What would Adam Smith say today?

Adam Smith might not have imagined how the industrial revolution could change the world. We live in another major inflection point today through the AI-invoked revolution.

Suh Kyoung-hoThe author is an editorial writer of the JoongAng Ilbo. “If he were alive today, how would Adam Smith (1723-1790) have responded to the emergency of this new ‘artificial hand’?” wondered Gita Gopinath — the first deputy managing director of the International Monetary Fund (IMF) on leave of public service from Harvard’s economics development — as she spoke on the “power and perils of the artificial hand” at an event at the University of Glasgow on June 5 marking the 300th anniversary of his birth.

She and other influential economists, including Nobel Prize winner Angus Deaton, joined a series of events from June 5 to 10 deliberating on the modern meaning of the Smithian thought on the occasion of the tercentenary of the great thinker at the Scottish school he had studied and lectured.

Gopinath first highlighted the gains from the new technology based on the Goldman Sachs report which said artificial intelligence (AI) could boost global output by 7 percent, or around $7 trillion, over the next decade, which is more than the combined size of the economies of India and the UK. In his most famous work, “The Wealth of Nations,” Smith argued that the wealth of a nation is determined by the living standards of the people and that those standards can be raised by lifting productivity — the amount of output produced per worker. The global productivity growth has been slowing, but “AI could certainly help reverse this trend,” the chief economist at the IMF claimed.

She said that AI can raise productivity by automating certain cognitive tasks and replacing routine and repetitive ones to allow workers to spend more time on being creative innovators and problem solvers. The benefits would be greater on newer and low-skilled workers as AI can spread the knowledge of the experienced and productive workers. She cited recent empirical studies pointing to AI reducing job-market polarization by putting downward pressure on wages of high-paying jobs.

Still, there is the possibility of AI adversely affecting the labor market. As economist Daron Acemoglu at MIT argued, AI could simply replace human jobs without creating new and more productive work for humans to shift to. Gopinath also cautioned about humans coming to rely on AI judgement which could be based on bias and false information to cause “hallucination” under the wrong hands. ”If we cede control to AI in areas such as medicine and critical infrastructure, the risks could be severe and even existential,” she said. Without specifically naming companies like Nvidia, she stressed that the market for the components to develop AI tools is highly concentrated. “A single company has a dominant position in the market for silicon chips best suited for AI applications,” which would have distressed Smith as he was interested in an economy that worked for everyone — “not simply a chosen few,” as he had criticized the mercantile trade system under which England sought to expand its exports at all cost with too much market power being concentrated in the hands of companies granted trading monopolies.

Smith also might have “realized that the invisible hand alone may not be enough to ensure broad benefits to the society,” she said, claiming “we urgently need sound, smart regulations that ensure AI is harnessed for the benefit of society.” To confront the power and perils of the artificial hand, “we need to summon every ounce of our empathy and ingenuity — the very things that make human intelligence so special.”

The world has been honoring the tercentenary of Adam Smith with various events. Scholars in Korea also have been holding a host of events. I attended a forum “The Liberal Path: Adam Smith and the Korean Society,” co-hosted by the Korea Hayek Society and the Korea Economic Daily last week.

At a symposium to commemorate the 300th birthday of Adam Smith in Seoul, Eamonn Butler, director of the Adam Smith Institute, one of the world’s leading neoliberal think tanks, lectures on the great British economist online, June 7. [SUH KYOUNG-HO]

Judging the market with imperfect intelligence In the opening address, Min Kyung-kuk, chairman of the Korea Hayek Society and a professor emeritus at Kangwon National University, stressed, “Natural freedom based on the respect for human dignity, property, and social contract has the self-problem-solving ability to bring about peace and prosperity.” But sadly, he continued, “People are oblivious to the wonders of the self-regulating order and instead rely on imperfect knowledge to judge the market’s self-regulating order.” Both the rightist and leftist are ignorant of human character, freedom, and market, the professor said. “They made the mistake of defining Smith as a scholar who firmly advocated for unfettered liberalism and cold-blooded self-interest.”

It is wrong to regard Smith as being contradictory for highlighting the intrinsic capacity to feel and sympathize with others in “The Theory of Moral Sentiments” while championing the essence of capitalism in “The Wealth of Nations,” Prof. Min argued. He added, “Some even joke that “The Theory of Moral Sentiments” was written by Adam and “The Wealth of Nations” by Smith. “But the essence of the market economy is justice, not self-interest. Justice means no infringement of freedom, property and dignity. Moral rules — such as civility, politeness, a respect for integrity and possession, and keeping promise — and the structure of determining prices lead an order, not the invisible hand.”

Just as Smith criticized the mercantilism in which the select minority monopolize the benefits, the speakers at the symposium in Seoul worried about the “rent-seeking practices” of the privileged groups, as seen in the artificial regulation on competitions for licensed professions like doctors and lawyers. “The systematic barriers for entries always hamper innovations and breed the motivations for interest groups to maximize their self-interest,” said Choi Chang-kyu, an economics professor at Myongji University. “Supply instability is the general reason for the shortage of workers in a certain occupation and their exceptional high pay.”

“An incompetent government is not capable of protecting the individual freedom and properties or allow free trade,” said Prof. Min. “Such government can be exploited by interest groups — or prompt self-interest-seeking behaviors — to eventually kill the motivation to diligently work and save for the future in economic participants.”

‘Judges should be paid by litigants, not the state’ “Adam Smith is not antique. His legacy goes beyond the time and space and has meaning today,” Prof. Min said. I sympathized with his conclusion. The economy for all — not for a precious few, as emphasized by Smith — still remains a challenge for Korea today. The doctors’ association engrossed in selfish interests won’t be any different from the guilds Smith had abhorred.

Smith even argued that judges should be paid by those involved in the litigation — not by the state — as they would hasten to proceed cases under their responsibility with their self-interest on the line. His advice could solve much of the chronic problems of a lengthy trial process that seriously impair the rights to speedy trial for Koreans.

Lee Seung-hoon, a professor emeritus at Seoul National University, said that Smith could frown at Korea’s success model based on government-led growth and exports-oriented economy in disregard to the cross-border division of labor. The year Smith published The Wealth of Nations in 1776, James Watt unveiled the modern steam engine. He might not have imagined how the industrial revolution could change the world. We live in another major inflection point today through the AI-invoked revolution.