Adam Smith: Self-interest or Selfishness? 

You are welcome. I wish I had more time to do economic videos but working on a PhD now.

Thank you for your positive comment. I want to be clear and to the point that there is a difference between selfishness and enlightened self- interest. People often criticizes capitalism on this point.

Thanks. You may also want to include in a future video or an edit. Pareto Efficiency and Pareto Optimality are different from each other. The summation of individual optimization (Pareto Efficiency) may not necessarily lead to a Pareto Optimal outcome (summation of the total). Smith was aware of this, but could not comment because the tools of game theory and prisoners' dilemma needed two more centuries to develop.

Yes many people thing Adam Smith version of capitalism is one dimensional, but if you read it in the content of this work "Theory of Moral Sentiments" you have a broader and clearer understanding of Adam Smith's invisible hand.

It is very hard to discern what Adam Smith really read because it is several hundred years in the past and he was a fairly private individual. In fact, even his religious views are debatable. On one hand he took a profession of faith as a requirement to be a faculty, yet on the other hand he was part to the Scottish Enlightenment which had this idea of Deism or even disbelief. What is known is he studied moral philosophy at University of Glasgow and at that time there is no way, he did not study Plato. Even I studied Plato. Back in those times with a major in Philosophy I would image it was standard reading. Even if on the outside chance he did not read Plato directly, he was influenced by the ideas. There is an element of speculation on my part as historians do not have all the facts, however, I feel on fairly sure footing that Adam Smith, with his enlightenment ideals and classical education believe as articulated in the video that people are innately good and given freedom, will act on their enlighten self interest which will bring society as a whole to a higher level. Here is a reasonable link to a discussion of Smith influences including Plato and Aristotle. plato.stanford.edu/entries/smith-moral-political/

@@EconLessons Hi my name is David Lancashire-what is Mark’s last name I really enjoyed his perspective and would like to connect with him on a book idea I am developing. david@boldventures.com.

Its a good example that we can all relate to. Humanity, and I mean most people has a reference to the whole and not simply the self.

@@EconLessons That isn't the whole quote . "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".

Its simply, I am self-interested. We all are, however, this self-interest is guided by actions that are not harmful to others and sincerely try to help others through the marketplace. Maybe I am not a saint but rather, I create something of value through my efforts and labor that others derive satisfaction from, without harming others. Through my labor and creative process I think of how I can serve humanity because if I do they will reward me with money in the marketplace as I satisfy a demand. Of course, people can make money in unscrupulous ways ways. That is pure self-interest, not enlightened self-interest. Smith was talking about enlightened self-interest an interest that benefits others through work in the market place and this reward was called profit. If I make something good that people demand then there will be a reward. Time have changed a bit but I still believe all humans reference others when making choices as its part of hour hardwiring.

@@EconLessons thanks a lot. I didn't expect you to reply after all these years. Again, many many thanks

@@sadmanwasit1708 I try to answer comments, I have to improve that video maybe, its a little dated but still the main point is correct.

Adam Smith was a monumental thinker in Economics but did not have all the answers. His theory of value, he was dancing around the issue, but could not articulate it as rigorous as the theory of value as articulated in the marginal revolution. It only then do we have a clear vision of supply and demand. Smith lacked a robust monetary theory. However, Smith, when you look at both of his books "The Theory of Moral Sentiments" along with "Wealth of Nations" We see a vision of capitalism that is not based on ruthlessness but on the ideal coming from the enlightenment, in his case the Scottish Enlightenment. We act on our enlightened self-interest to make the world a better place.

No!

Why would you do a job you were not feeling like you are helping others and getting some feeling of worth with reference to others? Humans are not one-dimensional beings. We do need to 'toil' sometimes, but most people find their way in this life and find 'work' as opposed to 'toil' that is congruent with their value systems and their world view. Since people by their nature are innately good, more people than not, resolve this dilemma of scarcity in a way the is good for them and others. For example, I teach economics. However, I could use my brain to make money in ways that would not be benefiting the common good but only me, and it would be a lot more lucrative. But I am not going to do it. I do not think you would do it also, even if it were legal and even accepted. Most people satisfy other people's needs in a positive way, rather than a negative way. Work is not the meaning of life. However, to help others and yourself, done in a free market, a market where individuals choose their work is better than a society where you do not have free choice. In some ways work and scarcity makes us self reflective and try to be more humble better humans.

