Too many invisible hands. Opaque transactions. Black pools. High frequency trading. We live in a much altered world than Adam Smith where the multinational corporation has found a natural habitat in the world of common markets.Our relative tariff enlightenment since WWII, though, has resulted less from a belated reading of Wealth of Nations, than from the much more powerful tendency for what serves the needs of large enterprises to become codified in public policy. But whether the business corporation is subordinate to the market or the market maker, subject to the authority of state is something today’s economists grapple with.
(see link at end)…“For example, the pioneering works of Adam Smith in the eighteenth century showed the usefulness and dynamism of the market economy, and why—and particularly how—that dynamism worked. Smith’s investigation provided an illuminating diagnosis of the workings of the market just when that dynamism was powerfully emerging. The contribution that The Wealth of Nations, published in 1776, made to the understanding of what came to be called capitalism was monumental. Smith showed how the freeing of trade can very often be extremely helpful in generating economic prosperity through specialization in production and division of labor and in making good use of economies of large scale.
Gussied up and properly shod- he usually wore his bedroom slippers-Smith appears in an engraving of 1790, the year of his death. Image: Forbes
Those lessons remain deeply relevant even today (it is interesting that the impressive and highly sophisticated analytical work on international trade for which Paul Krugman received the latest Nobel award in economics was closely linked to Smith’s far-reaching insights of more than 230 years ago). The economic analyses that followed those early expositions of markets and the use of capital in the eighteenth century have succeeded in solidly establishing the market system in the corpus of mainstream economics.
But Smith’s defense of private trade only took the form of disputing the belief that stopping trade in food would reduce the burden of hunger. That does not deny in any way the need for state action to supplement the operations of the market by creating jobs and incomes (e.g., through work programs). If unemployment were to increase sharply thanks to bad economic circumstances or bad public policy, the market would not, on its own, recreate the incomes of those who have lost their jobs. The new unemployed, Smith wrote, “would either starve, or be driven to seek a subsistence either by begging, or by the perpetration perhaps of the greatest enormities,” and “want, famine, and mortality would immediately prevail….” Read More:http://adamsmithslostlegacy.blogspot.ca/2009/03/amarya-sens-two-brilliant-essays-on.html
Smiths problem, if he were alive today would not be incorporating post-modernism into a theoretical system. Smith’s problem would have been more mundane. With his alleged contempt for theoretical pretense, economic charlatanism and demagoguery, and his concern for practical questions, he might have been refused getting tenure at a first rate university…
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