A ‘Third Culture’ in Economics? An Essay on Smith, Confucius andthe Rise of China

China’s rise drives a growing impact of China on economics. So far, this mainly works via theforce of example, but there is also an emerging role of Chinese thinking in economics. Thispaper raises the question how far Chinese perspectives can affect certain foundational principlesin economics, such as the assumptions on individualism and self-interest allegedly originatingin Adam Smith. I embark on sketching a ‘third culture’ in economics, employing anotion from cross-cultural communication theory, which starts out from the observation thatthe Chinese model was already influential during the European enlightenment, especially onphysiocracy, suggesting a particular conceptualization of the relation between good governmentand a liberal market economy. I relate this observation with the current revisionist viewon China’s economic history which has revealed the strong role of markets in the context ofinformal institutions, and thereby explains the strong performance of the Chinese economy inpre-industrial times. I sketch the cultural legacy of this pattern for traditional Chinese conceptionsof social interaction and behavior, which are still strong in rural society until today.These different strands of argument are woven together in a comparison between Confucianthinking and Adam Smith, especially with regard to the ‘Theory of Moral Sentiments’, whichends up in identifying a number of conceptual family resemblances between the two. I concludewith sketching a ‘third culture’ in economics in which moral aspects of economic actionloom large, as well as contextualized thinking in economic policies.