Will UnsilentStorms ... If we look at the current state of the economy (June 2022) We can see the Governments Enlighten Self interest has JUST harm all of us with inflation of course the poor will get hit hardest again I wonder how realistic this claim of "enlighten self interest" really measures up in the real world? Why do governments have enough atoms bombs to blow up the world multiply times ... Why would enlighten self interest want to blow up the world more then once? ...think of the money we save on all the unnecessary bombs Clearly humans do not have full information so many times we are making decisions on hopes, wishes, dreams and political self interest .. How does enlighten think work when we are just plan ignorant or delusional? I guess we would have to call it selfishness, Yes or No Think of the failed hunt for weapons of mass destruction? How many people died?

@@EconLessons Look at the Government behavior ... if we look at the current state of the economy (June 2022) We can see the Governments Enlighten Self interest has JUST harm all of us with inflation of course the poor will get hit hardest again I wonder how realistic this claim of "enlighten self interest" really measures up in the real world? Why do governments have enough atoms bombs to blow up the world multiply times ... Why would enlighten self interest want to blow up the world more then once? ...think of the money we save on all the unnecessary bombs Clearly humans do not have full information so many times we are making decisions on hopes, wishes, dreams and political self interest .. How does enlighten think work when we are just plan ignorant or delusional? I guess we would have to call it selfishness, Yes or No Think of the failed hunt for weapons of mass destruction? How many people died?

@@EconLessons I quote "Since people by their nature are innately good, more people than not, resolve this dilemma of scarcity in a way the is good for them and others." Maybe you are teaching your students the wrong ideas and doing harm ... Unless it benefits one and all you are doing harm ... humans are not innately good... as economics will tell you HUMANS make "trade offs" all the time how do you get "innately good" out of Trade Offs? Your thinking is fuzzy not complete thought out ... you need to define GOOD and ENLIGTEN for yourself as a starter ...

A human cannot fill their higher needs if their basic needs are not met. In anarchy you stop being a slave to the system but become slave to your own needs. As you spent your days focused on getting food mainly, worrying about the next meal always, you realize you don't need to chase any higher goals anymore only because your survival oriented mind has completely deprioritized them.

It is debatable if Any Rand had the philosophy of nihilism. Technically she was not. She if anything was trying to build a realistic and idealistic philosophy together. In fact it was called romantic realism. To be a nihilist you would have to reject moral principles. She was principled. She developed Objectivism. However, she was an atheist. That is the issue. If you take atheism to its corrosive end, and read the philosophy of Friedrich Nietzsche or Fyodor Dostoevsky you will become aware that in the words of Sartre there is "no exit". The moral basis based on man rather than an Absolute is relative and a house of sand. That being said the ideas of Adam Smith's thoughts on a Deity, from a very different time, are not know clearly despite his public proclaims within his Church. However, the two thinkers had a different approach on self interest and life. By An Rand's time, paradigms of morality had shifted and in a subtle way the two ideals of Smith and Rand are like night and day. I think ultimately Rand was a nihilist who dressed it up in romantic realism of Objectivism. More of a debatable view, but at with all the sugar coating on her philosophy there was ultimate foundation. I recommend Hans Kung's survey of modern thinking in his book "Does God Exist".

