Digital Commons Network^™

Vanity And The Daedalian Wings Of Paper Money In Adam Smith, Maria Pia Paganelli

Economics Faculty Research

Adam Smith presents a detailed technical analysis of both private and public credit. Many contemporaries, including David Hume, recognized that public credit, and in part private credit, could be used to affect the economy, either for good or bad. Nevertheless, Smith does not seem to recognize the full potential of public credit as a policy instrument whether as a way to stimulate the economy, fine-tune it, or cause economic disasters. The reason for this shortcoming may be Smith's downplaying the desire for power and benevolence as motivational forces in human conduct, due to his emphasis on vanity instead.