Monday, May 05, 2008

EMail Down: I'm Working on Adam Smith On Bargaining

This weekend my email server went down, unexplained still by the server company. I knew something was wrong on Saturday afternoon when I had received no emails, including from Google on mentions of Adam Smith on the web. Nothing still on Sunday and nothing until sometime this afternoon.

It’s not that I have been doing nothing. Work goes on even in ‘retirement’.

Among my tasks for May is to finish my final draft of the paper: “Adam Smith’s on Bargaining”, that I am to present at the 35th Annual Conference of the History of Economics Society to be held in York University, Toronto, 27-30 June. I wrote the first draft several month’s ago.

The basic problem is that most economists appear unaware that Adam Smith wrote on bargaining. The gap between his 18th-century insight into bargaining and the attention given to bargaining by modern economists, mainly in pursuit of a determinate solution to what they consider the ‘bargaining problem’ – how the final bargained price is decided – in what is called the bilateral monopolists who are the parties to the bargain.

My attention is directed at what Adam Smith saw was the problem – the role of bargaining in commercial markets and how the parties resolve their different versions of the price that they both agree to, normally a different price to that which they open their negotiation.

This brings together Adam Smith’s opening chapters of Wealth Of Nations, parts of lectures he gave in 1762-3 at Glasgow, and important contributions he wrote in Moral Sentiments. They also link to Adam Smith’s wider writings using his historic social-evolutionary market method (see Jim Otteson’s (2002): Adam Smith’s Market Place of Life, Cambridge).

Modern economics, using simple and sophisticated maths, has failed to find a determinate solution to the bargaining problem that is empirically verifiable – realistically they are unlikely ever to do so – but Adam Smith identified the method by which bargains are empirically achievable and through which negotiators may use to improve their bargaining skills.

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