Hostname: page-component-586b7cd67f-gb8f7 Total loading time: 0 Render date: 2024-11-23T21:45:14.751Z Has data issue: false hasContentIssue false
  • English
  • Français

ADAM SMITH’S SYSTEM OF NATURAL LIBERTY: COMPETITION, CONTESTABILITY, AND MARKET PROCESS

Published online by Cambridge University Press:  11 May 2010

MICHAEL E. BRADLEY
Get access Rights & Permissions [Opens in a new window]

Abstract

In this article, I argue that Adam Smith’s system of perfect liberty contains some of the seeds of perfect competition, but that the modern perfectly competitive model differs from Smith’s perfect liberty in some important respects—in particular, the role of active competition among firms and the role of the entrepreneur. The article examines the analytical linkages between Smith’s system of liberty and three strands of modern economic theory—neoclassical perfect competition, contestable market theory and the Austrian analysis of market process.

Type
Research Articles
Information
Journal of the History of Economic Thought , Volume 32 , Issue 2 , June 2010 , pp. 237 - 262
Copyright
Copyright © The History of Economics Society 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Andrews, P. W. S. 1964. On Competition in Economic Theory. New York: St. Martin’s Press.CrossRefGoogle Scholar
Arrow, Kenneth J. and Hahn, F. H. 1971. General Competitive Analysis. San Francisco: Holden-Day.Google Scholar
Backhouse, Roger E. 1990. “Competition.” In Creedy, John, ed., Foundations of Economic Thought. Cambridge, MA: Basil Blackwell, pp. 58–86.Google Scholar
Bateman, Bradley W. 1993. “Clearing the Ground: The Demise of the Social Gospel Movement and the Rise of Neoclassicism in American Economics.” In Morgan, Mary S. and Rutherford, Malcolm, eds., From Interwar Pluralism to Postwar Neoclassicism. Durham, NC: Duke University Press, pp. 29–52.Google Scholar
Bateman, Bradley W. 2008. “The Secularization of American Economics.” Journal of the History of Economic Thought 30 (1): pp. 1–20.CrossRefGoogle Scholar
Baumol, William J. 1982 “Contestable Markets: An Uprising in the Theory of Industry Structure.” American Economic Review 72 (1): 1–15.Google Scholar
Baumol, William J., Panzar, John C., Willig, Robert D., and Bailey, Elizabeth E.(BPWB) 1982. Contestable Markets and the Theory of Industry Structure. New York: Harcourt Brace Jovanovich.Google Scholar
Baumol, William J., Panzar, John C., Willig, Robert D. and Bailey, Elizabeth E.(BPWB) 1983. “Contestable Markets: An Uprising in the Theory of Industry Structure: Reply.” American Economic Review 73 (2): 491–496.Google Scholar
Baumol, William J., Panzar, John C., Willig, Robert D. and Bailey, Elizabeth E.(BPWB) 1986. “Contestability: Developments since the Book." Oxford Economic Papers, New Series 38 (Supplement): 9–36.CrossRefGoogle Scholar
Blaug, Mark. 1999. “The Formalist Revolution or What Happened to Orthodox Economics after World War II?” In Backhouse, Roger E. and Creedy, John, eds., From Classical Economics to the Theory of the Firm. Northampton, MA: Edward Elgar, pp. 257–280.Google Scholar
Blaug, Mark. 2001. “No History of Ideas, Please, We’re Economists.” Journal of Economic Perspectives 15 (1): 145–164.CrossRefGoogle Scholar
Bradley, Michael E. 1989. “John Stuart Mill’s Demand Curves.” History of Political Economy 21 (1): 43–56.CrossRefGoogle Scholar
