Adam Smith Kahneman. Donald Boudreaux

David Brooks properly applauds Daniel Kahneman, the late Amos Tversky, and other behavioral economists (“Who You Are,” Oct. 21).  But it’s untrue that “Before Kahneman and Tversky, people who thought about social problems and human behavior tended to assume that we are mostly rational agents.”

While too many economists – from George Stigler on the right to Paul Samuelson on the left – committed the methodological offense of assuming a wholly unreasonable degree of human reasonableness, the single most significant economist of all time did not: Adam Smith.  One can’t read Smith’s works without recognizing that the father of economics was acutely aware that people’s mental processes routinely deviate from what later economists defined as “rational.”*

And the fact that Smith was a behavioral economist long before behavioral economics was cool is significant.  It reveals that an understanding of human foibles, passions, and cognitive quirks does not (contrary to today’s irrational presumption) necessarily strengthen the case for greater government intervention.  Smith, remember, strongly advocated keeping markets free.  He did so not because free markets are perfect or because individuals are “rational,” but because free markets are less imperfect than regulated ones and because he wisely distrusted any of us disposition-effected, loss-averting, confirmation-biased, hyperbolic-discounting, and otherwise foible-infected humans with the power to order each other about.

Read full letter in Cafe Hayek.