… is from page 263 of my emeritus Nobel laureate colleague – and now Chapman University professor – Vernon Smith‘s essay “Adam Smith and Experimental Economics: Sentiments to Wealth,” which is chapter 16 in the forthcoming (2016) volume from Princeton University Press and edited by Ryan Patrick Hanley, Adam Smith: His Life, Thought, and Legacy (citations omitted; links added; original emphasis):
In Wealth [of Nations] property is necessary but not sufficient, and Adam Smith supplies the essential Discovery Axiom that fuels wealth creation: “the propensity to truck, barter and exchange.” Just as in [The Theory of Moral] Sentiments, it is process all the way up; it’s not about the whiteboard mechanics of market clearing prices and outcomes, based on specialization, that creates wealth; it’s about the discovery of prices, whose very existence call for comparisons that otherwise would not be made between one’s own circumstances and that of all others as revealed in prices as they form; prices provide the connection between the individual and all others in economic commerce, just as the “impartial spectator” is the connecting link between the individual and all others in social commerce. This price discovery perspective in Wealth was lost in the neoclassical marginal revolution and its aftermath. Instead of supplementing the price discovery process in Wealth, it was displaced by equilibrium market statics until revived by Hayek’s critique of price theory and the unexpected results of laboratory market experiments.
Those who would interfere with the market’s pricing process in an attempt to improve that process and its results are akin to those who would interfere with people’s freedom of speech and the press in order to improve that process and its results. The hubris of such people is manifest. Worse, their lack of understanding of both the logic and of the importance of the process that they would subvert with their own notions of what its specifics ‘should’ be is deeply harmful if policy advice offered by such people is taken seriously.
