Adam Smith's model works as a first approximation of coordination.
But it breaks when:
-power concentrates
-information is uneven
-costs are hidden
-humans behave irrationally - the baseline, not the exception.
So markets don't always self-correct, they can lock into distorted patterns.
I keep telling people Adam Smith's 'Free Markets' were not free from rules, they were free from *rents*. Which, for example, occur when power is concentrated and information is hidden; allowing players to arbitrage between two market participants who don't know each other.
He was fully aware of all these things, except I do think he believed people would behave rationally in most cases – which is patently *not true*. Forex the stock market reactions to lies about Iran.
Pretty Gnostic Machine
Jack William Bell