Self-Interest is Not Selfishness

In a post I made on 10 November (see below), Greg Baldwin posted a comment. I would normally just reply to the comment. However, I consider the exchange of wider interest and importance, and to avert it being missed by those who do not search for the rare comments Lost Legacy receives, I post the exchange of comments for wider readership:

“Greg Baldwin said...

Thanks for the comment. Secretly I want to believe that self interest and selfishness can be neatly distinguished, but I'll confess quotes like this from our friend Mr. Smith have not helped me to find the clear distinction:

"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 own self interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages."

`Adam Smith, Wealth of Nations’

I'm not sure I fully understand everything Smith is trying to say here, but self-love + self interest do seem to be at least the basic ingredients for selfishness...no?

What am I missing?"

To which I replied:

Hi Greg

Thanks for your comment.

Many people quote the “Butcher, Brewer, Baker” example from Smith’s Wealth Of Nations (WN I.ii.2: 26-27) without appreciating exactly what he was saying. He advanced the same example in the 1762-3 lectures (23 March, 176: vi.46: 348) that he gave in Glasgow University (Smith, Lectures On Jurisprudence, Oxford University Press/Liberty Fund: 1978), hence it was an early part of his oeuvre long before he wrote Wealth Of Nations.

‘Self-interest’ and ‘self-love’ in 18th-century discourse did not mean selfishness and were clearly distinguished.

Bernard Mandeville (1724) celebrated selfishness as a virtue (as did Ayn Rand in the 20th century). Smith regarded Mandeville’s teachings as “licentious” (Moral Sentiments, 1759: TMS VII.ii.4: 306-14)).

Examine the quote: we expect our dinner “from their regard to their own self interest”. But there are two people in each transaction: the hungry would-be diner and the shopkeeper potentially supplying the meat, beer, or bread.

Smith excluded the virtuous motive of their “benevolence” as too weak to rely upon regularly (as common sense suggests it would be, except at the margin). So how is the transaction to be conducted?

“We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

We don’t talk of our necessities in the transaction but address “their self-love” - they are self-interested too! They have gone to the trouble of securing supplies of “meat, beer, and bread” and offering them for sale to potential customers.

The earlier transactions of the “butchers, brewers, and bakers” to secure their supplies (from farmers and those along the supply chain) involved multiple transactions on the same basis. All suppliers need access to freely bargained exchanges to supply their families with their needs from others.

In the sentences immediately preceding the ones you quote, Smith wrote:

“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 such 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.”
(WN I.ii.2:26)

This is a clear description of the bargaining processes by which we obtain “those good offices which we stand in need of”.

Each party is self-interested in the outcome, but (and it is an important ‘but’) neither can obtain what they want without addressing what the other wants in voluntary exchange transactions. Two utterly selfish egoists would seldom, if ever, come to a voluntary agreement – neither would give up anything in place of demanding their price “or else”.

As Smith put it, in social converation we “persuade” to get what we want. Highlighting why something (what we offer to give) is good for someone is often a good place to start when seeking what we want to get.

That is the meaning of the paragraph from which you take the well-known quotation (in the process of which you elide from the 18th-century meaning of self-interest and self-love to a later meaning).

To read this as Smith advocating selfishness is quite different from the intended and explicit meaning of Smith's moral philosophy, as expressed in that paragraph.

And that Greg is the answer to you question: “What am I missing?”

Wrong On Darwin, Right on Adam Smith

'The Age of Empathy' by Dutch psychologist and primatologist, Frans de Waal, using primate tendencies as a model, contends that humans are hard-wired for compassion. In Los Angeles Times by Sara Lippincott, a freelance editor specializing in science. HERE:

“De Waal's principal thesis is that when contemplating our evolutionary heritage, we see ourselves more as natural-born competitors than natural-born empathizers and cooperators. "[U]ntil recently," he writes, "empathy was not taken seriously by science. Even with regards to our own species, it was considered an absurd, laughable topic. . . . " Some of us indeed have tended to think like Social Darwinist Herbert Spencer, who coined the phrase Darwin has been unfairly stuck with: "survival of the fittest." Indeed, some, like Hitler and the American and British eugenicists of the early 20th century, have tended to think that only the fittest ought to survive. But De Waal's readership is probably aware by now that altruism too has been built into the animal kingdom.

Nevertheless, he rightly argues that we modern humans need to recognize and cultivate our fellow feeling, "an innate age-old capacity" that has been naturally selected for -- for the excellent reason that without it we would have gone extinct long ago. "It's not as though we're asking our species to do anything foreign to it by building on the old herd instinct that has kept animal societies together for millions of years," he writes. "Every individual is connected to something larger than itself. . . . The connection is deeply felt and . . . no society can do without it."

