Posts tagged Adam Smith
Markets aren’t Zero Sum Games
Tibor R. Machan
The more I read about “Occupy Wall Street,” including the pundits who apologize for it, the more I find that people still believe that market exchanges are zero-sum games wherein for someone to gain, someone must lose. But this is plain bunk, as economists since Adam Smith have shown conclusively.
But consider–is a marathon race a zero-sum game? Does someone’s running really fast make all others run slow? Clearly not. How fast the winner runs doesn’t slow down or speed up the losers. When a person buys a watch at the mall, both the merchant and the costumer are getting what they want from the other, no one is being ripped off. And the same applies to all honest deals on Wall Street. I buy some shares in a company and it is doing well with its products or services and so the monetary value of the shares increases. Those who didn’t buy these shares do not make the gains I did but not because I prevented them from doing so, only because the purchasing public didn’t want the services or products of the companies in which they bought shares, unlike in the case of my choice of company.
Like marathon races, market processes do not involve what happens in a boxing ring–no one is knocked out so that another may be triumphant. Yet it seems nearly all those who sympathize with the people marching in the Occupy Wall Street parades, as well as the people who speak up for them in their midst, fail to see the difference.
Put bluntly, Bill Gates billions do not make me or anyone else poor. In fact, his billions make it possible for a lot of folks to improve on their economic circumstances. Bill goes out and buys a lot of stuff or just gives his money away in Africa and people will then go out and maker standard purchases with these funds. No one has lost anything, not a dime.
All the wealthy folks in my neighborhood who live on lakes in fancy homes and have yachts and Bentleys aren’t making anyone poor. So resenting them is nothing but sheer envy, a filthy vice! Like hating someone with a great voice when one cannot carry a tune! Or a tall basketball star when one is too short to play the game.
We are often very different from one another–indeed we are all individuals and then gather into groups–and some of this means that what we have stuff and opportunities that others do not, whether they badly want it and even need it. But those who have it aren’t guilty of any wrongdoing except in the fantasy world of egalitarians which is, being a fantasy world, a distortion of the real world in which problems need to be solved. This is, however, a welcome thing to most of us who give it but even a little thought. After all, since you aren’t like me, you will want different stuff from what I will and that way we can trade quite fruitfully, with both of us ahead once the trade is done. Yes, sometimes the market value of what you get from the trade is much lower than of that which I get from it. But so what? If I badly want to have your worn out gloves and am willing to give you my fabulous sunglasses for them, some will see this as a huge rip off but who are they to tell? In most cases they wouldn’t know and in any case they have no business butting in. (They may offer some advice but that’s all.)
Ever since I arrived on these shores many, many moons ago, I have had zero sympathy for people who insisted that we should all enjoy equal wealth, equal advantages, etc. Why? No reason. Maybe what such folks missed out in their education is the study of Orwell’s Animal Farm, Vonegut’s Harrison Bergeron, and Rand’s Anthem. I see get thee back to the classroom and off the streets, especially Wall Street.
Morality, the Professions and Politicians
Tibor R. Machan
While I see strong merits to an ultraminimal government idea, whereby the state has no other function than to protect the rights of the citizens from criminals and foreign aggressors, I do not share the view that politicians are necessarily corrupt. Sure, a welfare state attracts the kind of politicians who see little wrong with taking from some people to make available for others, including themselves, when they feel it is important enough. This is no different from how vice squad work attracts moralizing or puritanical police officers rather than ones who believe that victimless crimes should not exist and police should stick to guarding the peace — they used to be called “peace officers.”
Any corrupted profession is likely to be a Haven for people who yield to various temptations to do wrong because they can now do it with legal approval. The Nazi doctors who experimented on innocent victims were certainly that segment of the medical profession that had already gone bad. And going bad in this way is a subtle, psychologically complex process, beginning with the person convincing himself, first of all, that the policy being followed is acceptable, even necessary. So most of these people are quite sincere!
How does one encourage genuine ethics in the various professions? First, the profession must itself be morally upright — Murder, Inc., certainly isn’t going to be manned by saints. So if a profession already embodies some measure of evil, it’s going to be tough to ask of its members to behave themselves. Politicians in a system which legalizes theft are not likely to resist the temptation to steal! Medical or legal professionals whose prestigious associations support monopolies will probably lean in the direction of some immoral practices, ones that reflect the organization’s policies.
Yet apart from all this, much else is wrong with current thinking about professional ethics. For one, the prominent moral teachings of our time are confusing, indeed. Perhaps the best statement of this fact came from Adam Smith, who is known mostly as the founder of scientific economics but was in his own eyes and by his university appointments actually a moral philosopher. Here, in a someone lengthy passage, is the gist of our problem with contemporary thinking on morality: “…In the ancient philosophy, the perfection of virtue was represented as necessarily productive to the person who possessed it, of the most perfect happiness in this life. In the modern philosophy, it was frequently represented as almost always inconsistent with any degree of happiness in this life, and heaven was to be earned by penance and mortification, not by the liberal, generous, and spirited conduct of a man. By far the most important of all the different branches of philosophy became in this manner by far the most corrupted” (Adam Smith, The Wealth of Nations [New York: Random House, 1937], p. 726.)
