An Agent-Based Computational Approach to "The Adam Smith Problem{''

Authored by Michael Gavin

Date Published: 2018

DOI: 10.12759/hsr.43.2018.1.308-336

Sponsors: No sponsors listed

Platforms: NetLogo

Model Documentation: Other Narrative

Model Code URLs: Model code not found

Abstract

This paper uses agent-based modeling to investigate the philosophy of Adam Smith. During his lifetime, Smith published two books. In An Inquiry into the Nature and Causes of the Wealth of Nations (1776), he argued that market behavior was dictated primarily by self-interest. However, his earlier book, The Theory of Moral Sentiments (1759), placed sympathy and benevolence at the center of human social psychology. Reconciling these apparently contradictory views is known as the Adam Smith Problem. This study uses an agent-based model to combine Smith's theories, exploring how social norms affect economic behavior, and vice versa. Although they share many basic assumptions, Smith's works leave important questions unanswered: Theory of Moral Sentiments offers a strong model of how social norms consolidate but lacks a coherent explanation for how norms change over time, and, on the other side, Wealth of Nations does not account for the influence of social norms on commercial transactions nor for the durability of seemingly irrational norms in a context of market competition. Considering both theories together in a single model sheds light on their underlying tensions and exposes instabilities that Smith did not anticipate.

Tags

agent-based simulation Agent-Based Computational Economics Social norms Adam smith Digital humanities Intellectual history Theory of moral sentiments Wealth of nations