Now it is Adam Smith's, the Friedmans', and a host of others' view that, with regard to economics, it is far better, much more efficient, and often impossible otherwise, to let each person freely learn, decide, and form what connections he or she needs to make to further his own goals than to have government planners try to design and build the overall network and force connections to take place. The enterprise is too complex, and the details too numerous, for central planners to be able to anticipate, allow for, or correct, to permit centralized planning and organization without major mistakes and snags and also without trying to force people to do things they do not want to do, have no incentive to do, and often won't then do well, if at all. 

I take it that this view is an empirical claim about reality, that facts or experiments would prove or disprove if sufficient "pure" cases could be examined. And I also take it that it may possibly not be an all or nothing proposition, that it is possible certain enterprises or organizations may work out, and even work out best, or even only at all, when they are centrally planned, and others may work out best when they are allowed to grow in this sort of network fashion. In some cases a mixed practice may work out best --planning and coordination with flexibiity and some independent, shared decision-making at "lower" levels.

The notion of multiple relationships interweaving or evolving themselves into an undesigned, but efficient and fully functional, network explains how cooperation between individuals grows into a quilt or network of cooperation on a large scale. It does not, however, explain a number of things about networks or systems of networks. (1) What, if anything, guards against or insures that the overall network and each section of it are good things, since, for example, a crime network could grow this exact same way? (2) What, if anything guards against or insures that some individuals in it do not do things which unfairly engender cooperation, since fraud, cheating, dishonesty, or extortion, for example, could also induce cooperation in a network, particularly when the fraud is difficult to detect by the individual victim or takes an extended period of time for the results to surface that allow its detection? (3) What, if anything, guards against or insures that networks do not come into conflict with each other or act counter-productively toward each other? Or the more general form of this latter question, what guards against or insures that networks which seem to work, actually do work the most productive, efficient, or best way they could both for the individuals themselves involved in each network, and for everyone outside of that network, whether they are in a different network or not? (4) What insures that everyone will be able to enter into a network that wants to or needs to? Cannot networks conceivably stop adding members when all their members are sufficiently satisfied with the whole enterprise and their part in it? And if so, what of individuals who might need to or like to join, and who might be able to contribute, but who simply than do not have the opportunity because there is no niche or perceived need for them?

There are a number of ways to answer these questions. With regard to (1) and (2), codes and laws or sanctions often are developed, either by people within the network or by others outside of the network (e.g., legislators or regulating agencies) to describe which ends are unacceptable and what means are unacceptable to attain even good ends, and these laws and codes include sanctions to try to foster their being obeyed. 

Further, Adam Smith argued that the self-interest⁽¹⁾ of each individual would be important, or perhaps even sufficient to encourage honest and benevolent cooperation, since each person would see that such cooperation benefitted him more than it cost him. Unfortunately there are three kinds of self-interest, and although Smith seemed clearly to have only one of those in mind, his references to self-interest have been taken out of context and the cooperative benefits of one kind of individual self-interest is mistakenly applied to all three. It does not work with the other two, however.

The three kinds of self-interest are: 1) self-interest whose satisfaction does not really affect other people (e.g., playing golf by yourself on a weekend afternoon, or reading a book before going to bed if doing either is not to shirk some sort of responsibility); 2) self-interest whose satisfaction would harm others (e.g., theft, fraud, rape, vengeful homicide --again, the kinds of things which laws try to address and prevent); and 3) self-interest of the sort Adam Smith, the Friedman, and others really have in mind, the satisfaction of which also, benefits other people. Adam Smith realized that people do tend to cooperate with each other in good ways toward good or mutually satisfying ends, especially ends they could not achieve on their own or not achieve as easily on their own. Observations of even kindergarten children have shown that they can be very spontaneously cooperative in their own free play. Children building a project out of blocks will work together to get it done faster, often dividing up the labor, say between those who build and those who gather the right kind of blocks. There may even be one or a number of architects, someone who demonstrates a design of part of the construction and then does one part of it while others replicate his efforts in different segments that they then all join together.

