Deriving 'General Principles' in Adam Smith: The Ubiquity of Equilibrium and Comparative Statics Analysis Throughout His Works
38 Pages Posted: 17 Jul 2015 Last revised: 29 Jan 2017
Date Written: January 27, 2017
This paper contributes to the debate over the unity in Smith's corpus by emphasizing Smith's pervasive methodological approach based on an assumption of self-interest. Specifically, Smith consistently relies on equilibrium arguments to explain why a given pattern of economic, political, or social interaction is stable; and comparative static arguments to explain how a stable pattern changes. Some scholars have noted this technique in Smith's economics; however, missing in the literature is an appreciation for Smith’s usage of equilibrium and comparative statics arguments virtually every topic that he studies. As we demonstrate, this includes his explanation of morality and benevolence; the theory of languages; the political economics of development; and his theories of law, politics, and government, such as the form of government, property rights, family structure, and virtue in his famous “four stages” theory of history. We close the paper by arguing that equilibrium and comparative statics analysis has significant implications for the contents of Smith's so-called “missing second book” on government, law, and jurisprudence. Finally, this approach makes it easier to see that Smith's historical jurisprudence is more than narrative: it contains a great many theoretical explanations in the form of equilibrium and comparative statics.
Keywords: Adam Smith, equilibrium analysis, political-economic development
JEL Classification: B12, B38, D74, D78, H11, K10, N43, P16
Suggested Citation: Suggested Citation