Tuesday, April 21, 2009

Smith on Morals of Competition

John E. Hill writes a comment to an article, ‘Adam Smith would be appalled’ in The Boston Globe (20 April) HERE:

GORDON MARINO hit the nail squarely on the head with his op-ed "The business of business ethics." But he did not hammer the nail hard enough. Adam Smith, considered the father of capitalism, wrote, "In the race for wealth, and honors, and preferments, [one] may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors." But Smith added that one should not harm another in the process.

Surely Marino's critique of investors "taking unconscionable but legal risks with other people's pensions and life savings" means that hundreds of thousands of people have been harmed. And isn't the opacity of the instruments used to essentially defraud people of their pensions an impediment to the transparency needed for a truly free market?

The greedy Wall Street manipulators have violated not only ethical principles but also the free-market principles of Adam Smith.

John Hill should quote the full passage following the sentence he quotes to make clear and definitive the particular point that Smith makes (though congratulations to John Hill for spotting the basis of Smithian moral conduct in competition):

In the race for wealth, and honours, and preferments, he may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors. But if he should justle, or throw down any of them, the indulgence of the spectators is entirely at an end. It is a violation of fair play, which they cannot admit of. This man is to them, in every respect, as good as he: they do not enter into that self-love by which he prefers himself so much to this other, and cannot go along with the motive from which he hurt him. They readily, therefore, sympathize with the natural resentment of the injured, and the offender becomes the object of their hatred and indignation. He is sensible that he becomes so, and feels that those sentiments are ready to burst out from all sides against him.’ [TMS II.ii.2.1: 83]

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