Adam Smith economic beliefs

August 28, 2015
ECONOMY AFFECT CONSUMERS?

Deborah BoucoyannisBut the assumption is wrong. As I show in my article, the building blocks of Smith’s economic system do not allow the concentration of wealth—not due to normative constraints, but to how the blocks are set up in his theory to maximize the “wealth of nations.” Further, even in neo-classical economics, in a competitive economy with no entry barriers, profits should decline over the long term, so profit concentration is not an equilibrium prediction. Yet high firm profits, for instance, are treated as a sign of economic success that have to be sustained over time. These tensions have never been conclusively settled in economics.

Only recently have we seen a powerful position staked out on the need to avoid such inequalities from arising in the first place, and to implement “market reforms that encourage a more equal distribution of economic power and rewards even before government collects taxes or pays out benefits.” This is the idea of “pre-distribution, ” advanced by the American political scientist Jacob Hacker and incorporated in the new Labour agenda for policy. It remains a programmatic position, however, a prescription of how the market should be structured to ensure more equal outcomes. It could thus easily be identified as purely a normative position with an egalitarian goal—two elements, however, that non-progressives will reflexively reject.

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