Market Stability in Adam Smith: Competitive Process and Institutions

Jose M. Menudo

MPRA Paper from University Library of Munich, Germany

Abstract: Based on the new way of studying the work of Adam Smith in greater depth, with greater attention being paid to the use and context of his language, this investigation examines the theory of competitive exchange described in The Wealth of Nations, with the aim of bringing new contributions to the field of decision-making beyond the utilitarian theoretical framework. We have found an exchange process with principles of behaviour that are very different to those described in the traditional literature, principally through the leading role of both the cognitive process of decision-making, and of institutions. This work concludes that natural price is a rule of equivalence that guarantees market consistency and that the cognitive process of its participants is described as a mechanism for forming expectations based on institutions outside the market. These conclusions allow us to redefine the hypotheses of Adam Smith’s system of price determination.

Keywords: Classical; Adam Smith; Institutions; Market Structure and Pricing; Information and Knowledge. (search for similar items in EconPapers)
JEL-codes: B12 B31 D02 D4 D83 (search for similar items in EconPapers)
Date: 2011-06-20
New Economics Papers: this item is included in nep-hpe
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