Cairnes, John Elliot. [1875] 2006. The Character and Logical Method of Political Economy. Macmillan and Co., 1875. Library of Economics and Liberty. <http://econlib.org/library/Cairnes/crnPE1.html>.Google Scholar
Cairns, Robert D. and Mahabir, Dhanayshar. 1988. “Contestability: A Revisionist View.” Economica, New Series 55 (218): 269–276.CrossRefGoogle Scholar
Chamberlin, Edward H. 1962. The Theory of Monopolistic Competition, 8th edition. Cambridge: Harvard University Press.Google Scholar
Cournot, Augustin. [1838] 1971. Mathematical Principles of the Theory of Wealth. New York: Augustus M. Kelly Publishers.Google Scholar
Edgeworth, Francis Y. [1881] 1967. Mathematical Psychics. New York: Augustus M. Kelley Publishers.Google Scholar
Ekelund, Robert B. and Hébert, Robert F. 1999. Secret Origins of Modern Microeconomics. Chicago: University of Chicago Press.Google Scholar
Evensky, Jerry. 1989. “The Evolution of Adam Smith’s Views on Political Economy.” History of Political Economy 21 (1): 123–146.CrossRefGoogle Scholar
Fama, Eugene F. and Laffer, Arthur B. 1972. “The Number of Firms and Competition.” American Economic Review 62 (4): 670–674.Google Scholar
Fisher, Irving. 1927. “Bibliography of Mathematical Economics.” Appendix in Augustin Cournot [1838] 1971, Mathematical Principles of the Theory of Wealth. New York: Augustus M. Kelly Publishers, pp. 173–209.Google Scholar
Forget, Evelyn L. 1989. “J. S. Mill and J. E. Cairnes on Natural Value: The Role of Expectations in Late Classical Thought.” History of Political Economy 21 (1): 103–122.CrossRefGoogle Scholar
Fourcade-Gourinchas, Marion (2001). “Politics, Institutional Structures, and the Rise of Economics: A Comparative Study.” Theory and Society 30 (3): 397–447.CrossRefGoogle Scholar
Gilbert, Richard J. 1989. “The Role of Potential Competition in Industrial Organization.” The Journal of Economic Perspectives 3 (3): 107–127.CrossRefGoogle Scholar
Goodwin, Craufurd. 1998. “The Patrons of Economics in a Time of Transformation.” In Morgan, Mary S. and Rutherford, Malcom, eds., From Interwar Pluralism to Postwar Neoclassicism. Durham NC: Duke University Press, pp. 53–81.Google Scholar
Hayek, F. A. [1937] 1981. “Economics and Knowledge." Economica, New Series 44 (February): pp. 33–54. Reprinted in James M. Buchanan and George F. Thirlbe, eds., L.S.E. Essays on Cost. New York: New York University Press, Institute for Humane Studies.Google Scholar
Hayek, F. A. [1948] 1990 “The Meaning of Competition.” In Littlechild, Stephen, ed., Austrian Economics, Volume III. Aldershot, UK: Edward Elgar, pp. 169–183.Google Scholar
Hayek, F. A. 2002. “Competition as a Discovery Procedure,” translated by Snow, Marcellus S.. Quarterly Journal of Austrian Economics 5 (Fall): 9–23.Google Scholar
Hetherington, Norriss S. 1983. “Isaac Newton’s Influence on Adam Smith’s Natural Laws in Economics.” Journal of the History of Ideas 44 (3): 497–505.CrossRefGoogle Scholar
Horwitz, Steven. 2008. “Catallaxy, Competition, and 21st Century Capitalism: An Agenda for Economics.” In Harvey, John T. and Garnett, Robert F. Jr., eds., Future Directions for Heterodox Economics. Ann Arbor: University of Michigan Press, pp. 225–39.Google Scholar
Hutchison, Terence. 1999. “Adam Smith and General Equilibrium Theory.” In Backhouse, Roger E. and Creedy, John, eds., From Classical Economics to the Theory of the Firm. Northampton, MA: Edward Elgar, pp. 243–256.Google Scholar
Kirzner, Israel M. 1973. Competition and Entrepreneurship. Chicago: University of Chicago Press.Google Scholar
