Professor Cecilia Rouse, who served as Chair of the Council of Economic Advisers for President Joe Biden’s Government between 2021 till 2023, questioned the role of the public sector in the economy at the University of Glasgow’s third and final Hunter Foundation Lecture of Adam Smith’s tercentenary year.

Professor Rouse was 30th Chair of the Council of Economic Advisers, nominated by President Joe Biden. She was the first Black American to hold this position.

Professor Rouse delivered her talk on ‘Government’s Role in Today’s Economy: What would Adam Smith Say?’ at the British Embassy in Washington DC on 19 October. It was the third lecture to be funded by The Hunter Foundation, a proactive venture philanthropy that is based in Scotland.

“When we hear the name Adam Smith, we think of the free market,” said Professor Rouse. “In its simplest terms his economic model emphasises that prices can help allocate resources to their most productive uses.” Such thinking influenced the USA’s adoption of favouring the private sector over the public sector in the 1980s and 90s. However, Professor Rouse cautioned, this was an overly simplified way of interpreting Smith, perhaps by those who had not read The Wealth of Nations. “While Smith certainly believed in the virtues of the private market, he also recognised its limitations.”

Subsequently, Professor Rouse argues, “this retreat of the U.S. public sector from economic activity has played a role in some of the greatest economic challenges in this country. For example, average productivity gains have slowed in the past 75 years. The reasons for this slowdown are not fully understood, but arguably one factor has been an overreliance on the private sector.”

She also stressed that investing in childcare is one of the most productive investments in human capital a society can make. “I believe that were Adam Smith advising policymakers today, he would advise that if they want to maintain and improve quality of life, the U.S. must accept that a well-functioning and adequately resourced public sector must partner with the private sector. And I believe he would include the market for childcare as a prime example for this model.”

Professor Sir Anton Muscatelli, Principal and Vice-Chancellor of the University of Glasgow, said:

“It was a privilege to have Professor Cecilia Rouse deliver the final lecture in our Adam Smith Hunter Foundation Lecture series. Professor Rouse is an outstanding economist who stewarded the US economy through one of the most tumultuous periods in its history, and who has made a substantial impact in the field of social sciences and public policy.

“Professor Rouse joins global speakers of exceptional calibre who have contributed to the dialogue around Adam Smith during his tercentenary year, demonstrating how his powerful legacy has shaped the discipline of economics and indeed society as we know it today.”

Sir Tom Hunter, entrepreneur, philanthropist and founder of the Hunter Foundation said:

“As the founding father of modern economics, it's important we celebrate Smith’s role in the Enlightenment and learn from his legacy. It was our hope in supporting the University of Glasgow’s Adam Smith 300 lecture series, that we as a nation would reassess business creation and its role in supporting the public services we all rely upon. Without the economic growth business delivers, those services, as we are already seeing, diminish and those least well off in our society suffer the most.

“This final lecture with Professor Cecilia Rouse brought a global focus to this conversation and the Hunter Foundation is delighted to have supported this event series in reaching this global audience.”

Gita Gopinath, Deputy Managing Director of the International Monetary Fund (IMF), and Nobel Prize winner Professor Sir Angus Deaton, both delivered Hunter Foundation lectures in June for the University of Glasgow’s Adam Smith Tercentenary Week.

 

First published: 18 October 2023

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