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.     

The figure of Smith: Dugald Stewart and the propagation of Smithian economics

Despite the persistence of interpretive differences over the substance of Adam Smith's economic and political writings, in the last two decades historians of economic and political thought have done much to establish distinctions between the figure of Smith and the original subject. This paper examines a subset of issues surrounding what we call the Transmission questionnamely, the process which led to the forging of the figure of Smith as the apostle of economic liberalism that he is widely, if not universally, thought to have been. It is not primarily concerned with what Smith actually said but rather with the figure of Smith; with how and why it came to acquire some of its most characteristic feathers under the direction of Dugald Stewart.     

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?     

市场、政府与经济增长——亚当·斯密的经济思想评述

经济学之父亚当.斯密最早系统地分析了财富增长的源泉及促进财富增长的制度安排。文章在总结亚当.斯密的经济增长理论基础上,揭示他关于市场机制、政府与经济增长的关系的认识,并探讨其对我国经济增长的现实意义。     

Adam Smith versus Sima Qian: Comment on the Tao of markets

In contrast with Professor Young's views ( Pacific Economic Review , 1, 137–45), this paper argues (1) that Adam Smith came to his conclusion about the "invisible hand" before 1766, and hence the intellectual debt, if any, of Smith to the great Chinese historian Sima Qian via the agency of Turgot and the two Chinese visitors is minimal; and (2) that the allocative function of the price mechanism is explicit not only in The Wealth of Nations but also in Adam Smith's lecture notes and other writings from his years at Glasgow University before he left for Europe in 1764.     

Mirror neuron research and Adam Smith’s concept of sympathy: Three points of correspondence

In The Theory of Moral Sentiments, Adam Smith asserts that humans have an innate interest in the fortunes of other people and desire for sympathy with others. In Smith??s theory, sympathy is an imperfectly reflected combination of emotion and judgment when one observes someone (the agent) in a particular situation, and imagines being that person in that situation. That imagination produces a degree of interconnectedness among individuals. Recent neuroscience research on mirror neurons provides evidence consistent with Smith??s assertion, suggesting that humans have an innate capability to understand the mental states of others at a neural level. A mirror neuron fires both when an agent acts and when an agent observes that action being performed by another; the name derives from the ??mirroring?? of the action in the brain of the observer. This neural network and the capabilities arising from it have three points of correspondence with important aspects of the Smithian sympathetic process: an agent??s situation as a stimulus or connection between two similar but separate agents, an external perspective on the actions of others, and an innate imaginative capacity that enables an observer to imagine herself as the agent, in the agent??s situation. Both this sympathetic process and the mirror neuron system predispose individuals toward coordination of the expression of their emotions and of their actions. In Smith??s model this decentralized coordination leads to the emergence of social order, bolstered and reinforced by the emergence and evolution of informal and formal institutions grounded in the sympathetic process. Social order grounded in this sympathetic process relies on a sense of interconnectedness and on shared meanings of actions, and the mirror neuron system predisposes humans toward such interconnection.     

Smith,Marshall and Young on division of labour and economic growth

The aim of this paper is to reconstruct the theory of division of labour and economic growth proposed by Adam Smith and developed by Alfred Marshall and Allyn Young. In their approach division of labour is the main engine of growth and plays a central role in capital accumulation and technological progress. We suggest that, according to their theory: 1) economic growth is endogenous; 2) it has the nature of a cumulative, path-dependent process; and 3) it can be described as a disequilibrium process, supported by competitive forces. We argue that these aspects make the contributions of Smith, Marshall and Young still insightful for the development of growth theory, even in the light of the modern approach of endogenous growth theory.     

Fiscal restrictions and monetary union: Rationales,repercussions, reforms

We offer a critique of the fiscal preconditions for participation in Stage III of EMU and the Excessive Deficit Procedure of the Maastricht Treaty. We show that the high output costs associated with meeting the fiscal preconditions in Stage II and the incompatibility of the reference values for fiscal policy with other convergence criteria make it unlikely that a mechanical interpretation of those conditions will govern admission to Stage III. Knowledge of this fact will deter governments from undertaking major fiscal adjustments in the first place. Hence, the fiscal criteria of the treaty will not function as an efficient filter for distinguishing countries that are and are not prepared to live with the fiscal consequences of EMU.In Stage III, the function of the Excessive Deficit Procedure is to buttress the European Central Bank's protection from demands for a central bank bailout in the event of a debt crisis in a participating state. We show that other aspects of EU fiscal structure, namely the retention by member states of the bulk of their own revenue-raising capacity, should suffice to restrain the demand for a central bank bailout and the pressure on the ECB to supply it. Until political union follows monetary union, leading to the centralization of fiscal functions and revenu-raising capacity in the EU itself, the Excessive Deficit Procedure will be redundant. If there remains any reason to doubt the credibility of the no-bailout rule, then the best way to buttress it is directly, by further insulating the ECB from pressure to extend a bailout.If it is felt that policy in EU member states is biased toward excessive deficits, then the appropriate place to address this problem is at the national level. A limited approach would involve steps to insure that negotiations over the budget occur in the context of a firm general constraint on the overall level of spending. A more far-reaching reform would involve the creation of National Debt Boards to offset the prevailing bias.     