De Waal bolsters his case with plentiful anecdotes of sweet-natured primates and contemporary examples of ill-advised human cold-bloodedness (Enron, the response to Hurricane Katrina). Along the way, you learn a lot of interesting primatological arcana, such as that apes can't swim and invariably defecate when excited.

In concluding, De Waal points out that Adam Smith, the alpha male of free marketeers, has consistently been misunderstood. Smith's disciples "leave out an essential part of his thinking, which is far more congenial to the position I have taken throughout this book, namely, that reliance on greed as the driving force of society is bound to undermine its very fabric."

Comment
Frans De Waal is a much respected scientist, often working at the frontier of primate studies and human societies. Hence, when Sara Lippincott attributes to Darwin the following statement:

“Social Darwinist Herbert Spencer, who coined the phrase Darwin has been unfairly stuck with: "survival of the fittest",

I am a loss to explain from where she got her ideas about the origins of the phrase, "survival of the fittest”. I am sure they do not come from Frans De Waal; at least I hope not, because Frans will be familiar with Charles Darwin’s, The Descent of Man and Selection in Relation to Sex’ (1871: John Murray, London) and Darwin uses the phrase, survival of the fittest”, several times.

For example:

“In an area as large as some of these islands [New Guinea, Borneo, Australia], the competition between tribe and tribe would have been sufficient, under favourable conditions, to have raised man, through the survival of the fittest, to have the inherited effect of habit, to his present high position in the organic scale” (page 157).

Either Frans is momentarily forgetful, or, more likely, Sara she carelessly summarising Frans’ observation on how often Herbert Spenser used the phrase in his arguments as an epigone of Darwin.

By the way, for balance, we should add some fairly respectable people to Hitler’s name, among whom we have Marie Stopes, Emile Zola, Bernard Shaw, H. G. Wells, Woodrow Wilson, Theodore Roosevelt, John Maynard Keynes, Winston Churchill, and Sidney Webb.

The last paragraph, however, is encouraging. Greed had nothing to do with Adam Smith’s theories of how humans interact socially. That notion comes from popular misattribution of “greed” as a philosophy to Smith when it was, in fact, an idea of Bernard Mandeville’s (1724).

A Bible Scholar Bears "False Witness"

Charles Gill writes in Examiner.com HERE:

“Being born again and putting on the new self”

“The modern market based system is based upon greed, as per the words of Adam Smith, the founder of Capitalism and the writer of the Wealth of Nations. He argues that man is by nature greedy, which he views as good. This differs from Shema which says inclinations are neither good nor evil, and that we need God’s help to discern how to apply our inclinations. Adam Smith says greed is good.”

Comment
For the author of an article which is an exegesis of Bible texts, Charles Gill is remarkably sloppy when it comes to reporting on Adam Smith.

I conclude either that Charles has not read Adam Smith’s Theory of Moral Sentiments (1759), in which he describes greed as “pernicious” (referring to Bernard Mandevilles’ doctrine summed as “Private Vices, Pubic Virtue” in Fable of the Bees, 1724), or Wealth Of Nations (1776), which in no way asserts that “greed is good” or, worse, he is making up his account of Adam Smith’s views without any basis whatsoever (Smith never said that “argues that man is by nature greedy”, nor did he view such behaviour “as good”.

If he hasn’t bothered to read Adam Smith for himself his errors are excusable to the extent that his laziness is a personal failing.

If he is simply making up the alleged views of Adam Smith to strengthen his case, then that is not excusable at all; in fact it is condemnable, especially from an author claiming the authority of the Bible for his behaviour in defiance of its Commandment not to bear “false witness”.

Either way, it compromises his call to “on the new self”.

Beyond The Facts

Anthony North posts in Beyond the Blog HERE:

“Let me make something very clear. Greed is not bad. In order to succeed both individually and as a society, we need to be stimulated. Due to this, we have urges. Without them I doubt if humanity would have advanced at all – and greed is one of those urges.

The problem comes in the level of greed we display. Be too greedy and we hurt both ourselves and society, so it’s a matter of balance. Sadly, though, in today’s capitalism we have a glorification of greed, with it getting out of control. This was not how capitalism was meant to be, originally devised by Adam Smith as a
philosophy to go alongside thrift. We seem to have turned something noble into a feeding trough.”

Comment
“Greed is one of those urges” but is it predominant? Is everybody greedy for everything all of the time? I don’t think so. Life would be pretty grim if it was.

Bernard Mandeville, author of “The Fable of the Bees” (1724), developed a whole philosophy on the basis that greed predominated and he gave it his blessing (“Private Vice, Public Virtue”).

