Inside the Adam Smith Institute

Now that the new Adam Smith website is up, with an exciting plethora of activities and reports scheduled, new readers might like to take stock of what the ASI does, and what motivates us. If labels are used, they might be "free market" and "libertarian," but these are big tents under which disparate people are grouped. The crucial thing is that our free market libertarianism is both consequentialist and empiricist, combining an essentially Hayekian economic outlook with a deep optimism about the world.

In our view actions that enable individuals to advance their happiness by pursuing their own goals are worthy of support, and those that restrict their ability to do that should be opposed. We are more concerned with what results from actions than with the intentions or attitudes of those who initiate those actions. And we are more concerned with changing the world for the better than with promoting theories about it.

As empiricists we make conjectures about the world and its future, and we test their value against experience of real world outcomes. Where the two conflict, it is the conjecture that has to be rejected or modified. We take the view that "an ounce of practice is worth a pound of theory."

While economics and public policy are complex fields that make experiment and testing difficult to perform, we do attempt to test proposals by their results. Several times we have proposed small-scale trials of larger ideas in order to validate the ideas and ascertain any unforeseen drawbacks before they are rolled out more widely.

We recognize, of course, that poor people do not have access to the choices and chances accessible to the rich, and this is why many of our policy initiatives are directed to improving the lot of poorer people in society. We have advocated for many years that the income tax and national insurance thresholds should be set at the level of the minimum wage and indexed to it, so we would not be taxing people on the bottom income level.

Some of our research studies and policy suggestions derive from our recognition that poor people are hurt most by things such as restrictions on international trade and migration, planning controls that prevent cheap housing from being built, education policies that condemn poor children to bad schools and regulatory policies that protect established market players from new entrants.

We propose and back policies that give all parents choice over where their children go to school and which introduce competition into the school system, whether these be by education vouchers, or by allowing the allocation of state funds to schools be determined by the choices parents make. We tend to back the view that welfare is not just about providing the services the state thinks poor people should have, but about equipping people with the means to make their own choices about the mix of services they prefer. Ideas such as a negative income tax could remove the perverse incentives present in the current welfare system.

We recognize that states can cause a great deal of harm when they attempt to direct and micromanage the economy. Many regulations have damaging effects that were not anticipated, and this includes financial regulations that can make financial systems more unstable than they would be without them.

More broadly, we think that the ‘unknown unknowns’ of regulation should lead society to prefer decentralized trial and error to the risk of one big mistake that affects everyone in the same way.

We have argued that the central bank should follow the ‘Hayek rule’ – the stabilization of the level of nominal spending in times of booms and busts along a predictable path. Scott Sumner recently delivered our annual Adam Smith Lecture and explained how the failure of the world’s central banks to do this led to the Great Recession.

In the Adam Smith Institute we have always been very optimistic about technology and society. We see the world becoming increasingly open and tolerant in most (though not all) areas, with technology and entrepreneurship helping to drive that. To us, companies like Uber, Google and Airbnb deserve to be celebrated when they break down barriers to competition and disrupt the existing way of doing things in ways that give consumers a better product for a lower cost. It is this kind of innovative entrepreneurship that moves the world forward and allows today’s luxuries of the very rich to be tomorrow’s household commonplaces.

There is a dark side when new technologies are used by governments to spy on their citizens and control them. If technologies like Bitcoin and other blockchain-based innovations represent a long-term way of evading the worst excesses of government intrusion, they should be defended from government now while they are still in their infancy.

Of course the Institute is not a monolith. It consists of people who sometimes differ, but all of whom are brought together by a desire to give more power and liberty to individuals, so that their regard to their own interest can make them and us richer, freer and happier.