Is a Beautiful System Dying? A Possible Smithian Take on the Financial Crisis
The Adam Smith Review, No. 6, pp. 269-282, 2011
8 Pages Posted: 18 Oct 2011
Date Written: October 18, 2011
Adam Smith is not an optimistic describer of a providential order moved by an always-successful invisible hand. I present some of the more pessimistic analysis of Smith, which, unfortunately, seems to be most appropriate to describe and analyze our current affairs. This reading of Smith may provide an explanation for the events started in the fall of 2008.
The ‘beautiful system of natural liberty’ that Smith describes is a system that may be achieved only under rare circumstances. Smith recognizes systematic biases in human behaviours, ranging from overestimation of probability of success to almost blind admiration for the rich. He recognizes the dangers of concentrated interests. He recognizes the fundamental role of justice and morality in a well-functioning society, so that laws should serve the general population, not the interest of a few at the expense of the many. Smith makes a few policy recommendations, suggesting that the beautiful system that results from human actions but not human design would be threatened otherwise. Dismissing or failing to recognize its potential weaknesses may lead to its crumbling into ruins.
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