Michael Spence Is Revising The Wealth of Nations

Michael Spence is a Nobel Laureate in economics who believes that we need to reconsider the relationship between markets and the state. He argues that markets and competition are good at achieving efficiency despite imperfections that are recognized within economics. We acknowledge the problems of externalities, information gaps, asymmetries and coordination problems but markets have more fundamental weaknesses. Societies have important economic and social objectives that markets and competition are not designed to achieve. We need to provide stability, distributional equity and sustainability. These objectives require an enlightened relationship between private enterprise and the state. He outlines some of the things that must be done to provide greater stability and equity. He will deal with sustainability in his next article which expands economics beyond Adam Smith. This is a welcome effort from a conservative economist who is a Senior Fellow at the conservative Hoover Institute.