Adam Smith’s Essentials: On Trust, Faith, and Free Markets

Abstract

When trust is shaken, individuals pull back and the market system contracts. Where trust grows, individual energy and creativity are unleashed and the system grows. In Adam Smith’s vision of humankind’s progress, trust is the central theme. The Great Recession represents a classic case of a crisis of trust. Looking back to the work of Smith offers insight into the role of citizens and the State in creating an fruitful market environment based on trust, and the challenge of this process, given the human frailty of individuals (unfortunately, we are not angels) and the potential for State power to be captured and abused.

Keywords: Norms, values, ethics, Great Recession, Adam Smith, trust

JEL Classification: A13, B32, D50, D71, D72, D73, K20, P16, D43