1. Unsustainable Economic Growth: Adam Smith's perfect traditional market theory focused on economic growth as the ultimate goal, without any consideration for environmental protection or sustainability. This has led to a focus on unrestrained growth and over-consumption, which has had a devastating effect on the environment and has contributed to the climate crisis we now face.

2. Wealth Inequality: Adam Smith's theory of the perfect traditional market relies heavily on the concept of competition, which has created an environment of winners and losers in the economic arena. This has resulted in extreme wealth inequality, where the wealthy few have become increasingly richer while the majority of the population has become poorer. This wealth gap has been exacerbated by globalization and the free-market system, which has allowed the rich to take advantage of cheaper labor, resources, and products in poorer countries.

3. Exploitation of Workers: Adam Smith's theory of the perfect traditional market has allowed companies to exploit workers by paying them low wages and providing them with few benefits. This has resulted in a breakdown of the social contract between employers and employees, allowing companies to take advantage of their workers in order to maximize profits.

4. Poor Working Conditions: Poor working conditions are a direct result of the free-market system championed by Adam Smith. Companies are able to pay workers low wages, offer few benefits, and provide them with sub-standard working conditions in order to maximize profits. This has led to a decrease in job satisfaction and an increase in workplace stress and burnout.

Lucio Muñoz

I agree with the points identified by Peter.

Peter Donkor

However, we have to recognise the fundamental changes in economic management brought about by the internet.

We have to stay with free market principles but enable governments to act to ease deprivation and attain sustainable growth.

Preprint Global Economic System (August 2021)

Richard

Peter, I agree those 4 are some of the current negative implications, which could be grouped as economic and social implications, There are l also environmental implications like environmental problems/global warming which became the center of attention since 2012 RIO +20.

If the traditional market was sold as a perfect market, why do you think it had all this negative economic, social, and environmental consequences?

Would the same thing had happened if Adam Smith would have given us the theory of the perfect green market?

Good day Richard, thank you for writing.

Why do you think that the legacy of Adam Smith(1776 to 2022) went from positive to negative?

Good day Thomas

Yes, Adam Smith was a great thinker, and his ideas in his time were accepted easily and without long term foresight by his peers, of possible negative consequences of long term economic expansion on society, environment, population dynamics, and economic equality. It was until 1987(WCED) when first time Adam Smith model was formally criticise for his social and environmental sustainability short comings, and a call to move away of business as usual was formally made.

And here we are still today trying to address the long term consequences of that lack of long term foresight. If Adam Smith would have given us an environmentally responsible market(perfect green market) or socio-environmentally responsible market(perfect sustainability market) in 1776 we could have avoided some development issues while still expanding growth.

Thank you for writing.

Dear Thomas, thank you for writing. There are systematic thinkers and there are non-systematic thinkers. Non-systematic thinkers value the symplicityt of models and you can simplify complexity by assuming things away, and assumptions in the short term may look okay as you can not see problems easily so no action is needed, this is because of lack of foresight, but in the long term the problem start to appear and in the very long term the problems become so obvious that you can not longer hide or assume them away....that is in my view what happened with Adam Smith's model.

However, once the problems call for corrections you need to understand the real nature of the problem to be able to fix, otherwise you can not fix it....

So far those task with solving the issue have call for or implemented the wrong tools as they apparently have been looking at a sustainability issue as a non sustainability issue...

In 1987 the WCED saw a social and environmental sustainability problem, but they recommended sustainable development solutions solutions inconsistent with the systematic nature of the problem....IT WENT NOWHERE. The environmental problem worsen.

In 1997 they decided to address the emission problem of the environmentally dirty economy, but they did not set up green markets to transition the dirty economy to the environmentally clean economy....they went emission management...IT WENT NOWHERE...The emission problem worsen.

In 2012 The UNCSD/Rio + 20 they were going the right way towards green markets, green economy and green growth, but then they turned around and went the way of dwarf green markets, dwarf green economies and dwarf green growth a la environmental pollution management....IT SEEMS TO BE GOING NOWHERE,,,,,Pollution problem worsen

The 2015 Paris agreement is a multi-front sustainable development solutions to a sustainability problem, which goals not related to setting up green markets and with no plan to transition from the dirty economy to the environemtnally clean economy any time soon....IT SEEMS TO BE GOING NOWHERE....The pollution problem worsen...

COP27 2022 It is about how to continue living or surviving living in the dirty economy for ever......No mention of the need to set up pollution reduction mrkets like green markets to create the incentives to close the renewable energy technology gap in order to transition the dirty economy towards the environmentally clean economy as soon as possible....

So here we are today....with the ideas of Climate Change Economics inconsistent with perfect green market theory and thinking....THERE WE GO AGAIN.

