Rethinking Economics, the Role of Insurance: Adam Smith Upside Down—The Central Role of Insurance in the New Post-Industrial (Service) Economy
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AbstractIn the first page of The Wealth of Nations, Adam Smith described an apparently trivial issue, the making of a pin. In his search for ways to effectively fight poverty, he formulated the basis for a new view of economy based on the Industrial Revolution. Two centuries later, the perspective he developed remains intact and is largely outdated. It does not reflect the radical shift from an industrial to a service economy, which occurred during the later half of the 20th century and prevails today. Insurance, a very important component of the modern service economy, was and has been ignored or dismissed by past and contemporary economists. Founded on the principle of uncertainty, insurance now provides the basis for valuable insights into the unique characteristics of the service economy. A rethinking of economics is needed from this perspective.