Dr Alfred Duncan and Professor Charles Nolan discuss Adam Smith’s vision for banking and try to deduce how Smith might have approached some current issues in banking regulation.\u00a0<\/p>\n
To mark the tercentenary of Adam Smith\u2019s birth, Dr Alfred Duncan <\/a>and University of Glasgow’s\u00a0Professor Charles Nolan<\/a><\/span> try to imagine how the \u2018father of modern economics\u2019 might have applied his thoughts and ideas from 300 years ago, <\/span>to answer some of the challenges of today.<\/span><\/p>\n ‘Adam Smith promoted free banking\u2014private, competitive, convertible banknotes. He also supported restrictions on banks. We study Smith\u2019s views and the era in which they developed, suggesting his \u2018regulations\u2019 were a backstop against banks\u2019 risks to depositors but primarily monetary stability. In modern parlance, Smith supported macroprudential regulations to underpin monetary stability, as did Friedman and Schwartz the US FDIC. We discuss why Smith\u2019s vision for banking went unrealised. Bank regulation became microprudential and ran aground in 2008\/2009. The prominence of macroprudential regulation now provides a chance to reorientate regulation to support monetary stability. Early signs are not promising.’<\/p>\n Read this open access paper published by Cambridge University Press <\/a>on behalf of the National Institute Economic Review <\/span>here, <\/a><\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"