Ideas on how and why Adam Smith's ideas brought us here and the need now to think backwards to find a solution to the consequences of assuming that the environmental and social costs of production associated with economic activity do not matter can be found in the these 2 articles shared below:

Did Adam Smith Miss the Chance to State the Goal and Structure of Sustainability Markets in His Time? If Yes, Which Could Be Some of the Possible Reasons Behind That?

Article Did Adam Smith Miss the Chance to State the Goal and Structu...

Complex and Man-made Markets: Are We Currently Approaching Sustainability in a Backward and More Chaotic Way in Terms of Economic Thinking?

Article Complex and Man-made Markets: Are We Currently Approaching S...

Have a nice day Thomas!

Lucio

Adam Smith began with a wrong assumption (markets are efficient). He went on from there to build his philosophy. It isn't so much that he is absolutely wrong just on human time scales. We wouldn't even have markets and investors if markets were truly efficient within human timeframes.

As Alan Greenspan learned, some people can be greedy instead of doing what is for the greater good. Thus, unfettered markets will lead to a host of problems: environmental, social economic. People do sometimes opt for 'getting theirs now' over 'greater long-term rewards'. We see this in companies like GE and in agriculture where lands are overused then abandoned. Clear-cutting forest instead selective logging is yet another example. Perhaps they never heard about a golden goose.

Wherever the laissez-faire approach has been tried, it is eventually regulated due to the build-up of evils. To be sure there are still those that have not learned and still advocate for a hands-off approach.

Mitt Romney insisted that it isn't a question of regulation or no regulation. It is a question of how we update regulations as times change.

In the environmental arena we have the Wilderness Act, national parks and forests, clean air act, clean water act, soil services, etc, etc, etc because the unfettered marketplaces have led to great harm for society and the planet.

Thomas, good day.

To better understand the current implications of the structure of Adam Smith model systematically you have to look at it from two points of views:

a) From the point of view of environmental, social, population dynamics neutrality assumptions: Short term and very long term

Notice that those assumptions make the traditional market price an optimal market price, which can do NO social harm and No environmental harm, and which would not induce overshooting population dynamics.

b) From the point of view of when there are NO environmental, No social, and No population dynamic neutrality assumptions.

Notice that those assumptions make the traditional market price A DISTORTED MARKET PRICE in social and environmental terms, which as we know can do harm in the very long term as it leads to social problems and environmental problems, which lead to extreme overshooting population dynamics.

The goal of my writings since 1999 is to contrast the point of view “b” with the knowledge from point of view “a” from different sustainability angles to bring economic thinking beyond traditional market thinking and towards perfect green market thinking, perfect red market thinking and perfect sustainability thinking closing abnormalities affecting the sustainability of the traditional market and remove them using Thomas Kuhn’s paradigm evolution thinking.

If you are interested in this line of thinking you can browse my full publication record share in researchgate

https://www.researchgate.net/profile/Lucio-Munoz/research

Have a nice day

Lucio

Dear Arne, good day, Thank you for taking the time to write.

Can you place those comments within your answer to the question: What are the main current negative implications of Adam Smith’s legacy? Why it turned out this way?

Then we can have a positive and orderly exchange of ideas consitent with your views, and we go from there.

Respectfully yours;

Lucio

1. His summary model of exchanges in a craft economy in a British village in 1776 and the motives of the participants, who were bound by the constraints of that community, can't be scaled up to a national or global economy where the ties between trading participants are very different or missing.

2. When he wrote Wealth of Nations, with one or two exceptions, corporations didn't exist and firms were subject to community norms. Corporations especially multinationals are now unhinged from local obligations.

Why?

3. Economists and others have focused on a small selection of quotations from Wealth of Nations to the neglect of the broader philosophical framework that was his primary concern, in Theory of Moral Sentiments. The ethical canvas is missing from modern economics.

Good day Geoff, good day.

With all my respect, can you please place those comments within your view of the answer to the current question for a clear exchange of ideas in order to advance the natural growth of knowledge.

The question is: What are the main current negative implications of Adam Smith’s legacy? Why it turned out this way?

I do not think you are saying that economic thinking like the thinking of Adam Smith can not be scaled up, that he shared a model for that community only and that he thought the community was never going to grow up or expand or that his market idea was not going to be taken up by other communities, but reading your comment I am not sure if that is what you mean,,,,

if you share your view on the question, then I will reply to your view!

Respectfully yours;

Lucio

I will do my best to answer, Lucio.

1. Yes, the model of exchange in a craft economy based upon mutual benefits can be scaled up so long as the limitations are acknowledged. For example, a local baker's shop, it is in the baker's interests including pecuniary interests to offer good quality bread at a competitive price, and it is in my interest including pecuniary interest to choose the best value bread on offer.

