students will better understand what Adam Smith was trying to convey with his “invisible hand” metaphor and how the market economy connects people and coordinates their actions to produce the goods and services we want and need.
Time: 1 hour (plus extension)
Materials
Worksheets:
- Key passage: the Invisible Hand in Wealth of Nations
- Key passage: the Invisible Hand in The Theory of Moral Sentiments
- Optional: Guided reading of the Invisible Hand in Wealth of Nations passage
- Optional: Guided reading of the Invisible Hand in The Theory of Moral Sentiments passage
Method
Display (slides) or hand out the two key “invisible hand” passages (5 minutes)
In An Inquiry into the Nature and Causes of the Wealth of Nations, in a discussion of foreign trade policy:
“by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.” (Book IV, Chapter 2)
In The Theory of Moral Sentiments, in a discussion about the side-effects of luxury spending:
“The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.” (Part IV, Chapter 1)
“The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.” (Part IV, Chapter 1)
Imagine the economic coordination outside an 18th century pin factory
Show the video, I, Pencil: The Movie (10 minutes)
I, Pencil tells the story of all the people connected by the work it takes to produce a seemingly simple pencil. Some examples from the video of people who contribute to the production of a pencil are loggers, tool producers, rope makers, restaurant staff, miners, shippers, road maintenance workers, etc. These people work together thanks to the coordination provided by markets and prices that tell people which materials are most available and what consumers value.
Have students open the interactive pin factory at AdamSmithWorks.org. (10 minutes)
This resource (with discussion questions) is often used to introduce and explore the concept of division of labour, but today we are using it to talk about interdependence and economic coordination.
Show the video, I, Pencil: The Movie (10 minutes)
I, Pencil tells the story of all the people connected by the work it takes to produce a seemingly simple pencil. Some examples from the video of people who contribute to the production of a pencil are loggers, tool producers, rope makers, restaurant staff, miners, shippers, road maintenance workers, etc. These people work together thanks to the coordination provided by markets and prices that tell people which materials are most available and what consumers value.
Have students open the interactive pin factory at AdamSmithWorks.org. (10 minutes)
This resource (with discussion questions) is often used to introduce and explore the concept of division of labour, but today we are using it to talk about interdependence and economic coordination.
Discussion questions:
Divide the class into groups to answer these questions. (15 minutes)
- In each room, identify five people who are not in the pin factory on whom the pin factory depends. (For example, the miner in Germany mentioned in the description of step 1.)
- What are three “distinct trades” that have been created by the different materials in the pin factory before they got to the pin factory, in the way that the creation of pins has created jobs within the factory?
- What are some things that might seem unrelated to pin production that could affect whether or not the factory can run? When can these things be solved by changing prices, and when might they be impossible to solve?
Tie it together: Show the students the video, An Animal That Trades, Part 1: The Invisible Hand and discuss. (15 minutes)
Discussion questions:
- How are our non-economic relationships the same as our economic relationships? How are they different?
- What about economic relationships allows Adam Smith’s invisible hand to work?
Written reflection (for submission):
How much simpler would pin production have to be for a single person to produce a pin, from start to finish? Do you believe it’s possible? Why or why not
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Optional extension
Working together, students can make sense of the original text that is too difficult to tackle independently. Use these guided worksheets for group readings of a passage from one of Adam Smith's books. Have students work together to identify and define words they don't understand, then make sense of phrases they find confusing and the overall passage.
Groups may come together as the full class after these discussions to compare their understanding of the passages and work through discussion questions.
Worksheets for reading original passages containing the invisible hand in its original context, with questions for discussion. We suggest 30–60 minutes for group reading per worksheet. Economic concepts and discussion questions can be used in class or as homework.
Extension material
Guided reading of the passage with the invisible hand in the Wealth of Nations
Guided reading of the passage with the invisible hand in The Theory of Moral Sentiments
Recommended: Debrief with students after the readings. What worked well in their groups, and what would they change next time? What (if anything) about group reading helped them learn? What was most difficult about it? How will they approach passages they don't understand in the future?
(Teaser image by Lucas Sankey on Unsplash.)
Groups may come together as the full class after these discussions to compare their understanding of the passages and work through discussion questions.
Worksheets for reading original passages containing the invisible hand in its original context, with questions for discussion. We suggest 30–60 minutes for group reading per worksheet. Economic concepts and discussion questions can be used in class or as homework.
Extension material
Guided reading of the passage with the invisible hand in the Wealth of Nations
Guided reading of the passage with the invisible hand in The Theory of Moral Sentiments
Recommended: Debrief with students after the readings. What worked well in their groups, and what would they change next time? What (if anything) about group reading helped them learn? What was most difficult about it? How will they approach passages they don't understand in the future?
(Teaser image by Lucas Sankey on Unsplash.)