2004 Fiscal Year Final Research Report Summary
The evolution of Adam Smith's Theory of Banking
| Project/Area Number |
13630011
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
経済理論
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| Research Institution | Okayama University |
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Principal Investigator |
NIIMURA Satoshi Okayama University, Economics, Professor, 経済学部, 教授 (00167561)
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| Project Period (FY) |
2001 – 2004
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| Keywords | Adam Smith / Finance / Bank |
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| Research Abstract |
In this research, I consider the evolution of Adam Smith's theory of banking from his Lectures on Jurisprudence to The Wealth of Nations, with focusing on the relationship between the evolutional process of his theory and the economic issues in his days. Thus, I elucidates the multi-dimensional structure of Smith's thory of banking and the bank policy including both laisser-faire and regulations which apparently contradict each other.
At first, Smith was convinced that free competition of banks was effective enough to keep stability of economic order. However, after experiencing the exchange crisises in Scotland in early 1760s, Smith came to think that some legal regulations for banks were necessary. Furthermore, on facing the financial crisis and the bankruptcy of Ayr Bank in 1772, Smith became convinced that it was the most important for a bank to establish a reasonable and strict loan policy to escape a bad debt, Thus, Smith insists in The Wealth of Nations that free competition of banks, legal regulation, and bank's own reasonable lone policy are necessary in order to stabilize the banking system. Finally, I point that Smith shares some similar views with J.Steuart and J.M.Keynes concerning financial instability.
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