Hume and Endogenous Money

David Hume’s monetary theory has three standard yet inconsistent readings. As a forefather of the quantity theory of money, Hume sees money as neutral. As an inflationist, Hume sees an active positive role for monetary policy. As a monetarist, Hume sees an active positive role for monetary policy only in the short run. This paper reads Hume consistently instead by showing that for Hume money is endogenous and demand-driven. Hume would read the money equation in terms of reverse causation and the co-movement of inflation and output growth as driven by demand. The tenets of 18th century monetary theory corroborate this reading.

Recent Engagements with Adam Smith and the Scottish Enlightenment

Recent literature on Adam Smith and other eighteenth-century Scottish thinkers shows an engaged conversation between the Scots and today\u27s scholars in the sciences that deal with humans-the social sciences and the humanities, as well as neuroscience and evolutionary psychology. We share with the eighteenth-century Scots preoccupations about understanding human beings, human nature, sociability, moral development, our ability to understand nature and its possible creator, and about the possibilities to use our knowledge to improve our surroundings and standard of living. As our disciplines evolve, the studies of Smith and the Scottish Enlightenment evolve with them. Smith and the Scots remain our interlocutors

Boys Do Cry: Adam Smith on Wealth and Expressing Emotions

Recent studies on crying show that crying is more common in happier, freer, and richer countries than in poorer and less free countries. These results can sound counterintuitive and contradict the hypothesis that crying is more observable in countries where people experience more distress. Adam Smith may offer an explanation: In the severe hardship of poverty, showing emotion and distress can be read as a sign of weakness, attracting no sympathy and compromising survival. As a result, emotional displays are avoided. Instead, wealthier commercial societies offer ease and tranquility which allows individuals to express their emotions with fewer negative consequences

In Medio Stat Virtus: An Alternative View of Usury in Adam Smith’s Thinking

Some specific positions of Adam Smith have been, and still are, sources of problems and debates. Generally, the controversies concern apparent contradictions in the Smithian theory. An example of these puzzling contradictions in Smith is his position on usury laws: In countries where interest is permitted, the law, in order to prevent the extortion of usury, generally fixes the highest rate which can be taken without incurring a penalty. This rate ought always to be somewhat above the lowest market price, or the price which is commonly paid for the use of money by those who can give the most undoubted security. (WN, II.iv.14) How could a believer in the beauty and power of the market favor usury laws

Commercial Relations: From Adam Smith to Field Experiments

Adam Smith is often referred to as the father of economics and as a promoter of free markets. In what follows, I let the first claim stand and concentrate on the second: that Adam Smith is a promoter of free markets. In particular, I take for granted, with all the necessary caveats, that Smith is a promoter of free markets (but cf. e.g. Fleischacker 2004 ; McLean 2006 ) and concentrate on how Smith promotes free markets. Smith promotes free markets for at least two reasons: efficiency and morality. There is already a vast and detailed literature on the economic efficiency of the markets Smith describes. Here I focus on the claim that Smith promotes free markets on moral grounds and argues that markets can foster morality just as much as morality can foster markets

Smithian Answers to Some Experimental Puzzles

This paper draws attention to the increased use of Adam Smith’s work in the experimental economics literature. It also offers examples of how studying Adam Smith can help formulate possible answers to some otherwise counter-intuitive (if the intuition is based on the Rational-Choice paradigm) experimental results. The first part of the paper presents a short account of how, in recent years, the field has come to recognize the importance of considering other-regarding preferences as well as self-regarding preferences and how it is noticing the wealth of Adam Smith, who dealt with both. The central section of the paper offers examples of how the Smithian apparatus can provide plausible explanatory stories for data from experimental games such as, but not limited to, the Ultimatum Game, the Dictator Game and the Trust Game, which usually cannot be explained using only strict Rational Choice. Smithian resentment, love of praiseworthiness and dread of blameworthiness on the other hand seem to be plausible explanations for the seemingly irrational punishment and generosity observed in these experimental games. Concluding remarks end the essay

Adam Smith on the Future of Experimental Evolution and Economics

Experimental evolution is difficult to apply to humans because of the need to study possible changes over many generations. A similar method, though, may see history as a substitute for experiments. The 18th century economist Adam Smith uses methods compatible with the logic of experimental evolution, through the assumption of human homogeneity and the study of history, to explain endogenous variations of preferences and institutions

Vanity and the Daedalian Wings of Paper Money in Adam Smith

Adam Smith presents a detailed technical analysis of both private and public credit. Many contemporaries, including David Hume, recognized that public credit, and in part private credit, could be used to affect the economy, either for good or bad. Nevertheless, Smith does not seem to recognize the full potential of public credit as a policy instrument whether as a way to stimulate the economy, fine-tune it, or cause economic disasters. The reason for this shortcoming may be Smith\u27s downplaying the desire for power and benevolence as motivational forces in human conduct, due to his emphasis on vanity instead

Approbation and the Desire to Better One’s Condition in Adam Smith: When the Desire to Better One’s Conditions does not Better One’s Condition and Society’s Condition…

Adam Smith is often associated with the idea that the desire to better one\u27s condition makes an individual better off and also, unintentionally, makes society better off. This paper asks whether for Smith there are circumstances under which the same desire to better one\u27s condition ultimately betters neither one\u27s condition nor society\u27s condition. The answer proposed here is that in Smith\u27s works, the presence of significant wealth may generate perverse incentives misaligning the betterment of the individual and of society, either because the individual may be worse off while society is better off, or because the individual is better off while society is worst off. This result is achieved by analyzing the role of approbation. For Smith, approbation is gained through proper moral conduct as well as through bettering one\u27s material condition. But wealth can trump moral conduct as a means to achieve approbation. In a world with police, revenue, and arms the more prosperous society is, the more powerful the incentives to rely upon wealth to gain approbation, rather than upon virtuous conduct. In the presence of wealth generated by commerce and the government power of granting monopolies, the desire to better one\u27s condition can curb moral behaviors and bring ruin to either individuals or society

Adam Smith and Entangled Political Economy

Entangled Political Economy, the idea that the economy and the polity are a nexus of interrelations often with unplanned outcomes, is close to the concept of economics that Adam Smith presents, a concept which was not shaped by strict discipline barriers. I show that Adam Smith analyzes the nature and causes of the wealth of nations by analyzing the interaction of the economy with politics, ethics, and the law. In particular, Smith presents each of these systems as a network of relations with all the other systems: the economy is entangled not just with the polity, but also with other systems of behavior such as the law and morality. Adam Smith may help expand the horizons of the entangled political economy analysis and the explanatory powers of economics