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Full-Text Articles in Social and Behavioral Sciences
Adam Smith And The History Of Economic Thought: The Case Of Banking, Maria Pia Paganelli
Adam Smith And The History Of Economic Thought: The Case Of Banking, Maria Pia Paganelli
Economics Faculty Research
Adam Smith promotes markets because of their efficiency and because of their ability to develop and support moral social life. His views on banking are an example of his broader view. According to Smith banks should be allowed to issue their own money and compete in a minimally regulated environment. On the one hand, competition, including the possibility of bank failures, generates discipline, and discipline generates prudent behavior. On the other hand, competition in the banking sector is generated and maintained by prudent behavior. The prudent behavior of morally responsible banks is rewarded with economic success and it supports the …
David Hume On Banking And Hoarding, Maria Pia Paganelli
David Hume On Banking And Hoarding, Maria Pia Paganelli
Economics Faculty Research
David Hume opposes banks and favors hoarding. The only bank he reluctantly approves of is a public, 100% reserve bank. Other banks increase money supply and prices, hindering exports and economic growth. For Hume, a 100% reserve public bank would lead to ‘‘the destruction of paper-credit’’ ([1752] 1985, p. 285), fostering economic growth instead by preventing inflation. Additionally, a 100% reserve bank hoards a large quantity of gold and silver, which is available in case of national emergency.
Vanity And The Daedalian Wings Of Paper Money In Adam Smith, Maria Pia Paganelli
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.