Sentiments and Motivations in Adam Smith and Vernon Smith

Vernon Smith (VS) discovered Adam Smith (AS) late in his professional career, and has adopted ideas from The Theory of Moral Sentiments to explain findings in experimental economics. Most important is the theorized link between moral sentiments and the evolution of property rights and law as foundations for commerce. VS's encounter with AS, while not new, provides a compelling look at the modern laboratory of social science through the lens of the Enlightenment, and cannot easily be encapsulated within a utilitarian framework. This paper provides an overview and commentary on VS's approach.     

Vanity and the love of system in Theory of Moral Sentiments

Abstract

Some recent writing on Adam Smith's Theory of Moral Sentiments has emphasised the importance of vanity as one of the most important human motivations. This reading leads to a new version of Das Adam Smith Problem, but this is unwarranted. Such a reading tends to conceal the significance that Smith gave to the love of system, which motivates the actions of the philosopher, the man of state, and above all the entrepreneur. This paper shows, by contrast, that by using this conception we can relate Theory of Moral Sentiments to Wealth of Nations, and reject the idea that these works are based upon contradictory assumptions.     

The Treatment of Smith's Invisible Hand

Adam Smith used the metaphor of an invisible hand to represent the instincts of human nature that direct behavior. Moderated by self-control and guided by proper institutional incentives, actions grounded in instincts can be shown to generate a beneficial social order even if not intended. Smith's concept, however, has been diluted and distorted over time through extension and misuse. Common misperceptions are that Smith unconditionally endorsed laissez-faire markets, selfish individualism, and Pareto efficiency. The author draws upon recent literature to clarify Smith's meaning and to discuss ways of improving its classroom presentation. The author argues that the invisible hand operates within a variety of institutional settings and that a number of arrangements are compatible with economic progress.     

In defence of Adam Smith's theory of value

Abstract

This paper defends Adam Smith against his critics on his ‘additive’ theory of value as well as his theory of ‘falling rate of profits’. It argues that Adam Smith did not forget the raw materials, and so forth, in his resolution of the price into wages, profits, and rent, and that the constraint binding on the total income was also taken into account by treating rent as the residual. It further argues that there is no fallacy of composition in Smith's explanation for the ‘falling rate of profits’. It was explained on the basis of rising real wages and the farmers’ inability to shift the burden of the rise in wages from profit to rent in the context of a growing economy.     

Rhetoric and logic in Smith's Description of the Division of Labor

Abstract

This article analyses the first chapter of the Wealth of Nations, where the division of labour is defined and its effects described. It first shows the rhetoric and logical effects that are used to win the reader's goodwill. Then it reviews nineteenth century debates on the validity of the theory. Finally, it cites three real cases, where the division of labour does not increase the productive power of labour. In conclusion, it suggests that the theory on division of labour appears to require some adjustment, while acknowledging that some of the facts underlying arguments in its support are naturally true.     

Visible and invisible order. The theoretical duality of Smith's political economy

The aim of the paper is to show that Adam Smith elaborated a distinctive image of nature related to economic discourse. In Smith, visible events (or interdependencies) must be connected to invisible principles which, in particular, should provide an explanation of the self-coordination processes (especially that of market). In a broad sense, this approach was adopted by a number of disciplines in Smith's time (especially the sciences of life), which focused the analysis of the organization of complex systems. Moreover, the conceptual pair (visibility and invisibility) is connoted in terms of theoretical duality, and the paper attempts to demonstrate how such duality is reproduced in Smith's economic categories.     

Smith's theory of actions and the moral significance of unintended consequences

Abstract

An important clue to the ambiguity in Smith's attitudes towards commercial society may lie in his disaffection with natural distributions; with distributions based on unintended consequences. The absence of proportionality between motives and outcomes dooms the morality of commercial society, not the mere absence of an ethical dimension to human character. Through the analysis of actions, we find correspondence between the three economic states of the Wealth of Nations and the three social states of the Theory of Moral Sentiments. Thus, re-distribution is important in the moral evaluation of commercial systems. Unintended consequences are neither a source of moral strength nor a safeguard against injustice.     

An Archaeology of Adam Smith's Epistemic Context

Abstract

Adam Smith played a key role in Foucault's archaeology of political economy. This archaeology, which Foucault accomplished in The Order of Things, is the focus of this article. Foucault may have disagreed with the writings of the classical political economists but he widens our perspective through new possibilities of understanding. It is very illuminating to understand Smith's thinking as following a discursive practice that economic thought shared with the knowledge of living beings (natural history) and language (grammar). Foucault's archaeology highlights some ontological and epistemological conditions that shed light on some of the pillars of Smith's thinking: the centrality of exchange, the division of labour and the labour theory of value. The proximity between Newton and Smith is also examined in ontological and epistemological terms which can be understood through an investigation of that interdiscursivity practice. Beyond testing Foucault's considerations, our aim is to demonstrate their potential for the current scholarship of Smith's works. Foucault's archaeology of knowledge offers a range of elements that warrants greater analysis by historians of economic thought.     

Adam Smith's theory of economic history and economic development

Abstract

The aim of the paper is to show that Smith has a theory of economic history grounded in a politico-economic modeling (as well as a sort of economic theoretical modeling). In terms of the politico-economic approach, in the Wealth of Nations (Book III.ii–iv) Smith tried to offer a systematic account of economic development from feudalism to capitalism in Europe. These lead to suggest that the seeming internal inconsistency between the natural and the actual courses of progress in Book III may be resolved, and that Smith may be treated as a precursor of Douglass North, who stressed an inextricable link between the polity and the economy in economic history.     

