Adam Smith’s ‘Wealth of Nations’ Updated for Climate Challenge
(Bloomberg) -- Three centuries before Glasgow hosted the COP26 conference aimed at mitigating climate change, it played home to Adam Smith, often credited as the “father of economics.”
Now, the past and the present are colliding as a group of economists publish a rethink of Smith’s most famous work, “The Wealth of Nations,” to reflect the modern challenge of a warming planet.
The project, which takes the form of a 60-page book of essays, involved reassessing Smith’s well-known theories of value, development and how markets are shaped by an “invisible hand.”
Among the contributors are Lord Meghnad Desai of the London School of Economics and former Malaysian central bank chief Zeti Akhtar Aziz.
While Smith’s opus is traditionally viewed as promoting lightly-regulated markets, the authors of the essays argue if he was writing today he would be pushing for financial and economic curbs to accelerate the transition to a low-carbon economy.
“We cannot know exactly how Smith would have responded to the climate emergency, but given his support for reasonable protections against, for example, abuse of monopolies it seems likely that he would have supported regulation to guard against the destruction of the planet,” Nicola Sturgeon, First Minister of Scotland, wrote in a forward to the book. “It is the perfect time to reach back into our past as we look ahead to a future that is cleaner, greener and more just.”
Among the points made in the essays are that Smith would acknowledge nature provides us with “free” goods that carry a value and that he’d be in favour of financial rules to deter banks from lending to fossil fuel companies.
|“Wealth of Nations” book||Modern-day insights|
|‘Of the Causes of Improvement in the Productive Powers of Labour’||Classical conceptions of value must be re-conceptualized to include the ‘free’ goods nature provides us through the principles of cost accounting|
|‘Of the Nature, Accumulation, and Employment of Stock’||Smith’s argument for laws against usury suggest he’d also be in favor of financial regulations to push banks from lending money to fossil fuel companies|
|‘Of the different Progress of Opulence in Different Nations’||Smith’s theory of development provides an unusually modern appreciation of economic progress through which regulations to accelerate the climate transition can be justified|
|‘Of Systems of Political Economy’||Smith’s critique of mercantilism emphasizes the complex impact of trade on different groups in society, through which linkages between trade and climate change can be analyzed|
|‘Of the Revenue of the Sovereign or Commonwealth’||Smith’s duties for sovereign nations justify urgent action from both the state and the market against climate change|
The introspection comes at a time where the heavy-lifting of the world’s climate response is shifting from natural scientists, who estimated the scale of the threat, to social scientists, tasked with finding socio-economic solutions.
Central banks are incorporating climate change into policy decisions and how economies are measured is being rethought to account for the damage done to the earth’s atmosphere and biodiversity.
Smith was a student and academic at the University of Glasgow, the city currently hosting the United Nations’ annual climate talks. The essays will be explored at an evening lecture series across three days starting Monday at the university’s Adam Smith Business School.
“People like Adam Smith not only articulated economic ideas but also looked at philosophy and science,” said Anton Muscatelli, Vice-Chancellor of Smith’s alma matter and one of those updating his 18th century work. “We need to be more interdisciplinary as economists in the 21st century.”
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