The Wealth of Nations

In an interview on Globalisation

Next book?

Adam Smith, The Wealth of Nations. It was an extraordinary insight into how society works, and I stress the idea of society, rather than the economy, because his attempt was really to think about not just the famous things like division of labour, or the efficiency with which resources were allocated, but also how they were distributed: whether it was done in a moral, ethical way. And therefore he was thinking about winners and losers. Much of modern day economics, and the modern day reinterpretation of Smith, is all about the idea that you can create only winners if you allocate resources efficiently, that ultimately you are making the cake bigger and therefore, in theory, everyone can be better off. Of course those beliefs fed into the way we walked into the financial crisis, and the problem with that was that with time – which is what capital markets deal with – comes uncertainty. What is amazing about Smith is that he tried to relate economics to morals and ethics, in the sense that economics is only a small part of what society should be thinking about. I think it’s rather unfortunate: he’s been hijacked to a degree by a sort of right-wing free-market view of the world, which has done him a disservice in terms of his contribution to economic thought.