This was in Monday’s Writer’s Almanac:
We don’t know when Adam Smith was born, but it was on this day in 1723 that Smith, the economist who popularized the idea of free trade, was baptized in Kirkcaldy, Scotland. His first important book was The Theory of Moral Sentiments (1759), in which he argued that all people are selfish, but that the combined selfishness of many people benefits everyone. He wrote, “[We are] led by an invisible hand … without knowing it, without intending it, [to] advance the interest of the society.” He developed this idea in the book for which he is best remembered, Wealth of Nations (1776). That book established many of the most important principles for economists for the next two hundred years.
Adam Smith wrote, “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 interest.”
Today is also the birthday of the economist John Maynard Keynes, (books by this author), born in Cambridge, England (1883). He’s best known for his book The General Theory of Employment, Interest and Money, published during the Great Depression in 1935. He argued that governments can correct severe depressions by spending lots of money, even if it means running a deficit, to put people back to work. Keynes greatly influenced Franklin D. Roosevelt’s New Deal policies, and his ideas have been used to justify budget deficits ever since.
Interesting that these two men share a birthday, or something like it. Also interesting that the birthday is so close to my own. (At least it’s interesting to me.) A couple thoughts to share… mostly on Smith.
Invisible Hand? Not So Much
The Invisible Hand is broken… if indeed it ever existed. Within the constraints of perfect competition, the Invisible Hand the collective selfishness might (See my next thought.) work out to the benefit of most… or at least many. Not in today’s economy, which is a far cry from anything resembling perfect competition. Atomicity? Nope; try oligarchy. Homogeneity? Perhaps, but billions of marketing dollars are working hard to obfuscate that fact. Perfect Information? Equal Access? Free Entry? Not if the oligarchies have anything to say about it… and they do!
No, the Invisible Hand of the market has been bound and gagged. Motivated self-interest serves only the self, and those who possess power are best able to serve themselves.
Selfishness Is NOT an Agent of Good
It is noteworthy that Smith doesn’t say, “People will overcome and progress beyond selfishness, attaining to a more noble fundamental value.” No, he says in effect: “We’re all selfish bastards, and that ain’t gonna change. Fortunately, there is Something beyond our selfish little souls to protect us from each other.”
As a Christian I have to respond, “Close, but not far enough.” True Something is kind enough to protect us from ourselves to an extent, but it doesn’t end there. There is the possibility of real transformation of the soul. Self-interest need not be our driving motivation. Instead, our souls can be moved by genuine love.
The economic difference between Republicans and Democrats has nothing to do with accepting or rejecting Keynesian theory. Maybe it did at one time, but not anymore. Both parties embrace a bigger government role, because it protects their power and position. They only quibble over where government should expand next.
I was ready to shut the door on politics in 2004. Today, the door still remains cracked… but just a little. I’ve got some thinking to do here, still.