The Behaviour And Social Order Theory Of Adam Smith

Through the joint efforts of several generations, the economic theory based on homo oeconomicus assumptions has achieved great success in the interpretation and prediction of modern economic life, as well as in the design of social order. But with the deepening understanding of individuals’behaviors, the traditional analytical framework has been increasingly questioned. More and more scholars began to reflect on the moving direction of economics and tried to break through some of the fundamental assumptions of mainstream economics and change the paradigm of economics. All these efforts greatly enhanced people’s understanding of human behavior and the social and economic phenomenon, but still can not make us feel satisfied. So the key question of modern economics and the whole social science is seeking a new hypothesis about the core theory of human nature, which must comply with two requirements:authenticity and validity. To accomplish this, it is necessary to look back to the history of economic thoughts.Scholars, especially those economists generally regard Adam Smith as the founder and instigator of the homo oeconomicus hypothesis. Therefore, to break the dominance of homo oeconomicus hypothesis requires us to return to the source of this assumption, which means that we should review Smith’s thought again. I believe that in all of Smith’s thought, what was ignored, or at least has been misplaced is the comprehensive explain of human behavior and decision-making mechanisms in his book The Theory of Moral Sentiments, as well as the importance of these views regarding to the understanding of his another important work, An Inquiry into the Nature and Causes of the Wealth of Nations. It is in The Theory of Moral Sentiments that hides the clue which might be most important for the reconstruction of the core assumptions of social science. In this sense, centering on The Theory of Moral Sentiments, this paper investigates the thoughts of individuals’decision-making of Adam Smith, generalizes the logic and meaning behind his work, and then eplains his theory of human nature in details.Firstly, using the word frequency distribution statistical analysis method, it is concluded that the core concept of The Theory of Moral Sentiments is "propriety" rather than "sympathy" or "spectator", the latter two should be more precisely regarded as instrumental concepts introduced by Smith in order to explicate his "propriety" theory. Focusing on "propriety", and starting from its formation mechanism and internalization mechanism, this paper explicates the human behavior theory of Smith, and then, gives an accurate grasp of Smith’s image of individuals by language of modern economics. A simple behavioral experiment shows that Smith’s theoretical model of individual behavior has much more explanatory power than traditional economic models.Secondly, this paper selects "propriety" as the main line of The Theory of Moral Sentiments, re-connects each chapter of the book in series. The authur argues that the main focus of The Theory of Moral Sentiments is how the society is possible based on human nature. What Adam Smith aimed to answer in this book is first about how the society is possible, and then how the society could become a better one. Following this logic, we can understand better why Adam Smith made a substantial edit by adding several chapters on the theory of conscience in the second edition of The Theory of Moral Sentiments. It is believed that these changes are substantial, reflecting the depth of Adam Smith, which is an important step in building the certainty of his theory and is built on the basis of propriety.Finally, using the idea contained in The Theory of Moral Sentiments, this paper gives a deeper interpretation of Smith’s another famous book, An Inquiry into the Nature and Causes of the Wealth of Nations. It is pointed out that Smith’s system of natural liberty does not mean acting arbitrarily, but pursuing their own interests by labor division and exchange which are spontaneously formed under the premise of never violating the justice and laws. It is worth to note that both the labor division and exchange are the products of propriety. Based on Smith’s point of view, sympathy and altruism are both based on the tradeoff between self-love and propriety. Smith’s "invisible hand" is a hand of self-interest regulared by propriety. In other words, everyone lives with the guiding principles of self-interest, but the observance of propriety generates a degree of care of others, which makes the society persist unconsciously. There are never so called altruistic, presocial or moral motives in Smith’s individual behavior model, and all these behaviours are the consequence of the psychological mechanism of human regarding to propriety. The homo oeconomicus, which is regarded as the core hypothesis of modern mainstream economics, is in fact a self-interested person who respects to propriety. It is concluded that the human natures assumed in The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations are absolutely consistent, and therefore, in this sense, the Adam Smith Problem does not exist.Looking forward to the direction of economic science in the future, I believe that the individual behavior theory as well as the theory of social order of Adam Smith can be a good unity of those existing research evidence and ideas, provide a feasible and consistent path for integrating the modern economics evidence and models, and become a powerful alternative paradigm for us to grasp the emotional side of human decision-making and social order. Meanwhile, this paradigm can also take the ethical dimensions and context dimensions into the framework of economic analysis, and therefore there will be new opportunities for the development of economics.