From the
viewpoint of economic’s history of thought, “selfish” became a postulate by the
end of the nineteenth century, after the rise of neoclassical economics. In
this then new paradigm, calculus was widely used, “marginal” analysis
propounded, and the concepts of “maximization” and “minimization” accepted. The
principle of satisfying self-desires became the postulate of “constrained
maximization”, or cost minimization. An abbreviated term, “selfishness”, is
more commonly used.
Since its
rise, neoclassical economics has gradually become more scientific.
“Selfishness” has been treated by the profession as an objective postulate.
Whether the nature of mankind is selfish or not therefore becomes irrelevant.
Certainly, many economists today still cannot distinguish between value
judgment and scientific dialectic, confusing affection with analysis, thus
creating a big mess. On the other hand, economics can be highly admirable when
value judgment (or subjective judgment) and objective analysis are superbly
combined. The value judgments of economic gurus like Smith, Ricardo, John
Stuart Mill are fascinating yet plain and clean enough for later generations to
follow.
It is true
that the scientific “selfish postulate” we use today is evolved from the
subjective judgments of older generations. Two paragraphs in the 1776 classic
work “The Wealth of Nations” of Smith
are the most frequently quoted sayings in economics. Having read these time and
again, every time I still find new inspiration and feel overwhelming vigor.
This is what he 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 for his favor, 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…
“Therefore, every individual endeavors as much as he can to employ his
capital to render the greatest value. He generally, indeed, neither intends to
promote the public interest, nor knows how much he is promoting it. He intends
only his own security and 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. Nor is it always the worse for the society that it was no part of
it. By pursuing his own interest, he frequently promotes that of the society
more effectually than when he really intends to promote it.”
After
chewing “The Wealth of Nations” for
so many years, I believe Smith’s “selfish” viewpoint needs to be supplemented
in two areas. First, Smith rightly pointed out that selfishness brings massive
gain to the society as a whole, but belittled the damage that selfishness
causes the society. The latter significantly involves the issues of transaction
costs and property rights which are the foci of my research. Philosophically,
the importance I place on the damage of selfishness can be said to be the main
difference between this “Economic
Explanation” and “The Wealth of
Nations”. However, my main conclusion not only does not refute but in fact
strongly supports Smith’s. On the other hand, since my view on selfishness is
more comprehensive, relatively superior is my explanation on behavior.
My second
point about Smith’s selfish viewpoint is that he did not mention human is born
with selfishness. His implication was selfishness is forced out: not that human
desires to be selfish, but human cannot be unselfish. This “survival of the
fittest” viewpoint – so viewed in a number of issues in “The Wealth of Nations” – subsequently influenced Charles Darwin’s
earthshaking work “On the Origin of
Species”.
Alchian,
my teacher, published in 1950 a seminal article “Uncertainty, Evolution and Economic Theory”, triggering a great
methodology debate spanning almost twenty years. My “idiots and gasoline
stations” example in Section 4 of Chapter I was inspired by this article.
Alchian’s
argument was similar to Smith’s yet more forceful. The implication of Smith was
that selfishness was due to the survival of the fittest; Alchian’s implication
was that even for idiots who by definition could not be selfish, the same
effect could be felt since after elimination, the behavior of the remaining
idiots would inevitably be selfish.
Biologist
Richard Dawkins published in 1976 an informative book “The Selfish Gene”, using numerous examples to prove that animals
are born “selfish” which is hereditary and not alterable. This important book
inspired a new science – bio-economics. Jack Hirshleifer, another teacher of
mine, is a key advocate of this new science. He wrote to me more than ten years
ago that this science was developing in great strides.
As noted
above, there are four views of “selfishness”. Smith considered that was forced
out; though Alchian consistently used “selfishness” as a postulate, he also
considered that even idiots acting foolishly would have the same effect;
Dawkins said it was hereditary. I myself have nothing invented about
“selfishness”, but have always insisted theory had better be simple. My
preference is treating selfishness as the postulate of constrained
maximization. This is the tradition of neo-classical economics. Provided
constraints are appropriately managed, there is no difference in explanatory
power.
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