Writing in his Wealth of Nations in 1776, Adam Smith was the first to suggest that competitive markets send resources to the uses in which they have the highest value. Smith believed that each participant in a competitive market is “led by an invisible hand to promote an end [the efficient use of resources] which was no part of his intention.”

You can see the effects of the invisible hand at work every day. Your campus bookstore is stuffed with texts at the start of each term. It has the quantities that it predicts students will buy. The coffee shop has the variety and quantities of drinks and snacks that people plan to buy. Your local clothing store has the sweatpants and socks and other items that you plan to buy. Truckloads of textbooks, coffee and cookies, and sweatpants and socks roll along our highways and bring these items to where you and your friends want to buy them. Firms that don’t know you anticipate your wants and work hard to help you satisfy them.