Adam Smith's System of Natural Liberty: Competition, Contestability and Market Process

55 Pages Posted: 14 Oct 2007

See all articles by Michael E. Bradley

Michael E. Bradley

University of Maryland - Department of Economics

Date Written: October 12, 2007

Abstract

Many contemporary economists portray Smith's "perfect liberty" as a precursor of perfect competition. However, modern perfect competition, particularly post World War II mathematical general equilibrium models, are far removed from meaning and intent of Smith's "natural system of liberty." This article examines the role of Smithian "liberty" and resource mobility in the classical theory of value. It then analyzes the relationship between Smithian "perfect liberty" and the perfectly competitive model that had developed by mid-20th century. Finally, it analyzes the relationships between Smithian "liberty," contestable market theory and market processes. Smith's simple concept of "perfect liberty" is an essential component of perfect competition, contestable market theory, Austrian market processes, and indeed much of contemporary microeconomic theory. It is much more than an unsophisticated precursor of perfect competition.

Keywords: Adam Smith, Liberty, Competition, Contestability, process

JEL Classification: B1, B2, B31, A14

Suggested Citation

Bradley, Michael E., Adam Smith's System of Natural Liberty: Competition, Contestability and Market Process (October 12, 2007). Available at SSRN: https://ssrn.com/abstract=1021305 or http://dx.doi.org/10.2139/ssrn.1021305

Michael E. Bradley (Contact Author)

University of Maryland - Department of Economics ( email )

1000 Hilltop Circle
Baltimore, MD 21250
United States

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