Adam Smith Was A Behavioral Economist And No Fan of Greed
Adam Smith hated greed. He'd likely be horrified to see how his name is now used. And any Smith fans who believe selfishness is a virtue distort what Smith called his best work.
2. Smith got famous first for what we’d now call psychology. Edmund Burke called The Theory of Moral Sentiments “fittest to explain those natural movements of the mind... which every Science relating to our Nature” needed (commending Smith’s "illustrations from common Life").
3. Smith begins Sentiments by observing that “the virtuous” have no monopoly on sympathy—“the most hardened violator of... laws” has sympathies. Even the “greatest ruffian,” however selfish, “evidently [has] some principles in his nature which interest him in the fortunes of others, and render their happiness necessary.”
7. Smith’s now more famous book, The Wealth of Nations (WoN, 1776), is a founding document of economics. But it is no “greed is good” free-market “Bible of Capitalism.” Consider a few “surprising” quotes:
10. "When... regulation… is in favor of the workmen, it is always just.”
12. Smith’s “public good” republicanism is baked into America’s founding documents (e.g. Jefferson held to Smith’s Scottish Enlightenment sensibility).
13. The “Declaration’s” first listed justification for Independence is America’s need to enact “Laws… necessary for the public good.” The Constitution specifies government’s duty to “promote the general Welfare” (listed right after “provide for the common defense”).
15. Thaler says all economics was behavioural until the 1940s. After that all human behaviours were filtered, fitted, and squeezed into the formulation Economics = Optimization + Equilibrium.
Illustration by Julia Suits, The New Yorker Cartoonist & author of The Extraordinary Catalog of Peculiar Inventions.