Kirzner, Israel M. 1992. The Meaning of Market Process: Essays in the Development of Modern Austrian Economics. New York: Routledge.CrossRefGoogle Scholar
Kirzner, Israel M. 1997. “Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach.” Journal of Economic Literature 35 (1): 60–85.Google Scholar
Knight, Frank H. 1956. On the History and Method of Economics. Chicago: University of Chicago Press.Google Scholar
Knight, Frank H. [1921] 1957. Risk, Uncertainty and Profit. New York: Harper & Row.Google Scholar
Machlup, Fritz. 1952. The Economics of Sellers’ Competition: Model Analysis of Sellers’ Conduct. Baltimore: Johns Hopkins University Press.Google Scholar
Machovec, Frank M. 1995. Perfect Competition and the Transformation of Economics. New York: Routledge.CrossRefGoogle Scholar
Maloney, John. 1985. Marshall, Orthodoxy, and the Professionalization of Economics. Cambridge: Cambridge University Press.Google Scholar
Marshall, Alfred. [1920] 1990. Principles of Economics, 8th edition. Philadelphia: Porcupine Press.Google Scholar
McNulty, Paul J. 1967. “A Note on the History of Perfect Competition.” Journal of Political Economy 75 (4): 395–399.CrossRefGoogle Scholar
McNulty, Paul J. 1968. “Economic Theory and the Meaning of Competition.” Quarterly Journal of Economics 82 (4): 639–656.CrossRefGoogle Scholar
Medema, Steven G. 2007. “The Hesitant Hand: Mill, Sidgwick, and the Evolution of the Theory of Market Failure.” History of Political Economy 39 (3): 331–358.CrossRefGoogle Scholar
Menger, Carl. [1871] 2004. Principles of Economics, online edition. Ludwig von Mises Institute.Google Scholar
Mill, John Stuart. [1871] 2006. Principles of Political Economy With Some of Their Applications to Social Philosophy (vols. II and III, The Collected Works of John Stuart Mill). Indianapolis, IN: Liberty Fund.Google Scholar
Mirowski, Philip. 1989a. More Heat than Light: Economics as Social Physics, Physics as Nature’s Economics. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Mirowski, Philip. 1989b. “The When, the How and the Why of Mathematical Expression in the History of Economic Analysis.” Journal of Economic Perspectives 21 (1): 145–157.Google Scholar
Mises, Ludwig von. [1949] 1996. Human Action. Irvington-on-Hudson, NY: Foundation for Economic Education, Inc., 1996. [Online] available from http://www.econlib.org/library/Mises/HmA/msHmA15.html; accessed 31 May 2006.Google Scholar
Morgan, Mary S. 1993. “Competing Notions of ‘Competition’ in Late Nineteenth-Century American Economics.” History of Political Economy 25 (Winter): 564–604.CrossRefGoogle Scholar
Mosca, Manuela. 2008. “On the Origins of the Concept of Natural Monopoly.” European Journal of the History of Economic Thought 15 (2): 317–353.CrossRefGoogle Scholar
Ricardo, David. [1821] 2004a. Principles of Political Economy and Taxation. In Sraffa, Pierro and Dobb, M. H., eds, The Collected Works and Correspondence of David Ricardo, Vol. II. Indianapolis, Liberty Fund.Google Scholar
Ricardo, David. 2004b. The Collected Works and Correspondence of David Ricardo, Vol. V, edited by Sraffa, Pierro and Dobb, M. H.. Indianapolis, Liberty Fund.Google Scholar
Robinson, Joan. [1933] 1961. The Economics of Imperfect Competition. London: Macmillan.Google Scholar
Robinson, Joan. 1934. “What is Perfect Competition?” Quarterly Journal of Economics 49 (1): 104–120.CrossRefGoogle Scholar
Rogin, Leo. 1956. The Meaning and Validity of Economic Theory. New York: Harper & Brothers Publishers.Google Scholar
