Monday, November 07, 2005

Oh, No He Didn't!

Jim Stanford, an economist working for the Autoworkers union in Canada, writes a lively piece in the Globe and Mail, 7 November, headed “Rage against the machine”, an account of his frustration from being stalked by phone calls generated by an automatic machine in pursuit of a debt that somebody owed who had lived in his home before he moved in.

I am sure most of us have been there, and still suffer from, such intrusive phone calls trying to sell something, often at meal times, . Hence Jim, Stanford should start with a lot of sympathy in his quest to rid such nuisance calls from his life.

However, he lost mine at the first paragraph:

“Anyone who has read Adam Smith knows that in a free-market system, the pursuit of private profit always leads to the enhancement of the collective good. The inherent human desire to make a buck, channelled through the unfettered forces of supply and demand, will ensure that resources are optimally allocated and efficiency is maximized, for the good of us all.”

That is not what Adam Smith said, nor implied. It may well be what Jim Stanford was taught by his tutors during his economics' classes, but I think I can safely say that they never read this in Adam Smith’s “Wealth of Nations”, and neither did Jim Stanford, assuming his tutors and Jim ever read Smith’s books at all.

The pursuit of profit does not ‘always’ lead to ‘enhancement of the public good’, because private profit can also lead to the enhancement of private not public benefits, as in monopoly profits at the expense of consumers, fraudulent profits at the expense of the victims of fraud, and anti-social profits from polluters passing their costs onto others.


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