Sunday, June 10, 2012

"Adam Smith and the Myth of Laissez Faire"

Free, unregulated markets -- those absent government oversight of any kind -- are not the same as the ideal competitive markets found in textbooks, those that produce optimal outcomes. In a free market, producers are free to organize, for example, "in some contrivance to raise prices," and this takes us away from the optimal outcome free market enthusiasts are trying to defend. Government oversight and regulation are needed to stop producers from engaging in behavior that is harmful to consumers, excessive market power and the associated political power that come with it are both problematic, a point Smith's so-called disciples ought to take to heart.
And no, Adam Smith never used the phrase "laissez-faire," even though it knew of it. Gavin Kennedy shows that the narrative of Adam Smith embracing laissez-faire is myth whose origin is traceable to Jean-Baptiste Say and Fredric Bastiat. Kennedy is the authority on Adam Smith so let's put that myth to bed.

Read it at Economist's View
"Adam Smith and the Myth of Laissez Faire"
by Mark Thoma, with a long quote from Gavin Kennedy


Ramanan said...

Btw Tom have you seen this - it's a 10-part series of about an hour each.

I saw 1-3 and 9 in the last 24 hours.

Has so much of promotion of the doctrine of laissez-faire. Important because Friedman has had a powerful influence on how the world has functioned in the past 30 years. Amazing how wrong one could be!

Unforgiven said...

Meet the new Boss, same as the old Boss...

Matt Franko said...


It is the exact opposite of "Concerted Action".


Tom Hickey said...

Thanks for the link, Ramanan. I wasn't aware of that series but I am aware that there is a huge amount of $ behind promoting the worldview in Freedom to Choose, which regard as economic sado-masochism. It's freedom to choose in which the only choice is the master-slave relationship, but only the masters get to choose their role. The rest are obedient slaves.

Matt:"It is the exact opposite of "Concerted Action"."


Ramanan said...


Opposite - yeah.

Tom: Good points regarding Free to Choose. Yes I am aware that this view is known in the USA but I was a bit shocked in some places in the videos where the views sounded more extreme than I thought before.

Tom Hickey said...

We are having this fight big time in the US right now, and the "freedom to chose" faction is gaining strength, both in numbers, wealthy backing (especially post-Citizen United, and politically. Milton Friedman is actually looking pretty tame compared to the Ayn Randites. This does not bode well, especially with a huge private debt overhand still in play.