How did competition move workers and capital toward more profitable activities?

According to the Scottish philosopher Adam Smith, competition serves as a vital institutional mechanism that reconciles individual self-interest with the broader needs of society.12

In his work The Wealth of Nations, Smith explains that the drive for self-betterment—a fundamental aspect of human nature—compels individuals to engage in a competitive struggle. This process functions as an invisible hand that regulates the economy by inducing labour and capital to move away from less profitable occupations or areas and toward those that are more profitable.12

By constantly shifting these resources, the competitive mechanism ensures that the prices of commodities are restored to their "natural" levels, which correspond to their costs of production. Consequently, this movement not only corrects short-run market aberrations but also maintains an underlying orderliness in the distribution of income among workers, landlords, and manufacturers.12