Rutherford, Malcolm. 1999. “Institutionalism as ‘Scientific’ Economics.” In Backhouse, Roger, Backhouse, E., and Creedy, John, eds., From Classical Economics to the Theory of the Firm. Northampton, MA: Edward Elgar, pp. 223–242.Google Scholar
Say, Jean-Baptiste. 1855. A Treatise on Political Economy, translated by Prinsep, C. R., edited by Biddle, Clement C.. Philadelphia: Lippincott, Grambo & Co. Library of Economics and Liberty. <http://www.econlib.org/library/Say/sayT42.html>.Google Scholar
Schabas, Margaret. 2005. The Natural Origins of Economics. Chicago: University of Chicago Press.CrossRefGoogle Scholar
Schumpeter, Joseph A. 1954. History of Economic Analysis. New York: Oxford University Press.Google Scholar
Schwartz, Marius. 1986. “The Nature and Scope of Contestability Theory.” Oxford Economic Papers, New Series 38: 37–57.CrossRefGoogle Scholar
Schwartz, Marius and Reynolds, Robert J. 1983. “Contestable Markets: An Uprising in the Theory of Industry Structure: Comment.” American Economic Review 73 (3): 488–490.Google Scholar
Scitovsky, Tibor. 1966. Welfare and Competition: The Economics of a Fully Employed Economy. London: Unwin University Books.Google Scholar
Shepherd, William G. 1984. “‘Contestability’ vs. Competition.” American Economic Review 74 (4): 572–587.Google Scholar
Shepherd, William G. 1995. “Contestability vs. Competition—Once More.” Land Economics 71 (3): 299–309.CrossRefGoogle Scholar
Skidelsky, Robert. 1986. John Maynard Keynes: Hopes Betrayed, 1883–1920. New York: Penguin Books.Google Scholar
Smith, Adam. [1776] 1981 An Inquiry into the Nature and Causes of the Wealth of Nations. In Campbell, R. H. and Skinner, A. S., eds., The Glascow Edition of the Works and Correspondence of Adam Smith, vols. I and II. Indianapolis: Liberty Classics.Google Scholar
Smith, Adam. 1982a. The Principles Which Lead and Direct Philosophical Enquiries; Illustrated by the History of Astronomy. In Campbell, R. H. and Skinner, A. S., eds., The Glascow Edition of the Works and Correspondence of Adam Smith, Vol. III, Adam Smith, Writings on Philosophical Subjects. Indianapolis, Liberty Classics, pp. 31–105.Google Scholar
Smith, Adam. 1982b. The Principles Which Lead and Direct Philosophical Enquiries; Illustrated by the History of the Ancient Physics. In Campbell, R. H. and Skinner, A. S., eds., The Glascow Edition of the Works and Correspondence of Adam Smith, Vol. III, Adam Smith, Writings on Philosophical Subjects. Indianapolis, Liberty Classics, pp. 107–117.Google Scholar
Spence, Michael. 1983. “Contestable Markets and the Theory of Industry Structure: A Review Article.” Journal of Economic Literature 21 (3): 981–990.Google Scholar
Stigler, George J. 1957. “Perfect Competition, Historically Contemplated.” Journal of Political Economy 65 (1): 1–17.CrossRefGoogle Scholar
Tynan, Nicola. 2007. “Mill and Senior on London’s Water Supply: Agency, Increasing Returns, and Natural Monopoly.” Journal of the History of Economic Thought 29 (1): 49–68.CrossRefGoogle Scholar
Weintraub, E. Roy. 2002. How Economics Became a Mathematical Science. Durham, NC: Duke University Press.Google Scholar
Whewell, William [1829] 1971. On the Mathematical Exposition of Some Doctrines of Political Economy. New York: A. M. KelleyGoogle Scholar
Wicksell, Knut. 1934. Lectures on Political Economy, Volume I: General Theory. London: Routledge & Kegan Paul.Google Scholar