Sunday, October 19, 2008

Adam Smith

I spent last week on a business trip in Edinburgh, Scotland. Scotland of course was the home of Adam Smith, the father in many ways of the free market system. I stood before his statute on the Royal Mile and pondered what would he think of the current financial crisis? And then, what would his thoughts matter? The crisis has been caused by something that Smith could have never imagined. I doubt he would have much to say about the mechanics of subprime mortgages.

Or maybe he would. Would he have been worried about government interference in the real estate market? Or maybe he would have been more concerned about monetary policy, or the lack thereof.

This is not the first financial panic in history. They used to happen fairly regularly. Smith was obviously aware of the South Sea and Mississippi Company bubbles earlier in the 18th Century. It was those bubbles that probably kickstarted the Scottish interest in economics that flowered with Smith. And this panic looks a lot like that of 1907, with the bursting of a commodity bubble leading to panic on Wall Street and Main Street.

I do not know what Adam Smith would think. But I do know that we have been through this before, and will get through it again.

2 comments:

William R. Barker said...

Ahh... Edinburgh... (*SIGH*)

One of the most beautiful cities on earth.

So... which scotch(es) did you bring home? Did you buy at the duty free or at a specialty liquor store?

Did you bring home some woolens for the wife and kids?

BILL

Anthony said...

I drank scotch (not ones I ever heard of before, even though the locals were trying to convince me to drink Glenlivet and Macallan -- I can get those here), but brought home some fudge for the wife and kids.