The Science of Demand (11) - Unofficial Translation of Steven Cheung's 经济解释 - 科学说需求

Section 3.  Selfish as a Restraint

To say a person would consistently make predictable choice – the first postulate in economics – is already a restraint. But a supplement is required: since this restraining force is insufficient, we need to incorporate other essential restraints. The second postulate is: the behavior of every individual is for self-interest! That is, every individual would, under constraints, maximize his self-interest. Irrespective of diligence, rest, deceit, donation … the starting point is all self-interest.

Postulate is not arguable, and whether mankind per se is selfish is irrelevant: of essence is not how mankind is (this is the domain of psychology, physiology, or philosophy), rather it is how we assume mankind is. A question then arises. If we say deceit, donation … are all selfish behavior, will all behavior become not refutable by facts or other behavior simply by this “selfish” reason? The original aim is to restrain behavior, yet in the end there are no restraints at all, so how can it be justified? This is a good question. The answer is: if we randomly say any behavior is selfish, like a tautology that can never be falsified, then this selfish postulate will be devoid of content and application. But if we can assert certain constraint to specify that under certain circumstances a person would for self-interest make a certain choice, and any change in this constraint will lead to an inevitable change in certain behavior, then this is a different story.

For instance, donating for no reason, or helping a friend, has no connections with self-interest and therefore cannot be explained. But if we say, under certain constraint, the cost of donation is relatively low, or the gain relatively high, then donation activity will increase. As such, this selfish postulate becomes greatly useful. I can quote a few examples. More than twenty years ago, the son of Deng Xiaoping, Deng Pufang, came to Hong Kong and raised more than HK$50 million in donations at one sweep. Yet my son has no such prowess. If the donors donated just for donation’s sake, then regardless of how incapable my son was, why did they mark the occasion instead of quietly sending checks to charities? Someone might argue that “anonymous” donors do exist. Yet why does donation activity increase when donation is tax-deductible? How does compassion arise? Where does the “cause and effect” in “kindness gets rewarded” come from?

Under what constraint will an individual believe in cause-and-effect retribution as well as hold aloft virtue and morality? Under what constraint will an individual be more compassionate? Under what circumstances will an individual, in search of fame, become more generous toward charity? I very much appreciate people like Sir Run Run Shaw who do their utmost donating to education – naming a university building as “Sir Run Run Shaw Hall” is fair and appropriate indeed. To say the starting point of Shaw’s endowment is for self-interest has no implication to belittle him at all. If I had his wealth, I would not be as generous as him. But if we abandon the selfish postulate, there are no other means in economics to explain Shaw’s endowments to universities are non-random but selective. Behavior is not without purpose; donation is no exception.

Suppose we allow exceptions to exist, and whenever a phenomenon that is difficult to explain is allowed to be treated as an exception, then economic theory will never be refuted by facts or behavior. As such, the entire economic framework will fall apart with none explanatory power at all.

The difficulty lies not in whether this selfish postulate is right or wrong, but in how to assert under different constraints that self-interest would lead to the co-existence of deceit and donation, two distinct behavior. I have said in Chapter I that the assessment and delineation of constraints are the most arduous topics in economics. Up to new we still have no satisfactory explanation about numerous human behavior (this is the interesting part of economics; a science that answers everything is about time to come to an end), the main reason being insufficient knowledge of constraints.