Ayn Rand modernised the idea that selfishness was a virtue and created a school for her philosophy (“Objectivism”) which found popularity undergraduates philosophy classes. (You can find some of her lectures on U-Tube, with wide-eyed students listening in awe).

However, greed and selfishness were never popular with Adam Smith. He called Mandeville’s philosophy “licentious” but plausible in parts as an observation of an aspect of human nature in his book The Theory of Moral Sentiments (1759).

Anthony asserts that “in today’s capitalism we have a glorification of greed, with it getting out of control.” Well, is a point of view, though you can read 18th-cxentury sermons in the same tone, and I doubt whether you will find examples throughout history where similar sentiments have not been expressed by someone about their contemporaries.

But Anthony also asserts “This was not how capitalism was meant to be, originally devised by Adam Smith as a philosophy to go alongside thrift.” Where does Anthony get the mishmash of erroneous ideas to compose such a sentence?

There is no such way in which ‘capitalism was meant to be’. Social systems are not ‘designed’ by anyone. The appear in various forms and experience different histories according to how individuals react to circumstances.

Hayek, and others, refer to this as a ‘spontaneous’, or ‘emergent’ order, unintentionally arising by the independent actions of people. That, if I may say so, is their strength. No single person could undertake the myriad of actions that would enable an economy to establish itself, for good or ill.

Which makes the second part of his paragraph, “originally devised by Adam Smith as a philosophy to go alongside thrift”, a misreading of both the emergence of what we call now call capitalism and a misattribution to Adam Smith of that which he had no conscious part.

For a start, Smith neither knew the word, nor the phenomenon of ‘capitalism’. The word itself was first used in English (Oxford English Dictionary) in 1854 by Makepeace Thackeray in his novel, The Newcomes. Smith died in 1790. He couldn’t devise that which did not yet exist, and couldn’t devise a complex economic system even if he had wanted to. In fact, he warned against ‘men of system’ who, ‘wise in their conceit’, force their designs upon others.

Adam Smith was a moral philosopher and saw his scholarly duty as ‘doing nothing, but observing everything’. He analysed how commercial societies functioned in 18th-century Britain – already a major trading economy and major political player in Europe – and wrote in his Wealth Of Nations a devastating critique of mercantile political economy, as practised in Europe.

The players in commercial society dispersed in their private lives did not conform to a master plan for commerce or government. Depending on their history and circumstances their commercial societies grew ‘slowly and gradually’ (some of which struggled because state interventions held back their natural courses and all were affected by the usual ‘jealousies of trade’, petty wars of dynastic succession, legislated anti-competitive tariffs, protections and prohibitions, and the vagaries of different personalities.

To see history as a journey from a sort of ‘ideal’ design towards “a feeding trough” is quite inadequate. Anthony North should re-think his assessments, perhaps read a bit more Adam Smith, and reflect on his current opinions.

Edmund Gets It Wrong Too

Edmund Conway, apparently the economics editor, writes in The Telegraph (London) HERE:

“What Gordon Gekko got wrong”

The "invisible hand" is shorthand for the law of supply and demand and explains how the pull and push of these two factors serve to benefit society as a whole. The simple conceit is as follows: there is nothing wrong with people acting in their self-interest. In a free market, the combined force of everyone pursuing his or her own individual interests is to the benefit of society as a whole, enriching everyone.

Smith used the phrase only three times in his 1776 masterpiece The Wealth of Nations, but one key passage underlines its importance: "[Every individual] by directing [his] industry in such a manner as its produce may be of the greatest value he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good."

Comment
Edmund Conway gets it wrong too.

Geko’s script writer was expressing Bernard Mandeville’s philosophy (The Fable of the Bees, 1724), and, in modern form, the ideas of Ayn Rand. He was not expressing anything written by Adam Smith.

Adam Smith’s use of the popular 18th-century metaphor of ‘an invisible hand’ in Wealth Of Nations (1776) had nothing to do with his exposition of supply and demand. Smith clearly states his theory of supply an demand in Books I and II of Wealth Of Nations without once mentioning ‘an invisible hand’.

Edmund Conway discloses, inadvertently I am sure, that he has never read Wealth Of Nations:

“Smith used the phrase only three times in his 1776 masterpiece The Wealth of Nations”

If he had read it even once he would know that Smith only used the metaphor, ‘an invisible hand’ ONCE in all 900-plus pages of Wealth Of Nations, in Book IV, chapter 2, paragraph 9, page 456 (Oxford University Press, 1976).

I wonder where the other two references are? If Edmund Conway can show us any other references to the metaphor in Wealth Of Nations, I and most other Adam Smith scholars would be most surprised to say the least.

As a journalist, Edmund should know that statements claiming to be fact should always be checked and then double-checked by Editors, especially economics editors.