Adam Smith, Publick Works, and Nuclear Policy

Since the Treaty on the Nonproliferation of Nuclear Weapons entered into force in 1970, the peaceful uses of nuclear technology in electricity generation and medicine have been incorporated into international markets. However, nuclear markets are imperfect. This paper focuses on the properties of the nuclear industry that lead to “market failure”, where markets do not necessarily result in socially efficient outcomes. These properties in the production or consumption of a good or service are (1) public goods, such as advances in science; (2) positive or negative externalities, such as nuclear weapons technology proliferation; (3) asymmetric information and uncertainty, where an insurer or financier cannot determine whether the client is acting with due care and due diligence; and (4) increasing returns to scale, such that a “natural” monopoly could be established. Because of these properties, the nuclear industry is a quintessential “publick institution” providing “publick works”, as identified by Adam Smith in 1776. Furthermore, exploding demand for non-fossil generated electricity and declining access to medical radioisotopes requires a review of the public-private boundaries in international nuclear markets while continuing to uphold nonproliferation standards. For these standards to be effective, every nation and firm must adhere to nonproliferation agreements.