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Antecedents to the crisis: Mandeville, Smith, and Keynes

Jonathan B. Wight (University of Richmond, Richmond, Virginia, USA)

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 9 November 2018

Issue publication date: 27 September 2019

Abstract

Purpose

The purpose of this paper is to present the methods of teaching about the global financial crisis (GFC) from a social economic perspective. Using primary texts from the history of economic thought, the moral underpinnings for collective social action are examined in times of economic depression. The deregulation of financial markets raises two questions: to what extent is deregulation the result of a misunderstanding about human nature and the behavioral lessons of social economics; and to what extend does deregulation ignore the moral lessons of Adam Smith’s invisible hand?

Design/methodology/approach

By reading sources including Mandeville, Smith, Keynes, Hayek and others, students form conclusions about the strengths and weaknesses of government interventions, both to fix, and to prevent, major recessions and depressions.

Findings

Two fallacies relating to financial market deregulation are that “greed is good” and that rational actors in the market will self-regulate leading to widespread prosperity. These moral beliefs supported financial liberalization, and ultimately contributed to financial institutions taking on enormous risks and losses that are ultimately socialized.

Originality/value

This paper innovatively uses readings from the history of economic thought to spark pedagogical discussions and debates about human nature and policymaking relevant to the GFC.

Keywords

Acknowledgements

The author thanks Porcher Taylor, who suggested teaching this course, Jean Wight, who helped edit the paper, and two anonymous referees, who provided valuable suggestions. The author of this paper has not made their research data set openly available. Any enquiries regarding the data set can be directed to the corresponding author.

Citation

Wight, J.B. (2019), "Antecedents to the crisis: Mandeville, Smith, and Keynes", International Journal of Social Economics, Vol. 46 No. 8, pp. 1018-1030. https://doi.org/10.1108/IJSE-04-2018-0190

Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited