Acton Institute Powerblog

Misreading capitalism

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‘A statue of Adam Smith on Edinburgh’s Royal Mile’ by Zenit CC BY-SA 3.0

At this year’s LibertyCon Byran Caplan, Economist at George Mason University, and Elizabeth Bruenig, columnist for the Washington Post, debated the perennial question of ‘Socialism vs. Capitalism.’ Both Caplan and Bruenig have posted their opening statements and it is an interesting and engaging exchange. Caplan is charitable, well-reasoned, and clear and Bruenig is both gracious and an engaging storyteller.

Bruenig’s story while superficially plausible makes many mistakes in its characterization of the free-market and more broadly of the liberal tradition. Most glaring is the notion that,

Capitalism fosters an obsessive focus on one’s interests, meaning one’s material well-being, and argues that the pursuit of such is an unqualified moral good; it renders sustained contemplation for no other purpose than to know the truth utterly useless and irrational, and largely impossible.

There is a lot of confusion in this statement but what is most transparently mistaken is the notion that self-interest equals one’s own material well-being. Would free-market theorists really argue that someone who chose to write a love letter, to console a troubled friend, or to go to mass instead of advancing one’s material well-being would be acting against one’s own self-interest?

Perhaps no free-market theorist is more linked to the concept of self-interest than Adam Smith, who famously wrote in The Wealth of Nations,

…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. 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. 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.

If this ‘help’ and ‘advantage’ is construed as simply material, Bruenig may have a point. However, there is no reason to believe that Smith saw it as such. Adam Smith actually opens The Theory of Moral Sentiments arguing the contrary,

How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.

Later in that same work he argues that, “It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct.”

Self-interest is as varied and diverse as individuals themselves. Frederic Bastiat, whom Marx called, “The shallowest and therefore most successful representative of the apologists of vulgar economics,” had a similarly broad view of self or personal interest,

We cannot doubt, then, that Personal interest is the great mainspring of human nature. It must be perfectly understood, however, that this term is here employed as the expression of a universal fact, incontestable, and resulting from the organization of man—and not of a critical judgment on his conduct and actions, as if, instead of it, we should employ the word selfishness. Moral science would be rendered impossible if we were to pervert beforehand the terms of which it is compelled to make use.

In Human Action Ludwig von Mises similarly resists the reduction of man to simply material well-being,

Economics deals with the real actions of real men. Its theorems refer neither to ideal nor to perfect men, neither to the phantom of a fabulous economic man (homo oeconomicus) nor to the statistical notion of an average man (homme moyen).

When leading free-market theorists across three centuries and nations, with unique methodological commitments are all opposed to the characterization of self-interest as narrowly centered on material well-being we should be careful to examine just how well grounded Bruenig’s narrative actually is in the actual free-market tradition. Those who assume, like Bruenig, that they can dismiss the free-market system as one rooted in avarice have missed some basic insights at the center of economics since Adam Smith.

Dan Hugger Dan Hugger is Librarian and Research Associate at the Acton Institute.