Today’s Quote of the Day…

…is from Page 145 of Adam Smith’s classic 1776 work The Wealth of Nations (Liberty Fund Edition):

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

The first line of this quote is one of the most famous of all of Smith.  But the conversation usually ends there (typically with an erroneous claim that Smith would support antitrust legislation).  The immediately-following sentences provide deep insight into Smith’s classical liberalness as well as the dilemma we all face in the trade-off between liberty and security.

Smith also here has a discussion on incentives.  The law should not render associations between producers (ie trade groups, cartels, etc) necessary.  While Smith is discussing in the context of labor regulations and business regulations here, that discussion can be easily extended into the realm of what we now call Public Choice.  When government can hand out favors, firms will try to capture those favors.  They may even form associations to pool resources to increase the likelihood of capture (eg a Chamber of Commerce).

The foresight of Adam Smith, and his continued applicability to modern economics is astounding.