Vernon L. Smith

Adam Smith on Conduct and Rules: Trust Games, Emergence of Property, Wealth Creation


Abstract

Theory of Moral Sentiments models the rules we follow that define our sociality (humanity). Adam Smith models individuals as self-interested & highly social. In social maturation we learn to humble our self-interest so that others will go along with our actions. Common knowledge of self-interest is an axiom, but we cannot look our neighbor in the face & avow that all are actions are so determined. We use TMS to predict action in new trust & ultimatum games. In Wealth of Nations our sociability enters axiomatically as a propensity to truck, barter and exchange. Smith offers a seamless account of other-regarding behavior in our social groupings & our pursuit of specialization in markets. Instead of modifying Smith’s perspective, Neoclassical Economics substituted outcome equilibria for the process dynamics in Smith,


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