In this respect, the law of supply and demand holds true and it is legitimate it to remain the core of most modern theories of economics.

2. But the exchange becomes more complicated when the baker is not a local resident using his personal ambition, but a tool of an international company whose objective is not to supply quality bread to customers but to make taxation-free profits for the shareholders in another country. Mutual obligations have been disrupted.

3. Adam Smith could not have been expected to foresee the rise of corporations through which the beneficial owners of the corporation (shareholders) don't get involved in the manufacture or sale of their products. He could not have been expected to foresee the rise of global finance for transfer of money from a local community to the other ends of the earth in less than a second.

4. I would read one or two biographies of Smith to gain a better understanding of his motivations and would especially read Moral Sentiments.

5. Modern economics has made too much of the motive of "self-interest" as a driver of exchange. Humans have both a self-interested and a civic-minded dimension. Public goods by definition aren't or aren't readily provided by commercial markets. The future of humanity depends upon the provision of public goods. All economic exchange is built upon public institutions and these are not amenable to simplistic supply-demand analysis- read Acemoglu.

6. Modern economics has erected a tall building on narrow foundations, a small part lifted out of Adam Smith's thinking to the neglect of insights from other parts of Smith and other scholarly disciplines. Modern economics has disconnected its model of exchange built upon rational self-interest from an ethical framework, but an ethical framework was not missing from Smith.

Dear Geoff, thank you for trying.

The question has two parts on purpose:

a) What are the main current negative implications of Adam Smith’s legacy?

And

b) Why it turned out this way?

There is a reason why those negative consequences/implications went from unnoticeable to impossible to hide(1776-1987) when the 1987 WCED commission highlighted the problem of social and environmental sustainability problems associated with Adam Smith’s business as usual model and pointed out the need to reflect those issues in economic thinking. The 1987 WCED pointed out then deep social unsustainability issues(social problems) and deep environmental sustainability issues(environmental problems) as proof that Adam Smith’s model had not work well for society and the environment, which it can be said that it had led to a world under overconsumption, overproduction, over population, and extreme overshooting behavior. The same issues pointed out by the 1987 WCED are here still today, but attention seems to be given to the environmental issue since 2012 Rio +20

Understanding this reason behind negative consequences also gives away the way to go from business as usual to away from business as usual through externality cost internalization theory as then we can see different ways of correcting the pricing mechanism of Adam Smith’s idea and use this to move away from current negative implications of traditional economic development or to point out how the market should have been price since the beginning to avoid such negative implications in the very long term.

But to understand the reason behind the negative consequences we need to go outside the traditional economic box as from inside the box is very difficult if not impossible to see how to fix, not patch, those negative consequences. So modern economic thinking or economic thinking as usual would not help you here as you need to look at this situation from beyond economic thinking as usual as you are entering a world of paradigm shifts where the knowledge base of the old paradigm does not work in the new paradigm.

I respect Adam Smith as a great thinker as I respect Karl Marx, but living long term under their ideas has had negative consequences for humanity, and the question for me became how to make their ideas current by respectfully showing how those ideas can be corrected today or how they should have been proposed in the first place during their time.

Geoff the new comment, even though I agree with the way you see things justifying your previous post is not consistent with the question, which is based on “current negative implications” and “how those negative implications came to be”

I do appreciate your time to comment Geoff.

Respectfully yours;

Lucio

I understand your quest a little better now, Lucio, but I am going to come back with a similar answer to the second part of your request. The problem is not "Adam Smith's ideas" but the corruption of his ideas – in Australia we would call it the "bastardisation" of his ideas. The problem has been the plucking of a small extract of his work and making it the centrepiece of an edifice; and that extract is not equal to the task.

Possibly you have already read Wealth of Nations and The Theory of Moral Sentiments and I would refer you to the complete body of Adam Smith's work to evaluate his ideas. Now if my argument is correct, in other words, the weaknesses of modern pro-growth, pro-self-interest economics are not because of the weakness of Adam Smith's conceptualisation of economic relations, then your quest become something quite different. You will then look to see how, when and by whom his model became distorted – you will investigate the mathematical, clinical work of Marshall et cetera; later the work of von Hayek; later still the appalling damage done to corporate ethics by Friedman's 1970 essay and a range of other regressive influences that have become embedded in modern economic thought.

The second limb of your question in effect is a question about economic history. JK Galbraith A History of Economics: The Past as the Present. London: Hamish Hamilton is a starting point for a study of economic history but that ended at 1987 and others such as Stiglitz and Piketty can augment the picture after that. I also refer you to John Quiggin's book Zombie Economics: How Dead Ideas Still Walk Among Us.

