The Past Speaks

As have the philosophers, we social scientists have long been interested trying to reconcile the ideas Adam Smith presented The Theory of Moral Sentiments (TMS) with the principles established in The Wealth of Nations (WN). I have long felt that trying to balance or blend the principles in these two books is essential to our collective well-being  and one’s happiness as an individual living in a capitalist democracy. Smith’s ideas about economic nationalism, cosmopolitanism, and the moral aspects of the world-wide web of economic linkages that connect individuals and firms in different countries appear to be more relevant than ever, especially in light of the rise of anti-globalization populism.

In early July, Adam Smith’s Edinburgh house, Panmure, which now belongs to Edinburgh business school, will be the venue for an important interdisciplinary conference on “The New Enlightenment: Reshaping Capitalism and the Global Order in an Neo Mercantilist World.” The organizers of this conference, who include the great business thinker David Teece hope that this conference will  bring together action-oriented scholars, policy makers, and practitioners. The distinguished scholars who will be speaking at the conference include the management academics Jay Barney and Peter G. Klein, the economist Jon Kay, and such historians at Harold James,  Barry Eichengreen, and Niall Ferguson as well as some very distinguished practitioners and financial journalists. Practical details of the conference are here. The call to arms (theoretical document) describing the goals of the conference is available here.

Based on the call to arms document, I strongly suspect that shareholder value ideology (otherwise known as the doctrine of shareholder primacy) will be discussed at the conference. That document reads:

To the extent that current corporate law is viewed as imposing a legal duty to maximize (short-term) shareholder value, then it is inconsistent with Smith’s view of sustainable forms of capitalism. The imperative is now stronger than ever to read TMS and WN together. While some scholars see these as separate and contradictory theories, it’s hard to imagine that Smith  himself saw it that way. Both treatises have in common deep and prescient observations of society and the behavior of individuals. TMS, in particular, anticipates modern work in behavioral economics.

I’m very glad that that pros and cons of shareholder primacy will be discussed at this conference, as I’ve been convinced that this doctrine is corrosive to the long-term interests of capitalism as a system. About four decades ago, the doctrine of shareholder primacy was re-installed in the source code of Anglo-American capitalism and the results have not, in my view, been pretty. I know that some of the people attending this conference have, as I have, been heavily influenced by Hayek, an author who wrote eloquent defences of capitalism even though he did not accept shareholder primacy.  One of the intellectual puzzles that interests me is figuring out whether one can be sympathetic to Austrian economics and hostile to shareholder primacy at the same time. After careful reflection, I’ve decided that one can reconcile the two and that it is actually very important for society that we do so.

I would like to thank the conference organizers for inviting me to this august event. I also want to thank the various sponsors who are covering the costs of the conference.