Smith got it right: moral teaching for the last several centuries has been mostly of the self-sacrificial variety: those who care to live well aren’t morally worthy, those who care to make others live well are, period. One reason for this is that much of theology and even some social science claims that people are innately selfish, so why bother teaching them how they need to care for themselves, how to be prudent, how to do well at living? Isn’t that hard wired into everyone?
Actually, no it is not. But another thing that suggests that unselfishness is the height of ethics is that professionals do often take an oath to help others who seek them out. But they do this mainly because they find the profession rewarding to themselves. Indeed, nearly all parents urge their children, and teachers their students, to find a line of work that is self-fulfilling instead of a constant drudgery or chore.
But the ethics most widely championed tells us mainly that it’s good only if it hurts. Not that simply self-indulgent conduct is ethical, no. If one lives by following his or her desires, nothing else, this can neither promote one’s life or that of other people. It is senseless, helter-skelter. But it is the business of ethics to guide one to the true, actual, serious enhancement of oneself as a human being.
If one understands that the human being has a self that can flourish only by being alert to the world, including other people, a self-enhancing moral code will leave plenty of room for generosity, kindness, compassion, without being self-sacrificing, self-denying.
It is especially pointless to talk about business ethics, for example, if all one means is that people in business should give up trying to succeed in order to be ethical. That simply means business people will disregard ethics altogether. And disaster waits along such a route.
If, however, it is clear that business — or education, art, science, medicine, etc. — is a professional calling that requires success within certain limits, just as, indeed, all life does, ethical business can make clear sense. It will not include, for example, trying to profit from deeds that are unethical, since profit itself will have to be understood as meaning prosperity that is productive, not destructive.
Unless moral education changes toward teaching folks to be ethical because that is how happiness is achieved in life, many folks will indeed try to avoid doing the right thing. If you think that cheating, lying, stealing, and so forth are the road to happiness, while honesty, justice, prudence, generosity and the like make you a looser in life, it is not surprising that you will often choose to do the wrong thing.
It doesn’t have to be that way, however. Ethics is a discipline that’s supposed to help us live, to flourish. Even when we are generous or charitable toward other people, such policies are supposed to enrich our own lives in the process. The virtuous life is suppose to be something beneficial to those who live it.
Once morality is recognized as life enhancing, it is not going to be very difficult to champion it among our professionals, including politicians. A culture that makes morality constantly painful, however, cannot very well expect morality to be well received.
The Hubris of George Soros
Tibor R. Machan
Quite a few well known rich people aren’t satisfied with being rich and being able to do all the things they believe are important. They want to advertise this and to take up the role of teachers to the rest of us. The Hungarian born billionaire financier George Soros is no exception.
In a frankly narcissistic essay for The New York Review of Books (June 23, 2011) titled “My Philanthropy,” Soros reaches out to the readers of that very snooty, elitist publication evidently so as to make sure everyone who reads the piece will know how “virtuous” he is. That is to say, virtuous by the standards of a morality that requires us all to serve humanity first, before we take care of ourselves. Soros writes:
“I have made it a principle to pursue my self-interest in my business, subject to legal and ethical limitations, and to be guided by the public interest as a public intellectual and philanthropist. If the two are in conflict, the public interest ought to prevail. I do not hesitate to advocate policies that are in conflict with my business interests. I firmly believe that our democracy would function better if more people adopted this principle. And if they care about a well-functioning democracy, they ought to abide by this principle even if others do not. Just a small number of public spirited figures could make a difference.”
Sounds noble, if you believe it is meaningful. But “noble” is a matter of what values human beings should champion and promote. That’s why Soros’ declaration is dubious. It, first of all, makes it possible for him to look good in general without having to do much good in particular. You see, serving the public interest is one of those objectives that everyone likes to be associated with but has no idea what it actually requires of someone. Is the engineer who makes a locomotive run smoothly serving the public interest? Is the artist who paints a stunning landscape, a composer who creates a wonderful symphony, a doctor who cures someone’s disease, a shoe repairer who fixes people’s footware, a poet who moves us to tears–are these folks serving the public interest? Surely all those who welcome what they do are members of the public, so they are in fact serving the public interest.
Or would they only qualify as such if they made huge sacrifices, gave up all the benefits that came to them from doing all these things? Why? Why are only other people members of the public? If I serve my own interest, I am serving the interest of a member of the public too. So what on earth is serving the public interest? Who is it who studies that issue and answer this question reliably, dependably, competently?
Well, as the classical liberal political economists have established a long time ago, serving the public interest is in fact best done by serving one’s own. That’s because there is no general public interest apart from following certain very abstract principles that contain few if any specifics.
The American Founders gave a good clue when they proposed that the purpose of government is to secure the rights of all the citizens of the country. These are the rights to life, liberty and the pursuit of happiness. How would securing these rights be in the public interest? Because being secure in those rights is to everyone’s best interest. You, I, our neighbors, the shoe repairer, the physician, the artist, the scientist–all these and millions of others can embark upon serving their interest if no one is authorized to impose upon them burdens they have not freely assumed.