Referring now to the first limb of your question. I will attach two files that explain some of the negative implications of modern economics. As you will appreciate, there is a large literature on the weaknesses of modern economics and I advise you to recast your quest as: "What are the shortcomings of the narrow self-interested core of modern economics" rather than "What are the shortcomings of Adam Smith's ideas".

Geoff, thank you for writing. I am sorry, but you are getting very off the question.

My questions usually have short answers and the answers are usually linked one to one, which is the this case here. Part 1/the current negative consequences of the traditional market idea is linked to part 2/the why those current negative consequences came along. If you do not know/ list the consequences, how can you think about the why of something that is not known/listed?. So need to think part 1 first so you can think part 2.

We can simplify the question by for example using the 1987 finding of the WCED that among the problems that came along due to living in the world of the business as usual in the very long term were environmental problems, and ask ourselves, how/how could the traditional market model of Adam Smith have led/lead very long term to environmental problems?

See link : traditional market led to environmental problems, why?

Why do you think that the result of going long-term as business as usual led to environmental problems?

Respectfully yours;

Lucio

Clear cutting forests is acceptable for logging companies that look to maximize next quarters profits.

Mining companies extract ore and leave environmental hazards behind for someone else to deal with. Profit is the motive and no one was there originally to speak for the environment or those effected by the hazards.

The petroleum industry treats our air as a sewer. The entire world is left with climate change.

The environmental issues go on and on. Society and the environmental community are left to respond to the issues after they arise. Adam Smith's biggest failure is that he does not include society and the environment as, as equal participants Such a model would be more inclusive of all the issues, presumably leading to better decisions. Of course, this wouldn't be an unfettered economy so his entire premise falls apart.

There is another aspect. How close are all the participants in an economic activity to that activity. There was a study published, I believe it is called 'The Chesapeakes'. It began with the sustainable indigenous practices. Then it looked into early settler practices, again sustainable. Later, gentlemen farmers took over and became a norm. These gentlemen were removed from hands-on experience. They manage through others from an office, resulting in the degradation the land. The farther removed these gentlemen were from boots-on-the-ground, the worse their knowledge and the worse the decisions. These gentlemen made good decisions from their point of view; however, a ledger can't tell you what is best in the field.

Our capitalist system is another factor. The stock markets are often referred to as examples of perfect exchanges. For every willing buyer who thinks price will go up there is a willing seller who thinks prices will go down. Of course. that is way too simple. And the stock markets are regulated because people have unequal access to information first of all. And some people just cheat. While the stock markets are another example of how Adam Smith was just wrong, for this discussion it is more important to look at financial reporting. Every CEO of every public company is measured by next quarter's results. This short-term thinking is a disincentive for caring for the world. There are now mutual funds that favor socially and environmentally responsible stocks. This allows individuals a chance to participate in decision making through their investment choices. Some red states have moved to ban these from their portfolios deeming them too coercive on management.

Dear Arne, good day,

Again, thank you for taking the time to write.

I see you are listing some current negative social and environmental consequences of living under Adam Smith's world, but not cleared how you think they came about or how you think they could have been prevented.

Again, can you please place those comments within your answer to the two part question to: What are the main current negative implications of Adam Smith’s legacy? Why it turned out this way?

That will allow us to exchange ideas.

Respectfully yours;

Lucio

Very well Lucio, I will attempt to answer the first question as narrowly as possible.

The biggest environmental defect in the traditional economic framework is that scarcity is modelled within the economy that is being studied. From a mainstream economics point of view, outside the arena being studied there is an unlimited quantity of natural resources and energy, waiting to be harvested when the price is right. Price mediates scarcity. To scientists, this is nonsense. The natural world is absolutely limited and the limits of the capacity of environmental systems to maintain themselves are now being breached. One of the best expositions of this defect is the paper by Sanders that I attached to a previous post. Sanders explained that economics does not recognise absolute scarcity and regards all natural resources as interchangeable with other forms of capital such as financial capital.

One final comment before I sign off. I advise you to read a paper I wrote on the narrow, mathematical approach to economics. It is behind a paywall but if your library cannot obtain a copy, please get back to me at Griffith University

6.29.4.6

POLITICAL ARITHMETICK: PROBLEMS WITH GDP AS AN INDICATOR OF ECONOMIC PROGRESS

Geoff Edwards, Published online 2004 in the Encyclopaedia of Life Support Systems, UNESCO, Paris.

Lucio, you'll find answers to both questions in Tim Jackson's latest book, Post Growth - Life after Capitalism (2021).

Good day Erwin, Thank you for taking the time to write and sharing that citation.

If you have your own views on the question, please share them so we can exchange ideas/thoughts.

Respectfully yours;

Lucio