Sunday, February 22, 2009

A Financial Advisor who Understands Adam Smith

Michael Hennigan, Founder and Editor of Finfacts (Ireland) HERE, writes a most encouraging post : ‘The "free market" in these calamitous times’, containing this gem:

Adam Smith, the father of modern economics, in his 1776 book The Wealth of Nations, identified the importance of individual self-interest, but contrary to what some critics have claimed, his emphasis was that you serve your own self-interest by serving the self-interest of others. It is not what is generally concluded because the last line of the following extract is what is most often quoted, in isolation:

"In civilized society he [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. 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 show 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 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 self-love, and never talk to them of our own necessities but of their advantages

Regular readers of Lost Legacy will recognise this familiar quotation from Wealth Of Nations (WN I.ii.2: pp 26-7; Edwin Canaan, 1937 edition, p 14).

Michael Hennigan is absolutely right in his reading of this famous passage. Congratulations.

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Blogger Donald Pretari said...

Thank you for this post. I also liked this:

"Irish writer George Bernard Shaw is said to have remarked that Christianitymight be a good thing if anyone ever tried it. A pure free market wouldn't but in an imperfect world, in an economy untainted by cronyism, corruption and poor regulation, the delivery of most goods and services is better provided by competitive private sector firms than State-owned ones. However, the nexus between the political and business sectors has been an enduring feature of most modern economies before the recent period of taxpayer bail-outs and in the US, Wall Street has for long provided the greatest example of the extent of the departure from free market principles"

I have been arguing this using a thread of this Wittgenstein quote:

"if a lion could speak, we could not understand him. (PI, p.223)"

If a free market existed, our investor class and bankers could not compete in it.

This blog touches on so many themes by focusing on Adam Smith. It's wonderful. I used to spend some time correcting people about the views of Edmund Burke, but I'm not up to the level of doing a blog like yours on his views. I wish I were.

Don the libertarian Democrat

4:36 pm  
Blogger Gavin Kennedy said...


Thanks Don for your encouragement.

4:57 pm  

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