![]() Ronald Reagan and Margaret Thatcher were disciples of this way of thinking. Milton Friedman adapted Smith’s thinking for neoliberalism. Any interference from government in terms of price controls or regulations would distort this mechanism and should therefore be avoided. Chicago School free market advocates like Milton Friedman and George Stigler viewed it as a metaphor for prices, which they saw as signalling what producers wanted to produce and buyers wanted to buy. In more recent times, “invisible hand” has come to mean something slightly different. It is a metaphor for how a “free” market magically brings buyers and sellers together without any need for government involvement. Borrowed from Shakespeare’s Macbeth, the phrase actually appears only once in the whole text. Those on the right of the debate often cite Smith’s “invisible hand” phrase from the Wealth of Nations in support of their worldview. In observations about the British East India Company, which was the Amazon of its day and then some, Smith even warned about companies becoming too big to fail. He also warns against things like cronyism, corporate corruption of politics, imperialism, inequality and the exploitation of workers. He thinks high wages and low profits are good. ![]() Smith argues that slavery and feudalism are bad and that economic growth and getting people out of poverty are good. The Wealth of Nations is an eclectic text – even an “impenetrable” one, according to the director of the Adam Smith Institute. ![]() Larry Fink, head of investment giant BlackRock, has only just been arguing that artificial intelligence could improve productivity, for instance. Improving productivity is still seen as the holy grail for countries getting richer. Smith’s observations about how the division of labour can be organised to increase productivity remains one of his most enduring contributions to economics. It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own interest. He saw it as an all-purpose lubricant that delivers mutual benefit for all: It gave little consideration to how goods were produced – either the physical inputs or the human motivation.īut for Smith, motivation was at the heart of economic behaviour. It viewed economic value simply in terms of the amount of gold that a country had to buy the goods it needs. The dominant economic ideology of the time was known as mercantilism. This gave them a competitive advantage over their competitors, which did not sit well with the young Smith. Certain landowners were exempt from Kirkcaldy’s bridge tolls and market stall charges due to the town’s status as a royal burgh. One early experience that seems to have affected him concerned the town market. Smith seems to have been a very scholarly child, rarely seen without a book about his person. ![]() His father was a judge who died just before he was born. What we know is that he was born in the town of Kirkcaldy on the east coast of Scotland. Smith oversaw the burning of all his unpublished writings as he lay on his death bed – a common practice at the time, but not much help in settling endless arguments. Part of the problem is that we actually know very little about the man. With the exception of Jesus, it’s hard to think of anyone who attracts such radically different interpretations. Everyone wants to claim the Scottish philosopher and economist as one of their own. What to make of Adam Smith? You might have thought we would have straightened this out, given that he only ever wrote two books and it’s been 300 years since he was born. ![]()
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