Monday, January 03, 2011

Free Thinkers Can Be Wrong Too

Jon Lindgren posts (3 January) in Red River Freethinkers (‘the truth will set you free’) HERE

What is the “Common Good”?

“Those two words are simply beautiful. What do they mean? Surely, one part of the definition is that the common good is the opposite of selfishness. But, even that is not quite so clear. In 1776, Adam Smith published The Wealth of Nations which pointed out that in a capitalistic, everyone seeking their own selfish ends works to serve the common good by producing the goods we want the most. Other people argue that a socialistic democracy is better at seeking the common good because we can elect people who will then use a country’s resources to pursue this noble end

It is essential for constructive debate to ensure that assertions about a person’s statements are correct. Jon Lindgren asserts that Adam Smith pointed out that “everyone seeking their own selfish ends works to serve the common good by producing the goods we want the most.”

I am entitled to ask where Adam Smith made such a statement? He implies that it is to be found in Wealth Of Nations, but where exactly? He never said – and I challenge Jon Lindgren to produce his evidence – that everyone seeks “their own selfish ends” or that commerce – he never used the word “capitalistic” – would have the power which he ascribes to it.

Jon Lindgren
, or more likely his source for this misleading statement, confuses Adam Smith with Bernard Mandeville’s ‘Fable of the Bees’ (1724) with Smith’s Wealth Of Nations published 52 years later. Mandeville was responsible for creating a philosophy out of selfishness – “Private Vices, Public Benefits”, which Smith regarded, and wrote so in his Theory of Moral Sentiments (1759), as an unqualified “licentious” philosophy.

In fact, the most that anyone could draw from Smith’s view of “self-interest” of people unintentionally working for the common good in the single paragraph where he mentions the ‘invisible hand’ in Wealth Of Nations, is that by adding their annual revenue and employment to that of the rest of the society’s annual revenue and employment, it would increase the total of it – the whole is the sum of its parts – without making any statement about the nature of the consequential distribution of total output.

That it benefitted society came much later in the 20th century, following Paul Samuleson, and others, in his “Economic: an analytical introduction”, McGraw-Hill, 1948, page 36.

Smith regarded the actions of “merchants and manufacturers” with studied suspicion and showed how they did not work for the best of society in the main, with their mercantile monopolies, tariffs, prohibitions and influence on the legislature.

That is: the opposite of what Jon Lindgren (and for that matter, Paul Samuelson) asserted he did. Jon's in good company, but completely wrong for all that.

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Blogger daphnemillar said...

I think this comes so close to the comment you opbject as to make no difference.
" In almost every other race of animals, each
individual, when it is grown up to maturity, is entirely independent,
and in its natural state has occasion for the assistance of no other
living creature. But man has almost constant occasion for the help
of his brethren, and it is in vain for him to expect it from their
benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to
another a bargain of any kind, proposes to do this. Give me that which
I want, and you shall have this which you want, is the meaning of every
such offer; and it is in this manner that we obtain from one another the
far greater part of those good offices which we stand in need of. It is
not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages

2:09 pm  
Blogger entech said...

Professor Kennedy’s advice about reading Smith is to look back and forward a paragraph or two. In modern parlance ‘to see where he is coming from and where he is going’. Chapter 2 is all about exchange and the division of labour.
Earlier in the chapter Smith points out that you never see two dogs reach an agreement that this bone is more suitable for you and yours for me, so we should swap. And later he says that in a hunting society a specialisation tends to develop. I make a good hunting tool better and quicker than you, you are a better hunter than me, use my tools and give me some of the meat and we both save time and effort. When my interest coincides with yours we can ‘do a deal’.
Selfishness and self-interest is not the same thing. A completely selfish person cannot thrive, just as the dogs spend angst and effort to hold on to a bone that is hard to eat. Recognising where our self-interests coincide leads to a mutual benefit.
If you ever go to a produce market at the end of a working period (the market may be closed for the next few days), you see two types of shopper: one who is busy and buys early and the bargain hunter who waits for the end of the day. As the market gets near to closing time fresh food falls in price, either it will not be suitable for sale later or the effort of storing it is too great. You never see the butcher or greengrocer saying”help me out, buy this while it is still saleable”, rather he appeals to you to get a bargain price. Common interest makes self-interest work.

2:21 am  
Blogger Gavin Kennedy said...

Daphne Miller has selected a passage from Wealth Of Nations that she believes answers my defence of Smith against allegations that he advocated a thesis that the ‘selfish’ actions of individuals benefit society, viz: “everyone seeking their own selfish ends works to serve the common good by producing the goods we want the most.”

I believe that she (and many others who rely of quotations from Smith’s Works alone) has misread and misunderstands the words that she quotes. Let me explain:

The point that Smith makes about animals and individuals among them is that they do not need nor depend on other individuals of their species for anything once they reach maturity. However ‘man’ is in an entirely different situation with different behaviour sets in consequence. They are dependent (‘constantly’) for ‘the help
of his brethren’.

Whereas individual animals can survive in their selfishness (the strongest and the crafty doing marginally better), mankind has to co-operate with others in myriads of ways. This alters their behaviour sets considerably. It doesn’t turn them into angels, nor does it institute a regime of total and indiscriminate benevolence. Cooperation is a learned habit, even disguised in many ways. As Mirabeau put it in the 18th century: the individual thinks that he works for himself, but actually he works for everybody else.

We cannot be totally self-sufficient – more so with modern commercial society – and we rely on what others can do for us for what we cannot provide for ourselves. Our relationships are dominated, not by selfishness (though we are all selfish in some degree), but by persuasion and one form (not the only form) of that persuasion behaviour-set is what Smith correctly identified in the passage that Daphne quotes, as bargaining.
Now bargaining requires a mediation between parties of each transacting to get whet they want from someone in exchange for something that they want, hence: ‘Give me that which
I want, and you shall have this which you want”, which is in Smith’s words “the meaning of every
such offer”, adding that “it is in this manner that we obtain from one another the
far greater part of those good offices which we stand in need of”.

Smith elaborates by pointing out that the most effective way to persuade others to supply us with our wants is be ‘addressing’ their ‘self-love’ or ‘self interest’, and not just by addressing our own ‘interests’.

Two selfish individuals would have great difficulty in persuading each other to exchange something for whatever they wanted from the other. We give to get. Each tries to persuade the other that their interests are best served by accepting whatever they offer in exchange for whatever they want. This applies to the seller of a car persuading a potential buyer that the car is just what they need for whatever purpose they have a need for a car – big and roomy, if it’s a family, fast if it’s a trendy youngster, reliable in all weathers or terrains for a long-distance driver, long-lasting for a low income family, looks good for a socialite, and so on.

Daphne has got Smith so wrong. Smith attacked selfish philosophies (Bernard Mandeville) and also selfish actions (tripping up rivals, taking from others without giving something is return, cheating the poor, and other examples in his Theory of Moral Sentiments). He had no time for selfish ‘merchants and manufacturers’ who ‘narrowed the competition’ and ‘raised prices’. He had no philosophy of selfishness.

12:50 pm  

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