Adam Smith on self-deception

Thus far this week, we have pored over two intriguing selections from The Wealth of Nations — intriguing because Smith refers to the concepts of probability and risk in both of those passages in order to shed light on two different aspects of the economy. (One is a short paragraph in Book V, Chapter 1 of Smith’s magnum opus on the business of insurance. The other passage consists of a much longer paragraph in Book IV, Chapter 2, where the Scottish scholar is discussing the imposition of retaliatory tariffs.) But, for me, the most original and profound of these probability passages in The Wealth of Nations appears in paragraphs 22 and 23 of Book I, Chapter 10. Here, Smith explains how, on average, one’s wages are a function of the probability of success in one’s chosen profession: “The probability that any particular person shall ever be qualified for the employment to which he is educated is very different in different occupations. In the greater part of mechanic trades, success is…