NATURAL EQUALITY, INCREASING RETURNS, AND ECONOMIC PROGRESS: A REINTERPRETATION OF ADAM SMITH'S SYSTEM

James M. Buchanan

Division of Labor & Transaction Costs (DLTC), 2005, vol. 01, issue 01, pages 57-66

Abstract: My aim in this paper is to reinterpret Adam Smith's theory of economic interaction by assigning a central role to his foundational presumption that persons are natural equals. There are implications of this presumption to be drawn both for the behavioral adjustments that move the system toward an equilibrium and for the properties of equilibrium itself — implications that make the whole analysis significantly different from the more familiar analyses that embody the presumption of individual differences. This reinterpretation allows for the construction of an internally coherent model that critically depends on the incorporation of Smith's principle that relates the endogenous specialization of labour to the size of the market nexus. By contrast, if persons are presumed to differ, one from another, one step in the equilibrating process remains outside the model, and the division or specialization of labour remains exogenous and, thereby, independent of market size.

Keywords: Generalized increasing returns; extent of market; natural equality (search for similar items in EconPapers)
JEL-codes: C62 D E1 F F11 F12 F16 J2 J3 L O (search for similar items in EconPapers)
Date: 2005
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