In her book, The Unknowers, How strategic ignorance rules the world (2019), Linsey McGoey analyses arguments that Adam Smith made in his seminal eighteenth century economic treatise The Wealth of Nations. Free-market economists use Smith’s work to justify their economic philosophies but McGoey explains that The Wealth of Nations was made up of five ‘books’ the last of which is not normally part of published versions. Book 5 advises that governments need to take action to prevent markets being distorted by people who operate only for their own self-interest.
McGoey quotes Smith: ‘The interests of dealers, however, in any branch of trade or manufacture, is always in some respects different from, and even opposite to, that of the publick.’
According to McGoey, Smith defined 3 orders of people:
- First order: wealthy, landed gentry who lived off land rents and were made stupid by their wealth because they did not need to think about how to make money.
- Second order: wage labourers who were dulled by the pressure of their occupation and lacked education.
- Third order: the merchant class, the employers that lived by profit, had the ability to think more clearly about their own self-interest than the other two.
By this analysis, we have a ‘merchant class’ that are good problem solvers who turn this ability to their own ends and do not address the public good. That markets do not address public good issues is well accepted but McGoey’s view is that the when the merchant class put forward false arguments to justify their actions, their promotion of ignorance can be strategic.
For example, she summarises the marginal productivity theory of income distribution (that has had an important impact on economic thinking) as: ‘Under perfectly competitive markets, the remuneration that people receive from different economic activities tend to align naturally with the economic value that they have contributed to society.’ This theory is criticised on the basis that none of the assumptions are valid and it cannot be tested – that it is a fiction promoted by the merchant class to justify them taking a disproportionately large proportion of profits.
One action to counter strategic ignorance would be to make changes to the Companies Act that required directors to be more concerned with the welfare of employees and with environmental issues. Fat cats taking all the cream for themselves should at least be vieweed as unacceptable behaviour. A new ethos as to what is and what is not acceptable in business is needed.