Working Papers, Department of Economics, Rutgers, the State University of New Jersey 2010,04
Adam Smith and Milton Friedman are famous for championing Laissez Faire, yet both supported government regulation of the banking system. In both cases their deviation from free market orthodoxy was based on a careful reading of financial history: especially Smith's reading of the Crisis of 1772 and Friedman's reading of the Crisis of 1929-33. In both cases they based their reading on a complex and nuanced account of human nature. This paper describes their parallel journeys to the conclusion that banking requires government regulation.