Parallel Journeys: Adam Smith and Milton Friedman on the Regulation of Banking

Research, Preprint OPEN
Hugh Rockoff (2010)
  • Publisher: New Brunswick, NJ: Rutgers University, Department of Economics
  • Subject: Bankenpolitik | Dogmengeschichte | Theorie | banking, Adam Smith, Milton Friedman
    • jel: jel:B10
      ddc: ddc:330

Adam Smith and Milton Friedman are famous for championing Laissez Faire, yet both supported government regulation of the banking system. In both cases their deviation from free market orthodoxy was based on a careful reading of financial history: especially Smith's reading of the Crisis of 1772 and Friedman's reading of the Crisis of 1929-33. In both cases they based their reading on a complex and nuanced account of human nature. This paper describes their parallel journeys to the conclusion that banking requires government regulation.
  • References (4)

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    __________. 1995. “The Option Clause in Scottish Banking, 1730-65: A Reappraisal.” Journal of Money, Credit and Banking, Vol. 27, No. 3 (Aug.): 713-726.

    Hamilton, Henry. 1953. "Scotland's Balance of Payments Problem in 1762." The Economic History Review, New Series, Vol. 5, No. 3: 344-357.

    __________. 1982 [1764]. Lectures on Jurisprudence. The Glasgow Edition of the Works and Correspondence of Adam Smith. Oxford: Clarendon Press. Edited by R.L. Meek, D.D. Raphael, and P.G. Stein. Reprinted, Indianapolis: Liberty Classics.

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