Sunday, October 25, 2009

October Lost Legacy Prize Won by Kieran O'Hara - also a nominee for the 2009 Annual Prize

Kieron O'Hara, UK Centre for Policy Studies writes (25th October) in Gov Monitor HERE:

Capitalism And The Decline In Trust Of Our Markets”

“Smith has not been well-served by commentators whether admiring or hostile. He was neither the apostle of ‘greed is good’, nor the evangelist of free markets as the ideal resource allocation mechanisms at all times. In fact, his careful and lengthy examinations of human motivation, The Theory of Moral Sentiments and The Wealth of Nations still contain important lessons for our time.

It is particularly interesting that free market economics is widely blamed for the decline of trust throughout society, because rereading Smith reminds us how once upon a time the spread of markets was thought beneficial because it helped spread trust.

Our understanding of markets has fragmented since the days of Smith. Economists see them as mechanisms for optimally allocating resources, while sociologists see them completely differently as exchange mechanisms that tend to overwhelm other types of connection that hold societies together. … But Smith himself saw them as both social and economic. Their two different aspects could not be separated out.

Participation in markets helped people internalise the norms of socially-beneficial behaviour, spreading habits of trust and trustworthiness. They used pre-existing trust mechanisms, such as respect for contracts, the rule of law, sound money and a work ethic, and brought them all together in a perfect storm, magnifying their individual effects and transmitting trustworthy behaviour, self-discipline, moderation and stability across society.

Smith denied that markets could rest on selfishness (as many on the left maintain they do). Markets do indeed rest on self-interest, but that is not the same as selfishness. My self-interest is not simply the sum of my preferences at the moment (as many on the right will say it is). I am not the sole determinant of my self-interest; society makes a contribution too.

Whichever is the case (and they are not mutually exclusive), the knee-jerk reaction to blame market economics for the increase in individualism and the decline in trust is mistaken. Instead, following Smith, we should deduce that markets function less well, and are treated with more suspicion by consumers, when trust has declined for independent reasons."

Without doubt Kieron O'Hara deserves the October 09 Lost Legacy Prize for the best article on the Internet on Adam Smith (I would put it in for the best article on Smith in the year, but we must wait and see over November–December).

I am not prepared to risk overstepping the copyright conventions by publishing the whole article (though “it is better to ask for forgiveness than for permission”, as the Jesuits used to say).

The article is "COPYRIGHT © 2002 - 2009 Policy Dialogue Media Group International, INC. All rights reserved."

It can be read in full

I strongly recommend that your follow the link and read Kieran’s full argument (and pass the news on to your readers and Twitter sites. It is astonishingly brilliant compared to the normal daily dross put out in the media, including by top economists.

Congratulations to Kieron O’Hara for showing his understanding of Adam Smith, and to Gov Monitor for publishing it.

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