Why do you (or Nietzsche/Dostoevsky) think atheism leads to nihilism? Why should it be true that “if there is no god, everything is permitted”? Because according to atheism there are no absolutes? But Rand did believe in absolutes. She believed that existence has a definite nature and that that nature cannot be changed by the whim of some omnipotent god who can work miracles. She believed the nature of morality was determined by absolute facts about man’s nature, not arbitrary commandments handed down by a god. I think it is the faith-based religious approach (faith being belief without evidence), rather than her reason-based secular approach, that is the “house of sand.” It is the religious approach that makes anything (even killing your own son) good, so long as God commands it. So perhaps we should instead say: If there is a god, everything is permitted (so long as God commands it).

​@@DanNorton1 She thinks she created absolutes but she did not. If you meditate on Han Kung, Fyodor Dostoyevsky and Nieszche and really really read them, the books not the summaries you will be aware how Rand did not contribute anything radically new. Your anthropomorphic Feuerbachian view of God needs revision. If you do not see evidence for God, that is you do not see God, my reply is, You will.

@@EconLessons She does not think she created absolutes, like the fact that two and two make four or that ice melts near heat. Rather, she thinks there are absolutes independent of her or anyone else’s wishes. One might wish that two and two did not make four or that ice didn’t melt in heat, but that can’t change the facts. The facts are absolute. Did Kung, Nietzsche, or Dostoevsky anticipate her ethics of rational selfishness? Did they anticipate her theory of concepts? I think the traditional, Old Testament conception of god that I used helps to illustrate, by contrast, the absolutism of Rand’s view. But there are surely other conceptions of “god” and I’m not holding out for a particular one. I leave it to the theist to define what he means by “god” and present his evidence for it.

@@DanNorton1 First, interesting comments so nothing personal. I am not an expert on Ayn Rand, but her thinking there are absolutes in a world without the Absolute is not possible. Each person will construct their view of the world and call it right. Like the 100 million lives lost in the 20th century from such things, e.g. the Soviets and the National Socialists to start. In history each person has their own view, including religion, but I would argue there is less variance with the latter. Ayn Rand's thinking is just one philosophy among many. In the words of Hans Kung 'there is a post enlightenment bias on the individual'. To grossly, paraphrase of Mortimer J. Adler, the 20th century thinking did not yield any radically new thinking that was not already debated in philosophy of the Ancients or the past.I think her claim to absolutes is absurd if there is no Absolute that exists in the universe. This is what Han Kung, Fyodor Dostoyevsky and Nieszche write about. Yes you can not refute it. But if you take it to its corrosive end, there is nihilism, a void. There is nothing, including no absolutes. Only nihilism that each person tries to ascribe meaning in their own way. Like Camus myth of Sisyphus. Each person defies the fate of the void in some way they find. Some of those ways include Soviet Socialism which is almost 100% opposite of what Rand stood for. If there is no God then up or down makes no sense. If you stand back from the planet we live on, which point is up or down? There can be people making moral arguments but not compass no moral compass. That is why if there is no God, the end of 19th century thinking became aware there is nihilsm. Rand, is like in the Camus just trying to define something in someway to make her like meaningful. I argue that there is a God and that with reasonable fundamental trust we can go forward. Rand, in my reading are self centered. Adam Smith would have a very different view on self interest. Smith, if you read his Theory of Moral Sentiment said 'people should act lovely'. Rand wrote ' I swear, by my life and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine.' To me that is selflish. To me that is nihilist... ' Or The question isn't who is going to let me; it's who is going to stop me.' She is all about the individual. But the individual has to make reference to society in a positive way. I can not do whatever I want.

Adam Smith was an economist by any measure. He was also a moral philosopher. He believed in free trade and unfettered markets, with the government's role to help educate, and enforce the law rather than to control the economy because the invisible hand would perform economic actions more efficiently than central government planning by bureaucrats.

Adam Smith was a moral philosopher. He was part of the Scottish Enlightenment. Smith was highly ethical from my understanding of him. However, there is not enough information to determine his religious beliefs as he was guarded in what he said on the subject. Even myself I do not like to bring politics and religion in my class as I teach Economics. However, I am religious. He was born into the Church of Scotland. He took the Calvinist Profession of faith as a Professor in Glasgow. However, his close friend David Hume was not religious at least in the traditional sense as enlightenment thinkers were trying to distance themselves from traditional thought. He taught natural religion in his class. If I were to speculate, I would say he was a Deist. Something a long the lines of Unitarian today.

