Skip to main content Accessibility help
×
Home

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

  • MICHAEL E. BRADLEY

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.

Copyright

References

Hide All
Andrews, P. W. S. 1964. On Competition in Economic Theory. New York: St. Martin’s Press.
Arrow, Kenneth J. and Hahn, F. H. 1971. General Competitive Analysis. San Francisco: Holden-Day.
Backhouse, Roger E. 1990. “Competition.” In Creedy, John, ed., Foundations of Economic Thought. Cambridge, MA: Basil Blackwell, pp. 58–86.
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.
Bateman, Bradley W. 2008. “The Secularization of American Economics.” Journal of the History of Economic Thought 30 (1): pp. 1–20.
Baumol, William J. 1982Contestable Markets: An Uprising in the Theory of Industry Structure.” American Economic Review 72 (1): 1–15.
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.
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.
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.
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.
Blaug, Mark. 2001. “No History of Ideas, Please, We’re Economists.” Journal of Economic Perspectives 15 (1): 145–164.
Bradley, Michael E. 1989. “John Stuart Mill’s Demand Curves.” History of Political Economy 21 (1): 43–56.
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>.
Cairns, Robert D. and Mahabir, Dhanayshar. 1988. “Contestability: A Revisionist View.” Economica, New Series 55 (218): 269–276.
Chamberlin, Edward H. 1962. The Theory of Monopolistic Competition, 8th edition. Cambridge: Harvard University Press.
Cournot, Augustin. [1838] 1971. Mathematical Principles of the Theory of Wealth. New York: Augustus M. Kelly Publishers.
Edgeworth, Francis Y. [1881] 1967. Mathematical Psychics. New York: Augustus M. Kelley Publishers.
Ekelund, Robert B. and Hébert, Robert F. 1999. Secret Origins of Modern Microeconomics. Chicago: University of Chicago Press.
Evensky, Jerry. 1989. “The Evolution of Adam Smith’s Views on Political Economy.” History of Political Economy 21 (1): 123–146.
Fama, Eugene F. and Laffer, Arthur B. 1972. “The Number of Firms and Competition.” American Economic Review 62 (4): 670–674.
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.
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.
Fourcade-Gourinchas, Marion (2001). “Politics, Institutional Structures, and the Rise of Economics: A Comparative Study.” Theory and Society 30 (3): 397–447.
Gilbert, Richard J. 1989. “The Role of Potential Competition in Industrial Organization.” The Journal of Economic Perspectives 3 (3): 107–127.
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.
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.
Hayek, F. A. [1948] 1990 “The Meaning of Competition.” In Littlechild, Stephen, ed., Austrian Economics, Volume III. Aldershot, UK: Edward Elgar, pp. 169–183.
Hayek, F. A. 2002. “Competition as a Discovery Procedure,” translated by Snow, Marcellus S.. Quarterly Journal of Austrian Economics 5 (Fall): 9–23.
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.
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.
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.
Kirzner, Israel M. 1973. Competition and Entrepreneurship. Chicago: University of Chicago Press.
Kirzner, Israel M. 1992. The Meaning of Market Process: Essays in the Development of Modern Austrian Economics. New York: Routledge.
Kirzner, Israel M. 1997. “Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach.” Journal of Economic Literature 35 (1): 60–85.
Knight, Frank H. 1956. On the History and Method of Economics. Chicago: University of Chicago Press.
Knight, Frank H. [1921] 1957. Risk, Uncertainty and Profit. New York: Harper & Row.
Machlup, Fritz. 1952. The Economics of Sellers’ Competition: Model Analysis of Sellers’ Conduct. Baltimore: Johns Hopkins University Press.
Machovec, Frank M. 1995. Perfect Competition and the Transformation of Economics. New York: Routledge.
Maloney, John. 1985. Marshall, Orthodoxy, and the Professionalization of Economics. Cambridge: Cambridge University Press.
Marshall, Alfred. [1920] 1990. Principles of Economics, 8th edition. Philadelphia: Porcupine Press.
McNulty, Paul J. 1967. “A Note on the History of Perfect Competition.” Journal of Political Economy 75 (4): 395–399.
McNulty, Paul J. 1968. “Economic Theory and the Meaning of Competition.” Quarterly Journal of Economics 82 (4): 639–656.
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.
Menger, Carl. [1871] 2004. Principles of Economics, online edition. Ludwig von Mises Institute.
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.
Mirowski, Philip. 1989a. More Heat than Light: Economics as Social Physics, Physics as Nature’s Economics. Cambridge: Cambridge University Press.
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.
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.
Morgan, Mary S. 1993. “Competing Notions of ‘Competition’ in Late Nineteenth-Century American Economics.” History of Political Economy 25 (Winter): 564–604.
Mosca, Manuela. 2008. “On the Origins of the Concept of Natural Monopoly.” European Journal of the History of Economic Thought 15 (2): 317–353.
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.
Ricardo, David. 2004b. The Collected Works and Correspondence of David Ricardo, Vol. V, edited by Sraffa, Pierro and Dobb, M. H.. Indianapolis, Liberty Fund.
Robinson, Joan. [1933] 1961. The Economics of Imperfect Competition. London: Macmillan.
Robinson, Joan. 1934. “What is Perfect Competition?” Quarterly Journal of Economics 49 (1): 104–120.
Rogin, Leo. 1956. The Meaning and Validity of Economic Theory. New York: Harper & Brothers Publishers.
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.
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>.
Schabas, Margaret. 2005. The Natural Origins of Economics. Chicago: University of Chicago Press.
Schumpeter, Joseph A. 1954. History of Economic Analysis. New York: Oxford University Press.
Schwartz, Marius. 1986. “The Nature and Scope of Contestability Theory.” Oxford Economic Papers, New Series 38: 37–57.
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.
Scitovsky, Tibor. 1966. Welfare and Competition: The Economics of a Fully Employed Economy. London: Unwin University Books.
Shepherd, William G. 1984. “‘Contestability’ vs. Competition.” American Economic Review 74 (4): 572–587.
Shepherd, William G. 1995. “Contestability vs. Competition—Once More.” Land Economics 71 (3): 299–309.
Skidelsky, Robert. 1986. John Maynard Keynes: Hopes Betrayed, 1883–1920. New York: Penguin Books.
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.
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.
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.
Spence, Michael. 1983. “Contestable Markets and the Theory of Industry Structure: A Review Article.” Journal of Economic Literature 21 (3): 981–990.
Stigler, George J. 1957. “Perfect Competition, Historically Contemplated.” Journal of Political Economy 65 (1): 1–17.
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.
Weintraub, E. Roy. 2002. How Economics Became a Mathematical Science. Durham, NC: Duke University Press.
Whewell, William [1829] 1971. On the Mathematical Exposition of Some Doctrines of Political Economy. New York: A. M. Kelley
Wicksell, Knut. 1934. Lectures on Political Economy, Volume I: General Theory. London: Routledge & Kegan Paul.

Related content

Powered by UNSILO

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

  • MICHAEL E. BRADLEY

Metrics

Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed.