Adam Smith News

Subscribe to enjoy similar stories.Two centuries and a half ago, Adam Smith used the example of a pin factory in The Wealth of Nations to explain how capitalism uses division of labour to boost productivity by splitting production into specialized tasks done by workers paid to work in close coordination for efficiency. But what happens to this model if AI agents run factories and companies?Andon Labs, a US-based startup, runs a cafe where tasks like inventory control, hiring, scheduling and operations are supervised by Mona, an AI agent powered by Google Gemini, even as human baristas brew and serve coffee.

What is an economy for? Since Adam Smith, economists have given a straightforward answer to this question: the economy increases our consumption possibilities. A well-functioning economy is one that offers a widening array of ever-more affordable goods and services, from food and consumer items to housing and transportation.

I’ve long thought that calling Adam Smith the father of economics seriously understates his significance. In some ways he was indeed the first economist, and The Wealth of Nations, published 250 years ago this week, was indeed the discipline’s seminal text. But his ambitions and insights extended so much further than the dismal science as now conceived.

In 1776, the year 13 American colonies declared independence from Britain, Adam Smith published his magnum opus An Inquiry into the Nature and Causes of the Wealth of Nations; 9 March marked the 250th anniversary of its publication. While breathless praise for it was aired in many parts of the world, residents of Smith’s Scottish hometown Kirkcaldy opted for a characteristically quiet pragmatism: a modest Heritage Centre and a plaque on a brick wall marking the spot where his childhood home was unceremoniously razed in the 19th century.Globally, to the Right, Smith is the patron saint of ‘greed is good,’ a man whose book Thatcher reportedly brandished in her handbag like a holy relic. To the Left, he is the grandfather of market fundamentalism.The reality, though, is inconvenient.

Subscribe to enjoy similar stories. A POLITICIAN promised to open his poor country for foreign investment and wean it off aid, while Tony Blair nodded sagely. Standard fare for Davos—except that two months earlier the politician, Asaad al-Shaibani (pictured), was a member of a jihadist group blacklisted by the UN.

Subscribe to enjoy similar stories. Accounting conventions require that capital is accounted for in the balance sheet of the enterprise, and expenditures and incomes in the profit-and-loss account. This is universal for all corporate enterprises, be they business ventures, government agencies or ‘non-profit’ organizations.

Barack Obama, turned to Kimberly Clausing, a former member of the Biden administration and author of a book extolling the virtues of free trade. «Everyone in this room agrees with your book,» Furman said. «No one outside of this room agrees with your book.» The academics and policy wonks gathered in the hotel conference room laughed, but the comment captured something real: After decades of helping shape policy on weighty matters such as taxes and health insurance, economists find that their influence is at a low ebb.

Subscribe to enjoy similar stories. The trouble with taxation is not its inevitability, nor its comparison for that reason with mortality, but its susceptibility to being viewed through lenses tinted by the viewer’s own tax liability. Evidence of this rises and falls in waves, peaking around budget time.

Anantha Nageswaran has pointed out that listed companies are making higher profits but they are paying less to their employees. Nageswaran nudged the private corporate sector to hire more and find the “right balance between capital-intensive and labour-intensive growth”, underling that while profits of listed companies--as a percentage of GDP--hit a 15-year high in 2023-24, their wage cost increase decelerated. Without a judicious balance between the share of corporations’ income making up their profits and that going to workers as wages, there won’t be adequate demand in the economy for companies’ own products to be bought, the CEA said at an event a few days ago. Sustained income growth bolsters both consumption and savings, eventually spurring economic expansion. “In other words, not paying workers well or not hiring workers enough will end up being actually self-destructive or harmful for the corporate sector itself and for small enterprises,” Nageswaran said, stressing that even legendary economist Adam Smith had written The Theory of Moral Sentiments before his seminal work--The Wealth of Nations. “The most important ingredient of long term growth and consumption is to ensure employment income growth and, thus, spending power growth. Otherwise, it will become a mutually self-destructive cycle,” the CEA said.

