Wednesday, November 02, 2005

Invisible Hand, no 25

Farraz Khan, a columnist, in the Daily Texan (“Serving the community of The University of Texas at Austin since 1900”) 1 November writes:

Personally, I advocate Adam Smith's philosophy of self-interest as the invisible hand guiding individuals toward success. Its practical application proves it to be the most preferable system of economics. However, temperance is a virtue that cannot be ignored.It is necessary for the individual to find a balance between self-interest and social obligation, because true individual success ultimately resides in personal and social harmony. Through this process, one is able to determine that pure and lasting happiness is not derived from a Lexus or an Armani suit, but rather from doing something worthwhile, from using one's power to help humanity. Indeed, money used to help a family live another day is better spent than simply filling the coffers of a dead guy.”

Regular readers will anticipate what I usually say about Adam Smith’s alleged philosophy of ‘self interest as the invisible hand guiding individuals towards success’. If Farraz Khan reads Adam Smith that way, and believes it, it is not difficult to see why he qualifies what he has written. The misinterpretation is his, not Adam Smith’s

Smith in “Moral Sentiments” makes many qualifications on the error of seeing self-interest as the sole, or even the main, goal of people. ‘Self-love is not enough’!, writes Smith in “Wealth of Nations” (Book I, Chapter 2) and in his Lectures on Jurisprudence. He never had a materialist philosophy of consumption in the sense Khan criticises is prevalent in modern society. He sternly criticises the lust for ‘trinkets and baubles’ and such like. He shows in “Moral Sentiments” how it eventually brought down the power of the feudal lords; and how it holds back sharing in prosperity for the common poor in “Wealth of Nations” because prodigality, in place of frugality, slows down economic growth.

Farraz Khan’s summary of his own outlook is neatly put:

In the end, the rejection of this materialistic philosophy would allow for greater personal satisfaction. It would allow people to realize that their lives mean more than their financial statements would indicate. It would provide them with the opportunity to list their priorities in the order of what is really important. It would help establish the true foundation of happiness.”

Check the article for yourself at:

I cannot see Adam Smith disagreeing much with those later sentiments of Farraz Khan, though he would query why he brings the invisible hand into his earlier declaration.


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