Vanity and Luck in Adam Smith’s Economic Growth

Mostly Economics

Maria Pia Paganelli of Trinity University in this new paper:

What are the causes of prosperity? In addition to saving, capital accumulation, and good institutions, Adam Smith explains opulence through vanity and luck, two variables we tend to forget today. For Smith, wealth comes from our propensity to better our condition, combined with freedom and the security of the law. The propensity to better our condition is grounded in our vanity, and can take the form of both parsimony and prodigality. The laws that guarantee freedom and security seem to be more of an accident of history rather than deliberate attempts to create prosperity. For Smith, vanity and accidents play a relevant role in economic growth.

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