Praxeology,Experimental Economics and the Process of Choice: F.A. Hayek and Vernon Smith on the Misesian Action Axiom

Mises’s action axiom postulates that human action is purposeful behavior. While this axiom is the building block for a powerful methodology, it is also incomplete, because it sets aside the underlying processes of decision-making. And while Mises does not dismiss the gap between intention and action, he is silent on it, relegating such a study to psychology. We contend that a study of underlying thought patterns and the process of choice – rather than contradicting praxeology and the action axiom – in fact complements the writings of Mises. To demonstrate this, we look at two authors: F.A. Hayek and Vernon Smith. Hayek’s theory of the sensory order sheds light on the process of choice, and explains how decision-making is contextually embedded. Smith’s concepts of ecological rationality and neurological “hard-wiring” help us understand decision-making. We argue that cognitive foundations enrich our understanding of the process of choice, and thus of the Misesian action axiom.     

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.     

Overcoming Contemporary Mythology: An Essay

Over the last 35 years, a free market, laissez faire program has increasingly dominated perceptions as to what constitutes correct economic theory and policy. Most adherents of this program trace its origins to Adam Smith, and claim that its dominant position is the result of superior theory.

The argument here is that Adam Smith is not the theoretical ancestor of modern laissez faire economics, and that there are fundamental differences between Smith’s position on laissez faire and that of conventional neoclassical theory. A difference between “soft” and “hard” laissez faire is made, where Smith represents the former position; neoclassical theory the latter. Further, and more important, it is argued that the current laissez faire program is an outgrowth of a political program instituted in the 1930’s and financially supported in the present era by conservative foundations to promote an ideological framework that permits the development of specific governmental (and non-governmental) actions.     

The Changing Position of the Rural Sector in the Australian Economy since 1945

This article was prepared by Dr A. W. Smith and Rhonda Smith. It is a substantially revised version of a section of a paper presented to the 21st Annual Conference of the Australian Agricultural Economics Society held in Brisbane in February 1977. The authors are grateful to Alistair Watson, Roy Powell and Louise Barton for comments on earlier drafts     

Jacob Viner on Adam Smith: Development and reception of a theological reading

Abstract

Jacob Viner was one of the most important interpreters of Adam Smith's work, particularly for his emphasis in a classic 1927 article on Smith's theological framework, his discussion of the relationship between the Theory of Moral Sentiments and the Wealth of Nations and dismantling of a popular view of Smith as a doctrinaire advocate of laissez-faire. What is less well known is that Viner's theological reading of Smith developed over the next 40 years through intense study of eighteenth century natural theology, and some of his views changed. This article traces the development of Viner's interpretation of Smith. It assesses the suggestion of D.D. Raphael that Smith moved away from a theological framework over time and that Viner repudiated his theological reading of Smith. I argue instead that Viner's mature work broadened and strengthened the theological reading. Much of the literature on Smith and Viner wrongly assumes that naturalistic explanation and theological frameworks are mutually exclusive. This may be the dominant twentieth century view, but it was not so in the eighteenth century, as Viner well understood.     

Beyond natural selection and divine intervention: The Lamarckian implication of Adam Smith's invisible hand

Adam Smith's invisible hand metaphor (IH) is examined in light of two different accounts of the origin of traits: Charles Darwin's theory of evolutionary optimization and William Paley's theory of divine intervention. Smith's stand supersedes both accounts. For Smith, intermediating drives, such as the sexual one, neither arise accidentally and favored according to their fitness à la Darwin nor planted by the Deity à la Paley. For Smith, such drives are adopted in light of their ultimate end. Smith did not provide an account of how the drives are connected to their far-reaching, invisible beneficial ends or why do agents become dimly aware of that causality.     

