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Samantha Smith

I found “Adam Smith, Behavioral Economist” to be a very thought provoking article.

What I found myself wondering and thinking about while reading this piece was, to what extent is it human nature to act in these certain ways (altruistic, fair, etc.) and where does individual preference come in?

I found the section on the markets and altruism/fairness to be very interesting. It is clear that business is done based on altruism/fairness so that trust and relationships are built, but then we hear and read all of the negative press about banks essentially taking down the financial world because of individuals’ own self motivation and greed. This leads me to wonder about the balance between the motivations (just as the authors mention in the article).

When the authors mention Smith’s idea that people overestimate happiness and sadness- to what extent is that humans in general and then when do individuals’ chemical imbalances take over, such that they are depressed and cannot adapt to the sadness in life. So if there is one unemotional person will their overestimation of emotion be less than a very emotional person based on where their emotions started?

While I started thinking about individuals, it lead me to think broader- do these various behaviors vary by gender? Do men and women behave very differently inherently or do outside factors heighten differences in different cultures. There are no concrete answers to my questions, but I look forward to gaining understanding of behavioral economics as I learn more.

Bayan Misaghi

I found Adam Smith’s Preferences and Dual Perspectives insights fascinating, if not eerily prophetic. Smith’s writings are hypotheses that have since been supported over the last several decades with regards to how human behavior affects decision-making.

The Loss Aversion section, in my opinion, is closely related to the Endowment Effect. The authors mention that investors may be reluctant to sell assets losing value and large gaps between buying and selling prices. This might be because the investors are afraid of missing out on future returns (Loss Aversion) and/or because the agents actually feel like their assets are worth more now that they own it (Endowment Effect). That said, the agents involved in these scenarios might also be overconfident in their abilities; for example, in forecasting the terminal value of a stock price. So it’s difficult, if not impossible, to pin down precisely the reasons for these phenomena. I have a question with regards to the Endowment Effect: if we consider a good (e.g. coffee mug), would a reason for the Endowment Effect be that individuals require a certain return for warehousing risk? For example, if an individual pays $5 for the mug and a week later is willing to sell it for no less than $7, does the $2 spread represent the premium the individual wishes to receive for making sure the mug didn’t crack, that it wasn’t lost, etc.? Or is it because of something else?

The Intertemporal Choice segment was also very interesting. I’m reminded of a lecture by David Laibson at Harvard that I sat in on a few years ago (the lecture has since been updated and posted in the public domain: http://ec.europa.eu/dgs/jrc/downloads/jrc_aaas2013_laibson.pdf). Laibson highlighted studies that demonstrate that people have high expectations for the choices, tastes, and preferences their future selves make and have, but are seeking to maximize utility in the present with little-to-no regard for their future selves. For example, the Read and van Leeuwen (1998) study shows individuals choosing a healthy snack for themselves in the future (i.e. fruit), but choosing an unhealthy one in the present (i.e. chocolate). The Akerlof (1991) and O’Donoghue and Rabin (1998) studies demonstrate that most people shouldn’t join a gym because even if they have the best intentions when signing up since their plans to workout frequently are likely to fall through. Laibson speaks about how, for a given scenario, individuals tend to project costs as being significantly smaller in the future than they are when presented in the present. Smith alludes to this when he says “The pleasure which we are to enjoy ten years hence, interests us so little in comparison with that which we may enjoy to-day.” In short, even after acknowledging the long-term health benefits of and desires to cutting back on sugar and going to the gym regularly, individuals tend to be much more shortsighted.

