The Influence of Adam Smith: The Hayekian Narrative, Honest Profit, and the Invisible Hand

Brandon Lucas

Major Professor: Daniel B. Klein

Committee Members: Donald J. Boudreaux, Russell D. Roberts

Enterprise Hall, 318
November 29, 2010, 05:00 AM to 07:00 AM

Abstract:

Adam Smith’s contributions to the world and to the field of economics cannot be understated. College level economics students and even most lay people likely know Smith for his Invisible Hand metaphor, division of labor examples, or promotion of earning honest profit. Though such subjects are over 200 years old and often outwardly accepted as straightforward, debate remains active and divided regarding some of Smith’s ideas. The main chapters of my dissertation address three related, but separate, issues to further advance the broad frames of Smith’s scholarship. The first paper, In a Word or Two, Placed in the Middle: The Invisible Hand in Smith’s Tomes, is co-authored with Dr. Daniel Klein. The paper evaluates Smith’s use of the Invisible Hand in his two major works, The Theory of Moral Sentiments and The Wealth of Nations. While many scholars debate Smith’s attributed importance and purpose of the phrase, the paper shows physical centrality of word placement was we ll understood by Smith and that location of the Invisible Hand metaphor corresponds to such an understanding. The second paper, Adam Smith’s Congruence with the Hayekian Narrative, searches for congruence between Smith’s ideas and the epic socio-political story that Professor Daniel Klein dubs “The Hayekian Narrative.” Several elements comprise the Hayekian narrative, with cultural evolution and atavisms being prominent factors. The paper explains the narrative, discussing how humanity’s instincts, which are carried over from the primeval band, often conflict with the extended order, and how social-democratic worldviews may be interpreted as atavisms. The paper compares several of Smith and Hayek’s ideas to illustrate Smith’s similarities with the narrative. The third paper, Seeking Honest Profit as Smithian Distributive Justice, investigates whether seeking honest profit can be viewed as Smithian distributive justice. Before, and certainly after, the industrial revolution scores of writers and scholars have considered profit seeking to be an unbecoming trait. The paper uses Smith’s ideas about justice and honest profit to develop a framework showing how the search for honest profits can be seen as meeting the goals of distributive justice.

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