Smith was a moral philosopher and if you read Wealth of Nations and his Theory of Moral Sentiment then you understand his point of view. Every person makes an action or choice with reference to another unless they are sociopathic. Read for example, Part I, Section I, Chapter III: Of the manner in which we judge of the propriety or impropriety of the affections of other men by their concord or dissonance with our own - in his book - Theory of Moral Sentiment or Part I, Section II, Chapter V: Of the selfish passions. Economic incentives are part of human motives and action but it is a not a singular incentive that drives people. Humans are more complex, think of Maslow. Adam Smith's unintended consequences of individual action, on the whole, is not based on sociopathic greed, but when people pursue their own self-interest in a rational way with reference to others. You seem to have a particular counter-culture (including anti-religion) agenda motivated by perhaps ego, rather than objectivity. I would suggest you revisit Adam Smith's wealth of nations, in the context of this own life and other writings. Trust me, you do not want the alternative of capitalism, such as anarchy or Marxism.

I don't want communism, even the Ancient Romans got rid of their king and set up a republic in 509 BC because they understood the danger of centralised power. I would like to see a combination of capitalism with much more government regulation because our current model didn't work for me and many others. like you say Adam Smith said "It is not from the benevolence of the butcher, or the baker, that we can expect our dinner, but from their regard to their own interest" . This is what the school system is all about, encouraging kids to be selfish, think about their own exam results so one day they will have a good job that pays well. The problem is this selfish attitude is affecting other students mental health as the stress of exam pressure and being selfish doesn't work for all of them and they are handed over to mental health services. Whats wrong with that? Well psychiatry and psychology are total frauds and forms of social control to uphold and justify the unequal capitalist mode of production. Did you know psychiatrists use to label black slaves with "drapetomania" because they wanted to flee captivity in the 19th century. Today if you can't handle the stress of working for the minimum wage, being constantly tested or bullied at school or any other social problem then you get labeled with a mental illness and drugged to the eyeballs to keep you quiet while the other slaves work for nothing, or immigrants do the job. This is why people are labelled with "Autism", their personality is incompatible with our heartless exploitative capitalist environment and rather than change the environment to meet your needs YOU have to change. Because people with Autism can't change Autistica needs to do research in to why and how you can change in the future but all they need to do is accept that our environment is the cause of peoples misery and change the environment. Well if its that simple why don't they change the social environment? Because our environment is based on inequality, someone become rich and someone becomes poor, the minimum wage goes up then so do your bills and food so your always stuck in poverty. If they give people with Autism a job in the community and help it goes against the principles of our capitalist environment which isn't about help and caring for each other. Then there's another problem, if they give a job and help to people with Autism what about all the people who have depression because of their low paid jobs, people in prison with mental illness who need help and everyone else. The capitalist system would collapse so its imperative that people with Autism are dependent on mental health services which creates jobs for psychiatrists, psychologists, therapists and neuroscience research teams. They uphold and justify the capitalist mode of production which is why after 200 years of psychiatric research suicide is on the increase and they can't even diagnose properly like real medicine does. At the moment the whole premise behind psychiatry is that if you're mentally ill its due to a biological problem like a brain disease which is a lie. This means society can carry on screwing people over and making them ill because if its a brain problem then nothing needs to change and those who do thrive in this environment will continue to do so. Most of the illnesses in the DSM are voted into existence by the American Psychiatric Association, none are discovered in the laboratory. In fact most mental illnesses are diagnosed through an interview. Can you imagine a normal doctor giving someone insulin, chemotherapy, drugs to treat cancer etc on the basis of an interview? If I'm going to have chemotherapy or be put on a life long drug treatment plan then I want a test to prove it especially when psychiatric drugs can causes liver, kidney damage and other health problems. I've done a few videos which explain my ideas more clearly if you look on my user name and so have many others on RU-vid. thanks for taking an