Two hundred years ago the first liberal economist, Adam…
“Two hundred years ago the first liberal economist, Adam Smith, warned businessmen that they could absorb only a certain amount of rigidity. In the easy days after World War II... wage rises could be financed out of inflationary price increases.”
About This Quote
This interpretation was drafted with AI assistance. It is one reading of the quote, not the author's own explanation.
Adam Smith warned that firms can only tolerate limited rigidity; after WWII, wage hikes were covered by inflationary price rises, highlighting limits of growth‑driven policies.
In simple terms: Businesses can’t handle endless rigidity; inflation‑driven wages have limits.
Key Takeaway
Recognize structural limits in wage‑price dynamics.
Themes
economics
inflation
labor markets
business strategy
Mood
analytical
cautious
Type
economic
historical
When to use this quote
- policy making
- corporate budgeting
- salary negotiations
- inflation forecasting
Key Concepts
rigidity
inflationary financing
post‑war growth
Questions to Reflect On
- How does inflation affect wage sustainability?
- What alternatives exist beyond inflation‑driven pricing?
A Different Perspective
Assumes all firms face identical rigidity thresholds, ignoring sector differences.