The Concept of Equilibrium in Different Economic Traditions

The Concept of Equilibrium in Different Economic Traditions

An Historical Investigation

Bert Tieben

This book deals with one of the most puzzling concepts in economic science, that of economic equilibrium. In modern economics, equilibrium is considered a key assumption, but its role is contested by economists both from within the mainstream and from rival schools of thought.

Chapter 6: Adam Smith’s Love of System

Bert Tieben

Subjects: economics and finance, austrian economics, history of economic thought, methodology of economics, post-keynesian economics


INTRODUCTION In the ranking order of modern sciences economics is often classified as a natural science. This means that the regularities that form the basis of economic analysis are not the product of social forces, but of natural ones, like the human psyche, the availability of natural resources or the current state of technology. Hence modern economists speak of the natural mechanism of the market, the natural rate of economic growth and a host of other natural economic variables. This chapter will trace the idea of economics as a natural science to its earliest beginnings, as it is closely related to the development of equilibrium economics. In fact the term ‘equilibrium’ itself is a natural metaphor, as was argued in the previous two chapters. In the work of early liberal writers like Boisguilbert and the Physiocrats ‘equilibrium’ signified the search for the natural laws of the economy. But the great popularizer of the idea of economics as a natural science was Adam Smith. 1 Today Smith is considered the father of economics because he was above all a system builder. He was the first to build a coherent economic system to examine ‘the nature and causes of the wealth of nations’. In this book, which made him famous during his own lifetime, Smith frequently used the prefix ‘natural’ or ‘naturally’. He spoke of a ‘natural course of things’ or a ‘natural order of things’ determining capital investment. The rate of profit is said to be ‘naturally low in rich, and...

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