Sunday, 23 January 2011

Somethings never change

In this book “Adam Smith” (well worth a read) Gavin Kennedy writes
His [Smith's] criticism highlights his common theme about the eighteenth-century Europe: special-interested groups sought political and legal powers to enhance their interests at the expense of the public. Self-interest is not always benign.
I had two thoughts on reading this. First, how does the 18th century Europe differ from any other time or place? Public choice theory, I would think, tells that using political power to enhance ones own interests is the story of all centuries and all places. It would as true today (and tomorrow) as it was in Adam Smith’s time. Second, self-interest is benign, as I’m sure Smith would tell us, in the right institutional framework. In particular competition is the enemy of market power and having government limited to a few key roles so that it cannot provide protection for those who wish to prevent the forces of competition and economic change from undermining their position of privilege is also necessary.

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