2010: The Adam Smith Address Macroprudential Supervision and Monetary Policy in the Post-Crisis World

NEXT to John Law's Banque Royale, the most important mercantilist monetary experiment attempted in western Europe during the pre-Adam Smith era took place in Sweden. The Bank of Sweden (Riksens Ständers Bank), which had been established as a national bank in 1688, was used by the Swedish government in the mid-eighteenth century as an engine for economic development. Sweden's experiment in paper money mercantilism gave rise to an active debate which may be called the “Swedish bullionist controversy” because of its similarity to the monetary debate in England at the outset of the nineteenth century. This controversy took place in a highly charged political environment. Political power in Sweden from 1739 to 1772 was centered in the Swedish Riksdag, a representative body composed of the Four Estates: burghers, nobles, clergy, and peasants. Within this organization, the mercantile class predominated by virtue of its control of the influential House of Burghers when the Riksdag was in session and its control of the Secret Committee, which directed government policy when the Riksdag was not in session. The two political parties—the Hats and the Caps—vied with one another for control of the government from 1739 to 1772, a span including most of the epoch known in Swedish history as the “Age of Freedom,” 1719–1772. Participants in the bullionist controversy typically fell into one or the other political camp, and the political element is strong in most of the economic literature of the period. The two political parties locked horns on the issue of the “correct” monetary policy. At stake in the struggle was not only the correctness of economic theories and policies but, ultimately, also the viability of the Swedish parliamentary form of government. It is the purpose of this article to review the policies of the Riksbank in the mid-eighteenth century and to examine the economic theories of the two contending political parties.

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Interest Rates and Monetary Policy

Transactions of the Faculty of Actuaries ◽

10.1017/s0071368600007485 ◽

1962 ◽

Vol 28 ◽

pp. 197-221

Author(s):

J. E. Wadsworth

Keyword(s):

Monetary Policy ◽

Interest Rates ◽

Adam Smith ◽

Joint Stock Company ◽

Stock Company ◽

Business Interests ◽

Wealth Of Nations

Two centuries ago, a distinguished son of Scotland made his “Inquiry into the Nature and Cause of the Wealth of Nations”, there bringing together important business interests of actuaries and economists, and so providing justification for addressing you this evening. “The only trades”, wrote Adam Smith, “which it seems possible for a joint stock company to carry on successfully, without an exclusive privilege, are those of which all operations are capable of being reduced to … a routine. … Of this kind is, first, the banking trade; secondly, the trade of insurance.” As we all know, actuaries are a mainstay of insurance undertakings and economists are to be found in the employ of the banks; both, that is, are engaged with companies that are closely involved in movements in the level of interest rates, an involvement where, despite the views of Scotland's revered father of economists, few operations can be “reduced to a routine”!

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