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The Forum > Article Comments > Group and self-interests coalesce > Comments

Group and self-interests coalesce : Comments

By Nicholas Gruen, published 30/6/2005

Nicholas Gruen looks at whether we are better off focusing on self interest or the community using open sourced software as an example.

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Adam Smith’s statement about the “Butcher, the Brewer and the Baker” is not about markets being driven by self-interest.

In Smith’s “Lectures in Jurisprudence” (1763) he says:

“Man continually standing in need of the assistance of others … does not expect it unless he can turn it to your advantage or make it appear to be so. Mere self-love is not sufficient for it, till he applies it in some way to your self-love. A bargain does this in the easiest manner. When you apply to a brewer or butcher for beer of for beef you do not explain to him how much you stand in need of these, but how much it would be in [his] interest to allow you to have them for a certain price.”

In trade you serve your own self-interests best by serving the self-interests of the other party. The other party suppresses his too: you agree a price and make the exchange.

Smith mentioned the “invisible hand” three times only.

First in his “History of Astronomy” (1743-51) in a comment on pagan superstition; second in “Moral Sentiments” (1759) on Feudal Lords spending the surpluses on their Retainers and Serfs in nearly the same distribution as would occur if they owned plots themselves (no markets mentioned); and third in “Wealth of Nations” when describing the preference of local “merchants and manufacturers” to employ their capital in domestic industry rather than abroad. Again no ‘markets’ mentioned.

Hence, the “invisible hand” is not about “markets” at all. He warned of the proclivities of “merchants and manufacturers” to pursue their self-love against the interests of consumers in markets!

Smith connected our moral sentiments to the cohesion of peaceful “markets”. We moderate our passions to what the Impartial Spectator can “go along with” and reduce our temptations to theft and violence through our propensity to “truck, barter and exchange”.

These peaceful moral propensities, under the rule of law and without undue interference, are sufficient for society to grow from poverty to general opulence
Posted by Prof. Kennedy, Thursday, 30 June 2005 10:54:15 PM
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Micro Credit is an interesting innovation. However we still outlaw private currency in Australia. We have done since 1910. And in the last 12 months our financial regulators have run out of town the few exchange merchants who dealt in international private currencies such as e-gold.

http://www.e-gold.com/e-gold.asp?cid=1018942
Posted by Terje, Friday, 1 July 2005 5:19:18 AM
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