Chapter 9: Adam Smith on the Abuse of Markets

This chapter discusses key insights from Adam Smith’s economic book The Wealth of Nations in relation to his philosophy book The Theory of Moral Sentiments. When considered together, it becomes clear that for Smith, markets are embedded in society, and together with the state and the community economy make up the economy. Moreover, he attached specific moral values to each of the three economic domains: freedom to the market, justice to the state and caring (‘benevolence’) to the community economy. He argued that every well-functioning economy forms a balance between these three domains and their values. This insight helps to explain the failure of the EU Trading System (ETS) in carbon emissions. Preventing climate change is not a matter of free choice but of a combination of justice and caring for the earth, nature and humanity.