Smith and Behavioral Economics
Modern behavioral economists have rediscovered insights about human psychology that Smith articulated in The Theory of Moral Sentiments two centuries earlier.
Smith the Psychologist
Long before behavioral economics existed as a field, Adam Smith wrote with extraordinary precision about the psychological biases and emotional forces that drive human decision-making. In The Theory of Moral Sentiments (1759), he catalogued phenomena that modern researchers have given new names: loss aversion, overconfidence, present bias, status-seeking, and the gap between what we plan to do and what we actually do.
The irony is striking. Smith is routinely cited as the father of the 'rational economic agent' model, yet his actual writings described humans as profoundly irrational, driven by emotions, social comparison, and self-deception. The rational-agent caricature of Smith comes from economists who read The Wealth of Nations without reading The Theory of Moral Sentiments.
