Wednesday, November 02, 2005

Not a Quote from Smith

Alix Nyberg Stuart, a columnist on “CFO Magazine” (‘tools and resources for CFOs’) and one of its Senior Writers, has an article, “Market Magic: Internal markets can solve thorny allocation problems and predict the future”. It is about firms using internal markets to improve their allocative efficiency.

This a theme that Ronald Coase (1937) wrote the seminal article asserting that the Firm itself exists because there are transaction costs which a firm can reduce rather than leaving such decisions to markets where transaction costs are higher. However, read Alix Nyberg’s Stuart’s article at: and consider his case.

My concern is with his statement:

"Man is an animal that makes bargains," observed the great 18th-century economist Adam Smith."

The words in quotation marks in his article are an imaginative interpretation of what Smith said, albeit powerful in a literary sense, but not strictly what he said. They should be credited to Alix Nyberg Stuart not Adam Smith.

I like the sentence as a summary interpretation of Smith’s Chapter 2 in “Wealth of Nations”, but I would not be happy to see them ascribed to Smith by readers of Stuart’s article, because there are enough attributions to Smith that are dead wrong without adding more, no matter how close they might be from being strongly implied by Smith’s own words.


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