Curtis Jay Correll

This article made me think about both Adam Smith and the foundations of economics through a new lens. With a firm background in the Wealth of Nations and very little further exposure to Adam Smith’s works, I always thought of him as focused almost exclusively on market forces and the individual as a rational, self-interested actor. Seeing the foundation he lay for behavioral economics, The Theory of Moral Sentiments makes one question how behavioral economics remained a fringe practice of economics for so long. It seems almost as if early economists saw the “Invisible Hand” and stopped at that or ignored much of the rest of Adam Smith’s work.
His work should have established economics as an interdisciplinary study at its core. With references to sociology and psychology as well as a clear link to moral philosophy through ideas from Plato’s allegory of the chariot in Phaedrus, his work shows an important connection between economics and other fields. It almost establishes economics as a framework or mindset through which other fields of study can and should be viewed.
I found Smith’s writings on “Consumption and Its Discontents” to be the most interesting part of the article. The use of the “Invisible Hand” in the context of social interactions was really cool. Smith’s work reads much like many modern works that present the “groundbreaking” realization that wealth does not equate to happiness. The examples of a paraplegic and the lottery winner being nearly equally happy once they adjust to their circumstances and the anecdote of kings fighting for the safety and security that a common peasant would enjoy did an excellent job of demonstrating the principle that happiness and pain are feelings that only last for a short time.
The article ultimately gave me a new perspective on both Adam Smith and early economics. It showed me the natural connection between economics as a whole and behavioral economics as a sub-category. Economics was always a field intended to be looked at through two sides, first purely analyzing tendencies and market forces to see what would happen in a world of assumptions, then with some of the assumptions lifted so that people and decisions can be studied as they really are. With this method you can better understand not just what will happen, but why and how it comes about.


Beyond the basic concepts of The Wealth of Nations, I don’t know much about Adam Smith’s work. It was surprising to me to read this article referencing The Theory of Moral Sentiments, a work he wrote almost two decades before his more renowned piece which continues to be a building block of classical economics today.

Like many above, I enjoyed the altruism section. What was most interesting about this section for me was the “identifiable victim effect” and how it might be affected by the modern 24-hour news cycle. Although being able to see video and photos from crises around the world will certainly humanize victims, at the same time, I wonder if the 24 hour news cycle has also contributed to our inability to do so. We have adapted to a model which has caused us, more or less, to develop a sort of immunity to what we see and hear on the news. We, the audience, now have the ability to pick and choose what we want to listen to or watch (since there are so many media for news today) which might only distance us from the victim.

I also agree with Curtis. It’s difficult for me to understand why behavioral economics has remained in the background for so long. Many of the concepts mentioned in this article seem so fundamental to human behavior, yet while they were “discovered” in the 18th century, technology has only recently been able to give us a scientific look into choice in the human brain.

For me, this article clarified the relationship between science and economics and allowed me to see the relevance of behavioral economics. I thought this article was very engaging and I look forward to reading more about how these behaviors and choices might potentially be affected by social class, political party, age, or other factors.


Smith's take on human behavior provided me a refreshingly new framework for economic analysis. Throughout my education thus far, our thought process has idealized the rational actor, an entity totally aware of its own interests, never varying from the rational outcome. What Smith does so well is not only acknowledge but analyze the "human elements" that are really the core drivers of most of our decisions. Others have glossed over these "passions", but I wholeheartedly agree with Smith that these human emotions overtake our impartial decisions, and accordingly we must analyze and consider them in order to understand behavior.

While brief, Smith's thoughts on fairness really hit home with me. Human emotions and passions are not only tied to our own feelings but to those around us. Smith contends that people all desire justice, this is not a new argument. However, he does also state that the impartial spectator takes a role internalizing other people's sense of fairness. In turn, people want others to see them as fair and just, and act accordingly in order to promote an image to society and their own impartial spectator. This really demonstrated to me just how prevalent and spot on behavioral economics really is, and that one must consider not only the behavior of an individual but how others will view that behavior as well.

Also of note was Smith's ability to identify the sympathy for the "rich and great". It seems to me like this phenomena would be more prevalent today, given the status of celebrities globally and how technology has allowed us to interact with them more intimately than ever. However, Smith acknowledged this tendency several centuries ago, which further reinforces the idea that human behavior has been "irrational" for some time and will likely continue on into the future.

Morgan Moskal

I found the section on altruism very interesting as well as the section comparing altruism, fairness and market interactions. I am curious as to how cultural differences would change Arrow's assertion on trust being a lubricant for exchange. I believe there are major differences between the need for trust in East Asian cultures and the assumed lack of trust in Western cultures on the topic of trade.

From this paper I want to draw the comparison between Sympathy and Fairness. The Altruism and Fairness sections are extremely similar. I think that Sympathy is a feeling one human has towards another when something bad has happened to the other person. I would even argue that the person feels sympathetic because the action that has occurred is in a sense ‘unfair.’ In this case, sympathy would actually be a “natural sentiment toward fairness.” However, on this same note, why don’t capuchin monkeys that receive the “greater reward” share what they are given when they see other monkeys receiving less for the same work?

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