54. Self-interest?

Economic thought has its roots in utilitarianism, but originally the utilitarians (Bentham, J.S. Mill, Adam Smith) were oriented to the common good, and accepted that at times individual interest had to be sacrificed for the greater good of all, while in economic thought the self has increasingly become disconnected from the common good.

Economists do recognize enlightened self-interest, defined as taking interests of others into account, so long as after deduction of any sacrifice to the other it yields net advantage. I define altruism as making a sacrifice even if, within limits, it yields net disadvantage. The source of it can be love, morality, habit or instinct. In economics, altruism is almost always ruled out. The argument for that is that under competition in markets altruists would not survive. However, competition is seldom so stark, or ‘efficient’, as economists call it, as to leave no room for any altruism. I do grant that altruism is limited by conditions of survival. The sharper competition is the less room there is for it.

It is standard practice in economics to refer, in assumptions of self-interest, to Adam Smith’s argument of the ‘invisible hand’ (in his Wealth of nations), but Smith pointed out that self-interest can go against collective interest and then must be subjected to constraints. He also (in his Theory of moral sentiments) gave arguments against the notion that compassion (he calls it ‘sympathy’) is in fact self-satisfaction and further says  ‘That whole account of human nature, however, which deduces all sentiment and affections to self-love, which has made so much noise in the world, but which, so far as I know, has never yet been fully and distinctly explained, seems to me to have arisen from confused misapprehension of the system of sympathy’. That ‘noise’ in economic thought has resounded far in politics and policy and has carried us away from good sense and from humanism. It has institutionalized egotism in society. Everything had to go via the market and that was seen as a surrender to egotism. Erroneous notions in economic science have misled us. This is a scandal. I wish economists had read Smith better.

Earlier in this blog, in an item on freedom (item 47), I indicated that for the highest level of freedom, in determining what we find that we should want, we need others to coach us from our prejudice and misconceptions. Adam Smith (of all people) already said this: ‘We can never survey our own sentiments and motives, we can never form any judgment concerning them; unless we remove ourselves, as it were, from our own natural station, and endeavour to view them as at a certain distance from us.  But we can do this in no other way than by endeavouring to view them with the eyes of other people, or as other people are likely to view them’. Smith already recognized the need for the other. Again, I wish economists had read Smith better.