People really take Adam Smith way too seriously. He lived at a time when the economy was made up of independent artisans not people working for large multinational corporations. If markets were really so good at regulating themselves why were any government standards necessary at all?
The reality is, every product has an asymmetry of information, and the more complex it is, the higher the asymmetry. And you can’t determine the quality of a product until you buy it. And determining quality takes time, which is a limited resource.
> the business will rightly fail
In reality, what stops bad behavior is regulation because in reality, people do not have infinite time and infinite information to assess each thing they consume.
> In reality, what stops bad behavior is regulation because in reality, people do not have infinite time and infinite information to assess each thing they consume.
Reputation is much easier to destroy and bad behavior is much harder to hide today than 50 years ago due to the easier spread of information.
There is still a huge spectrum of business behaviour that is not violating regulations. In the aggregate businesses who please their consumers more will thrive compared to those that don't.
Adam Smith is often used as symbol of laissez-faire capitalism but was explicitly a proponent for regulation in situations where the market failed, such as this one imagine.
What you probably mean is that people take the concept of the invisible hand too seriously. Which was a relatively minor point in the book, and has somehow been magnified to the point of absurdity by the economic and political trends of the last 40 years.
Adam smith is way more reasonable than you’d think, given how he’s portrayed in the modern era.
The reality is, every product has an asymmetry of information, and the more complex it is, the higher the asymmetry. And you can’t determine the quality of a product until you buy it. And determining quality takes time, which is a limited resource.
> the business will rightly fail
In reality, what stops bad behavior is regulation because in reality, people do not have infinite time and infinite information to assess each thing they consume.