Human Intelligence: Adam Smith and Behavioural Economics

Abstract

Behavioural economic theory explores the basis for behaviour in human intelligence, with Adam Smith’s Theory of Moral Sentiments sometimes being cited as an important precursor. Here we investigate the particular way in which Smith is interpreted by behavioural economists compared to alternative interpretations, with a focus on Smith’s impartial spectator. It is argued that these different interpretations follow from different approaches to economics more generally. In particular it is argued that ‘new’ behavioural economics is unduly constrained by retaining as its benchmark the mainstream approach, whose models are based on rational atomistic individuals. The paper concludes with a consideration of how behavioural economics can be enhanced by taking on board Smith’s broader views of human behaviour and his open-system approach to theorizing.