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Adam Smith identified three main ingredients to his theory those being freedom, self-interest, and competition. Freedom is classified as the right to produce and exchange products, labor, and capital. Self-interest is the right to pursue one's own business and to appeal to the self-interest of others. Competition is the right to compete in the production and exchange of goods and services. Adam Smith argues that it was market forces that ensured the production of the right goods and services. This would happen because producers would want to make profits by providing them.

Greed makes us dream, makes us ambitious, makes us become more productive and the sum of all these things increases the wealth of society. Individual greed of merchants in competition meets society's need for goods and services. Individual animals in an ecosystem live and die in fierce competition yet their efforts create balance and growth. So too individual businesses live and die in fierce competition yet their efforts create balance and growth. This is the invisible hand. Greed is good for society. This ambitious quality of human nature allows for growth and evolution in civilization. The ability to work for in our own self-interest and without government intervention promotes progress in the marketplace.

This free market operating without any intervention is commonly referred to as a "laissez-faire" economy. "Laissez-faire" is a French term meaning, "allow them to do". This is in contrast to the command economy where the central Government has a direct or indirect hand in setting the market variables. "The system in which the invisible hand is most often assumed to work is the free market." (Joyce).

Several concepts are behind the theory of "the invisible hand" in the marketplace. First and foremost, for the free market to function properly, we must rely on the notion that consumers will search for what they believe to be the best value in products and services. The firms, on the other hand, are motivated to maximize profits in their business dealings with the consumer. The interactions between these two entities, who are both interested in furthering their positions, will serve to benefit the market by creating win-win transactions. If a series of such transactions occur, which benefit the parties to the transaction, the society will incrementally benefit. These market forces help determine exactly what gets produced, how much will be produced, and its method of production. Based on these principles, Adam Smith believed that if left to its own, the market would dictate the production of products that are most beneficial to society and at the lowest cost. . .

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