Selfishness, cooperation, the evolutionary point of view and its implications for economics

The assumed selfishness of market actors could be considered in the context of two perspectives: macroeconomic and microeconomic. The first concerns the market mechanism as the most effective from the social well-being or the wealth of a nation points of view. The latter is based on the premises of the nature of human beings. I have distinguished between two possible ways of understanding selfish forms of behaviour in the market: as rational economic behaviour i.e. the most effective from the gains and losses point of view (i.e. public interests in the works of A. Smith) or as selfish from the psychological point of view (this is mostly presented by J. S. Mill's theory). The first approach seems to be concerned with the creation of the most effective market mechanism from the State's point of view. In the context of historical processes over 400 years, cultural evolution “has been promoting” selfish behaviour; for example, it was widely presented in T. Hobbes' works and then for over 200 years, the theory of A. Smith has been supporting and moulding the institutional context of market and social behaviour. Thus, positive economics describes the market created by the ideas of a neo-classical paradigm, which is based on the normative premises of A. Smith and J. S. Mill. Moreover, the virtual market behaviour described by “effects” (f. e. Veblen's effect) and failures seems to be a manifestation of a discrepancy between market reality and the classical assumptions.The social evolution of human beings has been advantageous to the human species. Moreover, from the social point of view, pro-social behaviour is “natural” as well as desirable and it has been preferred by the cultural evolution. Competitiveness assumes that somebody has to lose, because someone gains. Cooperation looks for gains for all the players. The choice is political, and not imposed by selfishness.     

Adam Smith's “tolerable administration of justice” and the Wealth of Nations

Adam Smith argues that a country’s income depends on its labor productivity, which in turn hinges on the division of labor. But why are some countries able to take advantage of the division of labor and become rich, while others fail to do so and remain poor? Smith describes how the security of property rights, through a “tolerable administration of justice,” allows investment and exchange to take place, bringing about economic progress. Recent empirical work on economic development has supported Smith’s emphasis on a country’s political “institutions,” particularly the judiciary, in determining its national income.     

Economies in transition and in development: A possible warning from Adam Smith

Abstract

If Adam Smith were asked about transitioning and developing economies today, one may infer, he might suggest introducing small, yet constant, opportunities for wealth accumulation, avoiding the sudden accumulation of riches. Good institutions and the moral rules often needed to comply with them are more likely to be disregarded if there are large, sudden material gains, such as new wealth generated by the sudden opening of markets or government granting monopolies. For Smith, the desire to show off in front of others can inhibit moral behaviour and respect for good institutions, generating perverse incentives that hinder growth. Gradual change is to be preferred.     

Inter-Temporal Decompositions of Labour Market and Social Outcomes

This paper compares the Wellington (1993) and Smith and Welch (1989) decompositions of changes in labour market outcomes over time. The two examples considered are differences by gender in educational attainment and the gender wage differential. The results suggest that even though the procedure developed by Wellington (1993) has been favoured in recent research, the Smith and Welch decomposition is a more informative approach.     

Adam Smith on Relations of Subordination, Personal Incentives and the Division of Labour

In elaborating his stadial approach to economic and social progress, Smith placed special emphasis on the evolution of the conceptual pair authority/subordination. The aim of this paper is to analyse the reciprocal relations which link together the evolution of the relations of subordination, personal incentives, and the division of labour with special reference to the agricultural and the commercial stages. In the former case, Smith pointed out the exclusive role performed by personal incentives in increasing labour productivity, a role which is consistent with his manifest preference for the figure of the 'independent small-scale proprietor'. In the latter case we note a change of emphasis due both to the pervasive role of the division of labour in increasing labour productivity, and—as a by-product of this change—to the emergence of a new form of relation of subordination. In this new context the division of labour engenders a new form of property polarisation, one connected no longer to land but to capital accumulation. Moreover, because of its harmful effects on the mental capacity of manufacturing workers, the division of labour appears to act as an obstacle against social mobility, and this in turn further reinforces the process of property polarisation.     

Adam Smith's Entwurf eines politokonomischen systems

There are two core elements in Smith's draft of a politico-economic system, an individual-social orientated and a society-state orientated one. Economic actions and institutions have to bring both centres together so as to perform their main functions. Coming to self-autonomy, liberty and justice would be final goals of the Smithian “system of natural liberty”, for which Smith is famous. But he did not simply trust in self-fulfilling Natural Law. The “system of natural liberty” means a faculty, by which the society could develop, if the individual initiated actions might play their leading roles due to an ethical consensus in society, and if the state would be quite aware of his ordo-political task as a constructive matter. Smith gives no recipes. The generations have to find those for themselves. Thus, Smith cannot be called a determinist, but rather an evolutionist.The most exiting results can be found in a fundamental search for Smith as a master of politico-economical methods. The learned prejudice that the “grand classic” was somewhat eclectic and contradictious is to be forgotton. The master's “faults” might be analyzed as a genuine heterogeneous ones, essential for a realistic and pragmatic political economy. This would provide an urgent and modern message.