interest. But isn't capitalism the best social environment? Well for some people it might be like a business man but because different environments effect different people differently it doesn't work for everyone. Also we're told at school to think about ourselves, get good grades, go to uni and get a good job but we don't look over our shoulder to see how these stresses affect other people. We're not told that its an unequal exploitative, capitalist system where employers mainly care about money and will screw you over. In Business Studies we are taught about the differences between sole trader, partnerships and limited companies when discussing business but we are conveniently kept in the dark about the dark side of business. What do you mean? Take the slave trade for example, slavery expanded to satisfy European consumers and enrich merchants and bankers. in the 1700's the British were the main consumers of these goods. ports like Liverpool and Bristol became rich during the slave trade and lots of people depended on it including boat builders, sail makers, rope makers, carpenters, sailors and shopkeepers who sold the products. Slavery was seen as normal and even shopkeepers with savings to invest would finance slave voyages and the economy would boom. Sir Francis Baring founder of barings bank was one of the many bankers in the city of london who made fortunes out of the investments in the slave voyages without seeing any of the suffering inflicted on the Africans. Lloyds of London ( the insurer) has its roots in the slave trade. It was founded by Edward Lloyd in the 17th century in Tower Street and became a major insurer of slave ships during the Atlantic slave trade. it was originally called Lloyds Coffee House. A bronze statue on a pedestal of Portland stone was unveiled in Bristol city centre (in 1895) showing a deep thinking Edward Colton leaning on a stick, its inscription reads "Erected by the citizens of bristol as a memorial of one of the most virtuous and wise sons of their city". Not mentioned are the thousands of slave victims that Colston and his family trampled over to obtain much of their wealth. Ok but slavery ended now business is a good thing? No business exists to make money and screw you over that's why there's always been a conflict between employer and employee, like in 1823 The Master & Servants Act was a law which required obedience and loyalty from the workers to their contracted employer, with punishment enforced by jail or hard labour. It was used against workers organizing for better working conditions until the Trade Union Act of 1871 was implemented and secured the legal status of Trade Unions. Even today workers go on strike asking for better pay and conditions because their employers are taking advantage of them. Also think about all the cheap clothes and products we can buy, somebody somewhere must be getting screwed over. In April 2013 an eight storey building the Rana Plaza collapsed in Savar in Bangladesh, over 900 people died. The building contained clothing factories for companies like Benetton, Primark and Monsoon. The workers were worried about the state of the building because cracks appeared in the walls but they were forced to return to work and threatened with loss of pay if they didn't. It doesn't end there there's also corruption. What do you mean about corruption? Well business exists to make money and that's all they care about. Take Libor for example (the global benchmark for interest rates) was manipulated during the financial crisis of 2007 so Banks could carry on doing business. Also in 2012 an investigation by the US authorities found that HSBC the UK Bank was failing to stop criminals using the banking system. Mexican drug traffickers like the Sinaloa Narco Cartel laundered hundreds of millions of dollars with the bank. The New York Times reported that Federal Authorities would not prosecute HSBC in case a criminal prosecution would topple the entire capitalist system.

There is a lot here to address. I would tend to agree on some of the points you made. However, the underlying premise behind Smith is correct. That is if people are given freedom they will pursue things that are not just good for themselves but for others. To illustrate this I run game simulations in my classes. I play the Prisoner's dilemma game theory simulation in my classes for example. To this day, there are always more people taking the high road statistically. I believe that people are innately good. There will always be exceptions, but generally when given the freedom people act to their own advantage with reference to others and the whole is made better off. I believe that are genes are programmed this way and there is genetic evidence to back it up. In fact, that makes sense, if the genes to no consider the whole then humanity and the genes would not survive. So through evolution altruism and innate goodness is programmed in. Humanity is evolving with its consciousness, although there are many exceptions genererally the world is a more peaceful, richer better place because when people are given freedom, they will act on their self interest which has reference to others.