Adam Smith and Competitive Equilibrium

Ramesh Chandra

Research output: Working paperDiscussion paper

Abstract

A view has emerged which sees Adam Smith’s main contribution to economics in terms of his equilibrium theory. This paper argues that equilibrium economics was neither Smith’s main contribution nor his chief concern. It is true that Smith made a few observations which may be construed as equilibrium economics in some loose sense. For example, his observation that the market price of a commodity has a tendency to gravitate towards its natural price; or the rate of profit in different employments tends towards equality. But from this it cannot be concluded that Smith was chiefly an equilibrium theorist. In the first place, it needs to be emphasised that the ‘tendency’ towards equilibrium, which Smith talked about, is not the same thing as an equilibrium ‘outcome’. Equilibrium as an outcome is more likely to be reached in a stationary state than in an evolutionary system in the process of continuous dynamic motion. Smith’s evolutionary perspective, his analysis of the division of labour, capital accumulation, and the institutions most conducive to the generation of wealth, all point to the fact that Smith was more concerned with dynamic analysis than with static equilibrium. Finally, barring a few observations on the equilibrating tendency in the system, most of the Wealth of Nations is not devoted to this question.
LanguageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-21
Number of pages22
Volume03
Publication statusPublished - 15 Nov 2003

Fingerprint

Competitive equilibrium
Adam Smith
Wealth
Economic equilibrium
Evolutionary
Economics
Rate of profit
Equality
Capital accumulation
Natural prices
Market price
Commodities
Dynamic analysis
Division of labor
Equilibrium theory

Keywords

  • adam smith
  • equilibrium
  • economics
  • dynamic analysis
  • static equilibrium
  • wealth of nations

Cite this

Chandra, R. (2003). Adam Smith and Competitive Equilibrium. (11 ed.) (pp. 1-21). Glasgow: University of Strathclyde.
Chandra, Ramesh. / Adam Smith and Competitive Equilibrium. 11. ed. Glasgow : University of Strathclyde, 2003. pp. 1-21
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Chandra, R 2003 'Adam Smith and Competitive Equilibrium' 11 edn, University of Strathclyde, Glasgow, pp. 1-21.

Adam Smith and Competitive Equilibrium. / Chandra, Ramesh.

11. ed. Glasgow : University of Strathclyde, 2003. p. 1-21.

Research output: Working paperDiscussion paper

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Chandra R. Adam Smith and Competitive Equilibrium. 11 ed. Glasgow: University of Strathclyde. 2003 Nov 15, p. 1-21.