Adam Smith's Ethics and the “Noble Arts” 1

Adam Smith's character-based ethical system lays the foundation for his vision of the social and economic good. Within this system, the arts perform a critical role. Smith's essays “Of the Imitative Arts” and his Lectures on Rhetoric and Belles Lettres are useful companions to The Theory of Moral Sentiments in analyzing the mechanisms whereby literature and the arts excite moral development. The arts stretch the boundaries of imagination and perspective, stimulating self-awareness and self-reflective growth. When combined with rational thought, decision-making takes place through an internal dialogue in which this wider perspective weighs upon one's “impartial spectator” and becomes the background for action. According to this view, the arts provide positive externalities for society and should be encouraged through public policy. The arts promote a conversation that becomes part of the common goods of society, including that of science.     

How did it all begin? Adam Smith on the early and rude state of society and the age of hunters

Abstract

Scholars tend to examine Smith's historical approach as a whole from the perspective of the four stages theory. This leads to a neglect of Smith's ability to use history in different ways as his different purposes require. This article distinguishes Smith's recourse to primitive society with respect to his purposes in Wealth of Nations and in Lectures on Jurisprudence. In the former, Smith analyses the capitalist economy, thereby laying emphasis on capital and the division of labour in his account of wealth. In the latter, he explains the evolution of institutions in order to challenge contractarian accounts of government.     

From merchants to speakers: The common origins of trade and language

Abstract

Adam Smith argued that division of labour and language are linked to the concept of persuasion. However, this paper asserts that trade in the long term and linguistic communication have their roots in trust and probity since both imply some sort of mutuality. If not, neither one nor the other would occur as strategies in repetitive games show.     

Nicholas Kaldor on Adam Smith and Allyn Young

ABSTRACT

Nicholas Kaldor was much influenced by the Smith-Young view of increasing returns. The objective of this paper is to critically examine Kaldor’s interpretation of Smith and Young. In particular, five questions are addressed: (1) Does Smith’s Wealth of Nations have nothing much to contribute in terms of disequilibrium theory or increasing returns after the middle of chapter four? (2) Did Smith and Young have a sectoral view of increasing returns in the sense that they saw increasing returns being confined to manufacturing only? (3) Does the Youngian growth mechanism need to be supplemented with Keynesian aggregate demand so that growth does not fizzle out? (4) What are the important policy differences between Kaldor and the Smith-Young analysis of increasing returns? (5) Finally, what explains Kaldor’s interventionist bent of mind and his dirigiste approach to policy making?     

Economic Efficiency,the Economics Discipline,and the “Affected-With-A-Public-Interest” Concept

This paper examines Adam Smith's explanation of the stability of a competitive market. An initial hypothesis in the paper holds that the mechanism described in The Wealth of Nations has nothing to do with production costs, longterm, or sympathetic relationships. My proposal draws on the literature that evokes the decisive influence, acknowledged by Adam Smith, of institutions over the behavior of individuals. The argument is that Adam Smith's natural rates are a collective pattern that provides the basis for consistent expectations. Smith proposes this pillar to support the construction of a spontaneous order: Coordination through the market is a stable mechanism because it allows for an adjustment of plans grounded in consistent expectations.     

Adam Smith on the subordination of wage-earners in the commercial society

Abstract

Adam Smith's discourse on wage labour is both original for its time and complex. While Smith indisputably considered the substitution of serfdom by wage labour as an improvement in both opulence and independence, we argue that he nevertheless saw the wage relationship as one founded on subordination. We then cast light on the material factors and symbolic mechanisms which, in his writings, explain how and why the worker agrees to this subordination. Finally, we endeavour to show that Smith's praise for the system of natural liberty as well as his repeated criticisms of merchants and capital owners aimed to transcend this issue.     

Pod learning: Student groups create podcasts to achieve economics learning goals

In this article, the authors examine two ways that they use music (i.e., popular song lyrics) as an active learning technique in an undergraduate history of economic thought course. First, they use music to help students grasp the ideas of the great thinkers in economics and see their relevance today. Second, because they require students to read original texts and write thesis-driven essays, they use music to teach essential skills related to such assignments. While the article focuses on how they use music as a pedagogical device to teach the history of economic thought, the use of music to teach essential skills could be applied to any economics course in which students engage in higher-level reading and writing.     

Labour employed in production and labour commanded: a Ricardian conjecture

This paper explains the origin of some important ambiguitiesin the analysis of value and prices put forward by Smith inhis Wealth of Nations by considering the possibility that theyreflect a previous draft of the book where the quantity of labouremployed in production was indicated as the sole determinantof real price and exchange ratios. This conjecture is evidencedindirectly by the way in which Smith presented his own analysisat the end of Book I, Chapter IV; by some passages containedin Book I and Book II which suggest that the quantity of labouremployed in production should play a crucial role within theanalysis of exchangeable value; and by the important modificationsintroduced by Smith in Book I, Chapter VI, after the first editionof the Wealth of Nations was published.     

Adam Smith and the division of labour: is there a difference between organisation and market?

The paper claims that, in The Wealth of Nations, the divisionof labour refers simultaneously to two different things: a socialdivision of labour and an organisational division of labour.The central point is that the organisation of work (the organisationaldivision of labour) in the firm is the logical counterpart ofthe social division of labour, and that these reflect two inseparableaspects of the process of the division of labour. Smith is thusconcerned with organisations as well as with markets, each functioningaccording to the same principle. Hence, Smith does not believethat the organisational and the social divisions of labour arefundamentally different, although he does recognise some variationbetween them and describes different states of the divisionof labour within the firm, liberal and capitalist.