Adam Smith as a Model for the Modern Monetary-Policy Economist

Main Points

• One of the most important lessons we can learn from Adam Smith is his methodology. Ultimately, he relied on economic history to determine which institutions and policies were worth adopting and which should be rejected.
• Smith did not eschew quantitative research. Unlike much of the economics profession today, he did not start with an abstract, stylised model and then apply it to the real world.
• We can gain many useful insights into current monetary problems by considering analogies between the problems Smith analysed and those of our own time. The most important lesson we can learn is the value of careful generalisations based on intense examination of the origin and evolution of monetary institutions and policies.