Thursday, February 14, 2008

Adam Smith Confused with Bernard Mandeville (again!)

Jude Ndu write a tendentious piece in Nigerian Tribune (here), called ‘Money and greed’:

And greed, you mark my words, will not only save this company but also, that other Malfunctioning company called the U.S.A. Indeed greed eventually revealed itself to be very destructive as I watched Gordon Gekko (Michael Douglas) crashed and crushed towards the end of the movie. In 1776, Adam smith, father of modern economics wrote the book that changed the world’s economic system – The wealth of Nations. In his book, Smith laid the intellectual foundation for today’s capitalism. His thesis was that individual ambition and self-centered interest for self-actualization was more powerful than any organized government system.

Adam Smith said the best results come from everyone in an organization or economic system doing what is best for him or her self. In competition the individual ambition serves the common good. Every man for himself. The global economy today revolves around the self-interest of a powerful few – The driving force for all capitalistic success. If you make money the centre of your economic policy, the machine will eventually be brought to a halt by greed. It’s not the love of money itself but the love of giving that drives economic success – compared to greed, giving is God like.”

There are so many errors of fact and attribution in this piece that it ia hardly worth correcting. Those academics who taught the nonsense that Adam Smith anything remotely related to ‘greed’ which came from the misunderstanding of self-interest’ being the rock on which his economics was based (once again George Stigler’s fault!) when in fact Smith said the opposite, namely that by serving the self-interest of others each serves his own best interest.

Gordon Gekko (Wall Street) was a misidentification from its scriptwriter who confused Adam Smith’s philosophy with its opposite, the scandalous and 'licentious system' of Bernard Mandeville (Fable of the Bees, 1724). Gekko-type greedy behaviour has more in common with ‘creative’ talent of Hollywood than anything Adam Smith wrote about in Moral Sentiments or Wealth Of Nations.


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