“It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.” Adam Smith, The Wealth of Nations
A tender medallion of steak, a foaming pint of bitter and a crusty roll still hot from the oven — no wonder that Adam Smith chose an alliterative trio of artisanal food providers to make his point about the benefits of capitalism. If he had chosen a junk bond salesman, a fund manager, and a quantitative analyst, wielding a Gaussian copula in an effort to price a synthetic credit derivative, his defence of the market mechanism might not have resonated down the centuries in quite the same way.
Smith’s point was a good one. We are unlikely to give our custom to butchers who poison us, brewers who serve foul beer or bakers who overcharge; food sellers find it profitable to serve decent food at reasonable prices. The system needs some oversight — hygiene inspectors, trading standards officers, the Competition Commission — but the main engine of quality is the market mechanism. People prefer cheap and delicious food to food that is pricey and tastes horrid — and that fact alone delivers more than regulators ever could.
Tim Harford, “Why can’t banking be more like baking?”, TimHarford.com, 2013-11-05
May 25, 2014
QotD: Free markets and quality
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