Adam Smith Told You So…

By: Linda Beso
Staff Writer

There was a great article today in the Financial Times by P.J. O’Rourke titled “Adam Smith’s Last Laugh”

I urge everyone to read it. It discusses the fact that nothing in this current recession is new. Adam Smith expected and described this exact course of events hundreds of years ago, and explained the exact way to deal with it.

What was Adam Smith’s prescription for saving the day?

Do nothing.

In a capitalist system, when things become overpriced (think BUBBLE), the market reacts to drive prices back down.

We are seeing this today. House prices got too high, now they’re dropping faster than you can say the words “misconceived stimulus package”.

This drop in home prices is painful for homeowners. Tough luck. You shouldn’t have bought a house you can’t afford. It’s not the government’s job, according to Adam Smith, to help you out of that mess.

“But”…you say…”people will lose their homes, and we just can’t let that happen!!”

Of course we can. The people that lose their homes will just have to…*gasp*….rent.

Throughout history we’ve seen crises upon crisis just as bad or worse than this one. Think Tulip Mania. In each case, the only thing to be done was to let it work itself out and NOT let the government muck it up. Or as O’Rourke quotes Adam Smith as saying “I have never known much good done by those who affect to trade for the public good. “.

We couldn’t have said it better ourselves…

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February 11, 2009 | Filed Under Economics, Government Intervention, Recession, Stimulus | Leave a Comment