How Adam Smith Negotiated Leave from Oxford: A Game-Theoretic Account

Abstract

At age 17, Adam Smith accepted a Snell Fellowship to Oxford, agreeing to be ordained as a minister of the Church of England. Smith did not fulfill this obligation. Instead, Oxford officials agreed to allow him to transfer from the Ordination to the civil law tract; and, later, to leave Oxford early on a “compassionate leave.” Undoubtedly, Smith's life and writings would have been considerably different had he adhered to the terms of the Fellowship. How did this agreement come about? Until recently, Smith's biographers have not attended to this issue. In his new book, Kennedy (2017) provides the answer. Balliol College at Oxford, which housed the Snell Fellows, captured a major portion of each Fellow’s scholarship. Were Smith to abandon Oxford, Balliol would lose the funds associated with Smith's Fellowship. Hence the college officials had an incentive to make an agreement with Smith in a manner that maintained the flow of funds. To do so, they had to make accommodations with Smith. The purpose of this note is to provide a simple game theoretic exposition of Kennedy’s answer. This approach highlights both the strategic setting facing the bargaining parties as well as the gains from exchange.