Adam Smith’s Answer to Arthur Lewis

This is an imaginary letter that Adam Smith could have written to Arthur Lewis, if as in my imagination, the two could have communicated with each other.

Dear Mr Lewis

I read with great pleasure and interest the account that Mr Boianovsky gave of your understanding of my work. It pleases me to see that you found a use for it.

We share many interests indeed. We both care about the causes and nature of the wealth of nations, and we both try to understand how it increases and how it affects people’s life via institutional change. I am told that in your days you have some distinction between economic growth and economic development, growth meaning an increase of wealth within the same institutional setting, and development a change of that institutional setting. As you well know, it is difficult for me to see that distinction. As wealth increases, social, political, and economical institutions will have to change to adapt to the new conditions. Strange, then, that some of your contemporaries see the two processes as separated. Maybe it is because, to my great surprise, they do not pay much attention, if any at all, to institutions. I am glad you also, like me, pay attention to them. You see, I, like you, also wrote before Douglass North, and I do believe, probably even more strongly than you, that institutions are the key to understand what goes on in an economy.