Three Essays on Business and Politics in Adam Smith

Kacey Reeves West

Advisor: Daniel B Klein, PhD, Department of Economics

Committee Members: Donald Boudreaux, Peter Boettke, Erik Matson

Buchanan Hall, #D180
April 03, 2024, 02:30 PM to 04:30 PM

Abstract:

This dissertation examines nascent themes of Theory of the Firm and Public Choice in Adam Smith’s writings.

The first chapter argues that Smith conceives of a framework for moral entrepreneurship based on prudence in Theory of Moral Sentiments. The framework consists of two principles: First, approach everyday matters with the general “tenor of conduct” that governs your life and trade, and second, approach life-changing matters with prudence and justice. Recognizing that Smith is concerned with the total effect that an entrepreneurial venture has on society beyond its immediate profits opens the door to engage with contemporary research that studies the ethical and moral externalities of entrepreneurship.

The second chapter argues that many of the puzzling aspects of Smith’s commentary on joint-stock companies can be clarified when examined through the lens of the impartial spectator. Smith criticizes joint-stock companies for their poor economic performance but recognizes that their poor economic performance is caused in part by the “irresistible moral causes” fostered by their organizational structure. For that reason, both Smith’s economic and moral theory, and the interplay between both, are necessary for understanding his analysis of joint-stock companies. This argument advocates a reading of Smith which recognizes his epistemic roots as a virtue ethicist—not a modern scholar who embraces the fact-value distinction.

The third chapter, coauthored with Michael Clark, argues that the literature which hails Adam Smith as a forerunner to behavioral economics focuses exclusively on Smith’s analysis of market actors and ignores Smith’s analysis of political actors. Smith, however, not only recognizes behavioral anomalies in the brewer, the butcher, and the baker, but in the overconfident bureaucrat, ambitious politician, and nationalistic statesman. For that reason, Smith is not merely a forerunner of behavioral economics, but also of behavioral political economics, which is a growing field that applies the tools and insights of behavioral economics to political actors.