Adam Smith and Behavioral Economics

Assumptions of Adam Smith, later proved by psychologists and economists. 

"The overweening conceit which the greater part of men have of their own abilities is an ancient evil remarked by the philosophers and moralists of all ages. Their absurd presumption in their own good fortune has been less taken notice of...The chance of gain is by every man more or less overvalued, and the chance of loss is by most men undervalued, and by scarce any man, who is in tolerable health and spirits, valued more than it is worth." Wealth of Nations I.10.29–31 (1776)

"Pain, I have already had occasion to observe, is, in almost all cases, a more pungent sensation than the opposite and correspondent pleasure." The Theory of Moral Sentiments, III, ii.

"The pleasure which we are to enjoy ten years hence, interests us so little in comparison with that which we may enjoy to-day, the passion which the first excites, is naturally so weak in comparison with that violent emotion which the second is apt to give occasion to, that the one could never be any balance to the other, unless it was supported by the sense of propriety.” “The spectator,” in contrast, “does not feel the solicitations of our present appetites. To him the pleasure which we are to enjoy a week hence, or a year hence, is just as interesting as that which we are to enjoy this moment” (Theory of Moral Sentiments IV, ii).

References

Ashraf, Camerer, Loewenstein (2005) Adam Smith, Behavioral Economist. Journal of Economic Perspectives—Volume 19, Number 3—Summer 2005—Pages 131–145 https://www.cmu.edu/dietrich/sds/docs/loewenstein/AdamSmith.pdf



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