Sunday, February 17, 2008

Armchair Economist Is Precisely Wrong

Armchair economist – ‘empower the individual and minimise the state’ - writes on ‘Bill Gates and Altruism’ here:

“We can help others by simply helping ourselves–Adam Smith demonstrated this in the 18th century.

This brings me to Gary Becker. The professor, writing about Gateses ideas on corporate altruism, takes an example from Adam Smith that has always resonated with me. It goes:

"Smith was skeptical not about the strength of altruism, but about its scope or reach. For example, he uses an example in this book that is highly relevant to the present and to Gates’ quest. He asks “how a man of humanity in Europe: would respond to hearing ” that the great empire of China… was suddenly swallowed up by an earthquake…”? His answer was that “If he [this man] was to lose his little finger tomorrow, he would not sleep tonight; but, provided he never saw them [i.e, the people of China], he would snore with the most profound security over the ruin of a hundred million of his brethren, and the destruction of that immense multitude seems plainly an object less interesting to him than this paltry misfortune of his own” (Part III, Chapter 3).

"Liberals tend to hate this above example.”

Comment
Having no claim to being a ‘liberal’ (US sense), because I’m moderate right-of-centre, and I step into this discussion, not in order to defend ‘liberals’, but to present Adam Smith’s legacy accurately.

It is always preferable to read all that Adam Smith wrote about a topic rather than just a snippet of a quotation torn out of context. This particular quotation is widely misunderstood because readers do not read far enough. I am surprised that Garry Becker, a Nobel Prize winner in economics (Bank of Sweden) may have made this mistake.

You will find the entire episode in The Theory of Moral Sentiments (TMS III.iii. 3.4: pp 136-37). I shall quote the entire paragraph for you to read and compare as a whole with the unwarranted conclusion placed upon it by the Armchair Economist’s edited version of it:

Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment. He would too, perhaps, if he was a man of speculation, enter into many reasonings concerning the effects which this disaster might produce upon the commerce of Europe, and the trade and business of the world in general. And when all this fine philosophy was over, when all these humane sentiments had been once fairly expressed, he would pursue his business or his pleasure, take his repose or his diversion, with the same ease and tranquillity, as if no such accident had happened. The most frivolous disaster which could befal himself would occasion a more real disturbance. If he was to lose his little finger to-morrow, he would not sleep to-night; but, provided he never saw them, he will snore with the most profound security over the ruin of a hundred millions of his brethren, and the destruction of that immense multitude seems plainly an object less interesting to him, than this paltry misfortune of his own. To prevent, therefore, this paltry misfortune to himself, would a man of humanity be willing to sacrifice the lives of a hundred millions of his brethren, provided he had never seen them? Human nature startles with horror at the thought, and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it. But what makes this difference? When our passive feelings are almost always so sordid and so selfish, how comes it that our active principles should often be so generous and so noble? When we are always so much more deeply affected by whatever concerns ourselves, than by whatever concerns other men; what is it which prompts the generous, upon all occasions, and the mean upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self-love. It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct. It is he who, whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it; and that when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration. It is from him only that we learn the real littleness of ourselves, and of whatever relates to ourselves, and the natural misrepresentations of self-love can be corrected only by the eye of this impartial spectator. It is he who shows us the propriety of generosity and the deformity of injustice; the propriety of resigning the greatest interests of our own, for the yet greater interests of others, and the deformity of doing the smallest injury to another, in order to obtain the greatest benefit to ourselves. It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters.” (TMS III.iii.4: pp 136-7)

If you read this carefully, the entire tone of the Armchair Economist’s selected and edited partial quotation changes completely.

Offered a choice between losing his little finger and saving 100 millions of his brethren, does the man choose his finger or does he save the 100 million in China?

From the first part of Adam Smith’s paragraph it seems he would act as Armchair economist imagines he would act, but that is not what Adam Smith said. It is only plausible if the reader is not presented with the rest of Smith’s paragraph, as it is so often the case when it is used to show the base selfishness of mankind (perhaps for those who edit the paragraph, they truly believe they would choose their little finger!). But what does Smith say of such persons?

Human nature startles with horror at the thought, and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it.’

So much for the moral fibre of the Armchair economist. But he has not natural right to misreport what Adam Smith said – he can disagree with Adam Smith by all means, but he abuses Adam Smith’s Natural rights to his reputation, if he purloins his words to say the reverse of what he actually said.

[I am grateful for Sandra Peart for correcting my own misreading of this passage in 2005.]

Oh, by the way: Armchair also got it wrong when he claims: ‘We can help others by simply helping ourselves’, and worse, claims that ‘Adam Smith demonstrated this in the 18th century’.

No! What Adam Smith demonstrated was the exact reverse: that by helping others (when we address their interests, not our own) we help ourselves!

This is precisely the opposite of what the Armchair economist asserts – he should get out of his armchair more often and take Moral Sentiments off of his shelf (he does have a copy, doesn’t he?) read carefully the above fuller extract [and read Wealth Of Nations and see what Adam Smith did write]:

We address ourselves, not to their humanity but to their self-love, and never speak to them of our necessities but of their advantages’ (WN I.ii.4: p 27)

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