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Natural Equality, Increasing Returns, And Economic Progress: A Reinterpretation Of Adam Smith'S System

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  • JAMES M. BUCHANAN

    (James M. Buchanan Center for Political Economy, George Mason University, USA)

Abstract

My aim in this paper is to reinterpret Adam Smith's theory of economic interaction by assigning a central role to his foundational presumption that persons are natural equals. There are implications of this presumption to be drawn both for the behavioral adjustments that move the system toward an equilibrium and for the properties of equilibrium itself — implications that make the whole analysis significantly different from the more familiar analyses that embody the presumption of individual differences. This reinterpretation allows for the construction of an internally coherent model that critically depends on the incorporation of Smith's principle that relates the endogenous specialization of labour to the size of the market nexus. By contrast, if persons are presumed to differ, one from another, one step in the equilibrating process remains outside the model, and the division or specialization of labour remains exogenous and, thereby, independent of market size.

Suggested Citation

  • James M. Buchanan, 2005. "Natural Equality, Increasing Returns, And Economic Progress: A Reinterpretation Of Adam Smith'S System," Division of Labor & Transaction Costs (DLTC), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 57-66.
    • Handle: RePEc:wsi:dltcxx:v:01:y:2005:i:01:n:s0219871105000062
    DOI: 10.1142/S0219871105000062
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    References listed on IDEAS

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    1. Levy, David M., 2001. "How the Dismal Science Got its Name: Debating Racial Quackery," Journal of the History of Economic Thought, Cambridge University Press, vol. 23(1), pages 5-35, March.
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    Cited by:

    1. Guang-Zhen Sun, 2005. "A Review Of Selected Literature In The Economics Of Division Of Labor From 5th Century To Wwii: Part I," Monash Economics Working Papers 01/05, Monash University, Department of Economics.
    2. Erik W. Matson, 2022. "What is liberal about Adam Smith's “liberal plan”?," Southern Economic Journal, John Wiley & Sons, vol. 89(2), pages 593-610, October.

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    More about this item

    Keywords

    Generalized increasing returns; extent of market; natural equality;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D - Microeconomics
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • F - International Economics
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L - Industrial Organization
    • O - Economic Development, Innovation, Technological Change, and Growth

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