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What Makes Markets Tick: The Rules of Adam Smith

By Nivine Richie

This Financial Times video reviews the rules of Adam Smith and what makes markets successful

Rule #1. Markets work best when as many people as possible are involved

Rule #2. Markets are most efficient when prices are transparent to many participants

Rule #3. Managers must have a stake in the business and bear responsibility if something goes wrong

Rule #4. Money is embedded in morality and social relations

For discussion

  • How have these rules been violated in modern financial markets?
  • Why would some of these rules be easier to follow in markets dominated by small business than in markets dominated by large corporations?
  • How does the complexity of modern financial markets make these four rules difficult to follow?