Chief economic advisor (CEA) V Anantha Nageswaran on Thursday nudged the private corporate sector to hire more and find the “right balance between capital-intensive and labour-intensive growth”, underling that while profits of private listed companies, as a percentage of GDP, hit a 15-year high in March 2024, their wage cost increase dwindled. Without a judicious balance between the share of corporations’ income making up their profits and that going to workers as wages, there won’t be adequate demand in the economy for companies’ own products to be bought, the CEA said. Sustained income growth bolsters both consumption and savings, which eventually spur economic expansion. “In other words, not paying workers well or not hiring workers enough will end up being actually self-destructive or harmful for the corporate sector itself and for small enterprises,” Nageswaran said, stressing that even legendary economist Adam Smith had written The Theory of Moral Sentiments before his seminal work--The Wealth of Nations.

Adam Smith wrote in The Wealth of Nations that managers of joint stock companies can't be expected to watch over a company with the same anxious vigilance that owners watch over their own company. The wisdom remains relevant in modern day business. Owners with the money, but who lack expertise or time to run the business, hire professional managers. The anxious vigilance of owners referred by Smith is to ensure that the business generates enough economic value for them-to put it simply, to see it's earning a return on capital that exceeds costs. Professional managers hired by owners are primarily the capital or asset allocators in the business. If capital allocation within the business is inefficient, then enough economic value won't be generated. As rudimentary as it may sound, it's surprising how awareness of high cost attached to equity capital is often missing in many suave, confident and crafty professional managers in corporate India.

Subscribe to enjoy similar stories. Adam Smith would be baffled by microelectronics. When the great economist died in 1790 James Watt’s two-cylinder steam engine passed for the height of technological sophistication.

Don Wright, former head of British Columbia’s public service and deputy minister to the premier, wrote a very truething here the other day. In “creating jobs,” he wrote, governments shouldn’t forget basic math. The quotation marks are because governments don’t actually create jobs, they merely shuffle resources around, discouraging some activities with rules and taxes and encouraging others with subsidies, tax credits and so on.

Even as newspaper headlines celebrate equity mutual fund inflows surpassing ₹45,000 crore in June, with systematic investment plans (SIPs) exceeding ₹21,000 crore (growing 9x in the last 10 years), we should remain cognizant that like any true market, equities have two sides to the equation–demand and supply. 

Last checked, US-based Tesla had not taken the bait of India’s policy package unveiled in March to attract global makers of electric vehicles (EVs), though Vietnam’s VinFast may qualify for its benefits—which include low-tariff imports of EVs worth under $35,000 apiece for five years—and Germany’s famous Mercedes-Benz has it under consideration. As reported, Mercedes India’s CEO Santosh Iyer has said the car-maker is ready to invest $500 million, the qualifying minimum, if it could be certain that today’s 5% GST rate for EVs stays in place for at least a decade. In itself, this is not an unreasonable ask.

The world economy is at a turning point. As global supply chains face frequent disruptions, the structures underpinning markets and international trade are unravelling, leading to economic instability which is spilling over into other domains and fuelling conflict and political polarization. It is worth asking why, despite an unprecedented influx of data, mainstream economic thinking and policymaking appear to be failing.

Stock markets are an enigma from which there is little escape. At times, it seems as if the S&P BSE Sensex and NSE Nifty have become synonymous with everything that is happening in the country, including events that transcend the economy. High readings of the purchasing managers’ index (PMI) are routinely interpreted as a sign that the economy is buoyant, and this leads to stock-index gains.

₹24.5 crore, the highest paid for any cricketer. Was this shocking? Yes. Was there something amiss? No.

The first thing students learn in Economics is that human beings act rationally. So, when a price comes down, we buy more of the product. This was the micro part of the story.

Biden vs Trump: The lineup in the 2024 US election has long been a foregone conclusion, with a rematch between the two presidents appearing all but certain. But what would happen if, for any number of reasons, one of the two contenders does not end up taking part in the November vote? Apart from immense political confusion, here is what would happen, according to the rules and experts: What would cause President Joe Biden, an 81-year-old Democrat, or ex-president Donald Trump, the 77-year-old Republican, not to be on the ballot? Age for one.