In the case of George Soros this would imply that he serves the public interest precisely by doing whatever actually, really, truly serves his own interest without doing violence to others. As Adam Smith pointed out, he might not even know that he is doing such a public service but in fact that is all there is to doing one’s public service–making sure of what is in one’s proper interest and making sure that that freedom to pursue it is secured for everyone. That means that the pursuit of one’s self-interest, provided it really is one’s self-interest, ultimately amounts also to serving the public interest. No conflict there at all, contrary to the picture George Soros imagines, whereby the two can be in conflict. No they cannot, not if properly understood.
What can be inflict, of course, is what some people want or desire and their real interest, including then the public interest. When I work hard to educate my students or to explain the principles of human liberty to readers of my books and articles, I serve my own interest as well as the public interest. And when I fail in serving my genuine self-interest, I am also undermining the public interest, the interest of the public to which I belong.
So Mr. Soros should stop his hubris about serving some vague public interest first, before his self-interest. He should stick to figuring out what is truly in his interest and go for it. Then the public interest will take care of itself.
Ayn Rand & Libertarians Grossly Misunderstood
Tibor R. Machan
In my local paper a letter writer, apparently eager to besmirch Ayn Rand–which many have tried in vain–had this to say: “Rand’s libertarianism has an underlying philosophy that says that if you are not particularly smart, ambitious, disciplined or wealthy, and you become homeless, hungry, financially ruined and suffer from premature illness or death, then that is entirely your fault.” (April 25, Local p. 5)
Neither Ayn Rand nor libertarianism says any of this. What they both do say is that if you are in such a state, you by no stretch of the imagination have the authority to deprive others of their resources. You can ask, of course. And surely that is correct.
Even a person in the greatest of need has no warrant for stealing from others. What such a person most definitely is fully justified in doing is to request help from others which, in America especially, millions provide at little urging–just consider the help that they provide when something like Katrina or a tsunami strikes, and all the charitable contributions they send to the casualties of various similar mishaps. They do this far more than citizens of any other country.
Both Rand and libertarians support voluntary aid but oppose, most vigorously and vociferously, confiscating what other people own.
Nor do Rand and libertarians hold that everything the letter writer lists is one’s fault, quite the contrary. Many mishaps people experience, because of illness and natural disasters, are clearly not their and (most often) anyone else’s fault. Bad things do happen, be it to good or bad people.
What Rand and libertarians have believed, on pretty good grounds, is that when improvements are needed in people’s lives, relying on confiscating other people’s belongings and coercing them to do work to provide assistance are flawed and morally wrong remedies. Instead, voluntary cooperation is both the most ethical and the most effective way to go.
This idea is by no means odd. In broad terms it is recognized that countries the laws of which protect their citizens against coercion–violent criminals, intrusive or meddling governments–are in better shape than those ruled by strong rulers who impose their idea of what is good for everyone not by convincing citizens of what they believe is right but by imposing their will on them. Be this in small matters or large ones, history is replete with the lessons about how coercive force between human beings is an ill advised way to handle problems.
In one area, especially, this has proven to be true for the last few centuries. Ever since Adam Smith published his path-breaking book The Wealth of Nations in 1776, it has been understood by quite a few political economists that prosperity is best pursued in peaceful ways. Voluntary economic relations among people are what is now referred to a win-win situation, whereas coercive economic relations are primarily zero-sum games, meaning when one party gains the other loses. In most of human history, sadly, this latter is how wealth has been obtained and many still advocate the approach even today. This is in part because in a largely free markets–there has never been a fully free market anywhere, unfortunately–those seeking to have their needs and wants met, from gaining groceries to major medical treatments, have been able to find nearly exactly what they have in mind, suiting their particular, individual needs and wants instead of some general benefit that governments prescribe for everyone, something that always suffers from government’s ignorance of what it is that can benefit individual human beings. This may be one reason boosters of government involvement in our lives–in other words, statists–tend to speak mostly of the public interest or the public good or the common welfare since these are so indeterminate, to vague that no one can check out just exactly what they come to in practice.
Aside from all this, there is also the less well known greater generosity found in free societies than in those with top-down government regimentation of nearly everything in people’s lives. But this isn’t government “generosity,” involving robbing Peter so as to hand some of the loot to Paul. It is voluntary charity and philanthropy so it is likely to be far more efficient than what the government does when it sets out to “help” people, including the poor, indigent, hapless, or unfortunate among us. (It isn’t help when one doesn’t dig into one’s own pockets or bank accounts but those of other people and hands these to those in need of help. Moreover the welfare state didn’t emerge because private help was not forthcoming.)
Ayn Rand and libertarians have supported all voluntary contributions to the people the letter writer listed, provided those people aren’t set on robbing others to support their goals or urging the government to do so. Rand, in particular, did believe that focusing too intently on the needy is a mistake. After all, even the needy are much better off if the productive among us are championed. And how are the needy ever going to gain from rich bashing, by denigrating and discouraging those who create the resources from which they might benefit?