Good article.

“These phenomena can’t be easily explained within economists’ standard framework, in which economic decision makers are reduced to the ideal type known in the trade as homo economicus.”

That’s because the assumptions of "economists' standard framework" are wrong.

On the one hand you say:
“Homo economicus is a pure, calculating egoist optimising his profit or “utility” without regard for others’ views or conduct (except where they’re useful to his ends).”

But on the other:
“We’re socially comparative beings. We care deeply about the conduct, opinions and values of our peers, using comparisons with them to orient our own ideas about what we need or value and how wealthy we want or need to be.”

Man’s “ends” include *all* the values for which he takes action. All of them enter into his decision whether to do a particular act, and whether and if so how much to hand over in an exchange. It is not viable to distinguish "economic" from "non-economic" values; so long as either of them motivates human action, they are comprehended within the principles of economices.

Blind Freddy can see it is simply wrong to assert that man’s satisfaction in life is limited to the acquisition of material goods. This bald untruth seems to me to be an uneconomic or anti-economic theory. I suspect it was dreamt up by mathematical economists trying to come up with a neat model so they could hurry on to doing mathematical equations. Such wilful ignorance brings economics into disrepute.

Yes it is wonderful to see the spontaneous and socially beneficial order that springs out of people’s freedom to truck and barter whatever they want. But it is easily explained: maximum freedom to exchange ideas, goods and services of every kind is the ethical and practical basis for the good and open society.

Thanks Nicholas, you have explained rather than exsposed Adam Smith like a true scholar, which, as a late learner brought up in the scrub my expression in comparison is limited.

However, it could be said that somewhat like Thomas Aquinas who is said as a Christian to have accepted Hellenistic Reasoning with a serious troubled mind, Adam Smith was somewhat similar when he explained his Laissez-faire as not something not to be trifled with, or rather not to played with as the very term deregulation has done to our modern free-market.

Certainly Smith must be lately turning in his grave.

Finally, could guess that poor historical explanatory wording may have caused capitalism to be over-exposed to the e's, with the double ee's in freedom, need and greed, and the single e in ethics giving us a reminder that the linkage seems almost like a spiritually cautious reminder of our rampant carelessness in capitalistic principles today.

Cheers, BB, WA.

I’m wondering how much the web will actually benefit Australia. Will it help to increase exports, or will it only result in more imports and more wealth leaving the country.

If someone has $10 to spend, they can go to the local corner shop and spend it. The shop will employ a sales assistant, and if the shop makes a profit, then it pays tax which goes to government and is later returned back into the economy. So the $10 circulates within the country.

If someone spends $10 by purchasing something on the internet, that money basically leaves the country and is of benefit to very few. This is because Australia manufactures or produces very little.

I have software for sale on the internet, and I regularly look at most of the big download sites. I cannot readily see any other software from an Australian company on those large download sites. Australia is not producing much at all, and if someone is purchasing something from the internet, they are most likely importing, and the money they are spending represents a loss of wealth from the country.

Well done Nicholas to point out the forgotten part of Adam Smith's work. Smith knew that there was much more to it than the blatant seeking of self interest.

Modern economic systems have done us a great disservice in ignoring the "moral" side of transactions. I prefer to call it the "giving" side to transactions. We don't just write things in blogs so that someone will take notice of us. We do it because we cannot help ourselves give and we give for pleasure. We get more enjoyment in doing something for others than for what we receive for ourselves.

The cynics will say what a load of rubbish - of course I get more pleasure from receiving than giving. If you believe that then think back to your last gift giving day. Did you get more pleasure from the things you gave than the things you received?

There have been many interesting experiments that have watched the pleasure circuits in the brain light up when you give and when you receive acknowledgment that your gift has been appreciated. The physical evidence is that we like to give more than receive and we really like it when others acknowledge the gift. That is, why bonuses are nicer to receive for work well done than an increase in salary.

It is probably why some people like shopping so much. Not for the things they buy but because they give people money.

Unfortunately we can train people not to enjoy giving and the way we have structured our economic system to encourage people to take without acknowledgment would cause Adam Smith to be most anxious.

We need to structure our economic systems to put more emphasis on the giving side of transactions which is behind the idea of Rewards. Giving people Rewards for something they do or don't do is acknowledging their gift to society and then providing them with a way they can spend Rewards and benefit society while benefiting themselves is a double pleasure hit.