Economies in Transition and in Development: A Possible Warning from Adam Smith

The European Journal of the History of Economic Thought. 2012. 19.2: 149-163.

16 Pages Posted: 7 Jun 2012

Date Written: May 24, 2011

Abstract

If Adam Smith were asked about transitioning and developing economies today, one may infer, he might suggest introducing small, yet constant, opportunities for wealth accumulation, avoiding the sudden accumulation of riches. Good institutions and the moral rules often needed to comply with them are more likely to be disregarded if there are large, sudden material gains, such as new wealth generated by the sudden opening of markets or government granting monopolies. For Smith, the desire to show off in front of others can inhibit moral behavior and respect for good institutions, generating perverse incentives that hinder growth. Gradual change is to be preferred.

Keywords: Adam Smith, transition, development, institutions, gradualism

JEL Classification: B12, F1, O1, P

Suggested Citation

Paganelli, Maria Pia, Economies in Transition and in Development: A Possible Warning from Adam Smith (May 24, 2011). The European Journal of the History of Economic Thought. 2012. 19.2: 149-163., Available at SSRN: https://ssrn.com/abstract=2079514

Maria Pia Paganelli (Contact Author)

Trinity University ( email )

Dept. of Economics
One Trinity Place
San Antonio, TX 78212
United States

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