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October 22, 2013

Adam Smith and culture

The political economy of Adam Smith is often seen as the birth of capitalism, and economist's like Nobel Prize winner Milton Friedman, advisor to Ronald Reagan and inspired Margret Thatcher's economic reforms in the 1980s, is greatly influenced by Smith. The invisible hand is Smith's concept to explain how an economy can free itself of the state and by means of the self interest of the producer contribute to maximize production and production quality through. Utility is a governing force and works for much of the produced goods and services.

The first thing that comes to mind concerning Adam Smith's wish to reduce the state is that in the 18th century Scotland the state was the king or queen and certainly not a democracy. The attempt to reduce the power of a dictatorship and an autocrat to allow more space for the freedom of the individual is rather different to the Tea Party movement in the US to reduce the democratically elected american government.

The second thing is that Smith was thinking of a local and individual production, within corporations with one person up to a few. A context radically different from the sphere of macroeconomics and multi national cooperations. What is the role of the invisible hand when the producer's main concern are the share holders rather than the customer? Also, in the 18th century the financial sector was only a tiny fraction of the economy. Today, it amounts to 20% of the GNP. What is the role of the invisible hand when the main merchandise is money.

Finally, what is the utility aspect of culture? After all, culture, in terms of usefulness is pretty vague. That's also the reason why a comparison between, say, health care and culture is a comparison between incompatible types. No, culture, like so many other practically undefined needs in society today has got to be measured following other standards.

Posted by henrikfr at October 22, 2013 04:37 PM

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