The problem in describing cooperative enterprises or networks as growing naturally out of people satisfying their own self-interests is that it can only likely happen beneficially for society from this third kind of self-interest, not all kinds of self-interest. Furthermore, I would argue, that in many cases this kind of self-interest is not even best described as self-interest at all. And I am not talking about cases of self-sacrificing altruism and even martyrdom, which in fact do sometimes occur, though they are not what guides most of us any more than does unmitigated, self-serving greed. For the most part, in regard to personal or immediate relationships, we try to avoid gaining at other deserving people's expense, and we try to help others if it does not cost us more than we think fair. We particularly tend to help those we think deserving when just a little work on our part may give them great benefit. As our "costs", risks, or efforts increase, or their potential benefits decline, we may be less inclined to help unless there is also some additional benefit in it for us. Many times we do things for others which do not cost us much, if anything, and which help them a great deal. We open doors for people carrying parcels or who are on crutches. We let someone with one item and money in hand in front of us at the supermarket when we have a full shopping cart. We permit other motorists sometimes to enter a lane ahead of us if they are not likely to be able to do so otherwise, etc. Of course, we do not always do this; and not everyone does it even sometimes. But most people do it far more frequently than proponents of self-interest recognize or admit. And though they may gain some satisfaction from being benevolent, they do not act benevolently in order to have satisfaction; they do so to help others. Smith, Friedman, and others mistake the side-effect of certain activities as the cause of them; they mistake one (often minor, if even existing) benefit --what the agent gets as a reward for himself-- as the main cause or stimulus of the agent's action. 

Further, in regard to those acts which we engage in because they bring benefit to both parties in the transaction, the kind Smith, et al, are basically addressing, referring to them as transactions of mutual self-interest only focuses on half the motivation. Both parties are each helping as much as they are being helped; mutual giving is as much a part as is mutual receiving. Many people in fact do not want to knowingly take advantage of others. 

By using simply the term "self-interest" to describe the main impetus for a free market economic system, it gives many people the impression that any form of greed or selfishness, or any form of desired idleness which does no active "negative" harm to anyone else, will contribute to society. This in fact is a potentially very harmful philosophical or psychological principle to promote, being somewhat self-fulfilling (as I will argue shortly it can be), since laws and law enforcement cannot possibly keep up with individuals or networks intentionally bent on their own gain regardless of the (often unwitting) expense of others. Smith may be correct that we cannot always depend on the benevolence of others to promote someone else's or the common good; but there would be a lot less mutual or common good, if any at all, if people generally did not have and act on a sense of benevolence, mutual benevolence, and fair play. If one indiscriminately joins all three types of self-interest above under one convenient label, and then espouses it, one is as likely to promote harmful greed and laziness as one is to promote transactions of multipli-mutual and societal benefit. Perhaps even more likely. By not discriminating between these three forms of self-interest, we unwittingly promote as an ideal one of the worst, lowest, and most divisive human qualities --pure selfishness at the unnecessary and unjustified expense of others. Smith's and the Friedman's and others' promotion of self-interest is really of the third sort of self-interest listed above; and it only works, or has worked in the past, to perform the economic miracles it has, under two conditions: (1) when the general moral climate or understanding in a society includes an acted upon appreciation of the virtue of a certain amount of altruism, and an acted upon understanding of the good⁽²⁾, and (2) when vast powers of harm and destruction (including not only weapons, but life-endangering pollution or contamination of vital resources, and wholesale powers that promote social or psychological evils) cannot easily be possessed by people that do not have or act on such an understanding. 

Most people do not realize, given the numerous doctrines, along with Smith's, that preach the inevitability or benefits of self-interest, how selfless much of people's motivation naturally is; and prescriptions for people to follow their own self-interest in terms of some sort of obvious personal gain, help mask and eliminate from people's behavior a genuine desire to help others or to make improvements in something. This happens in two ways: (1) by conditioning us to goals different from our natural inclinations, and (2) by actually making it irrational to be altruistic or helpful unless one gets an "external" reward. 

Regarding (1), one example is that all too often in school, a genuine love of learning can be transformed into a desire to get good grades or extra credit, so that if a fantastic course is offered for no grade or credit, many students will not sign up for it, who otherwise would have loved to have gained the information. They confuse the goal of learning, which in many people is a natural kind of joy, with the goal of getting a good grade or some sort of certification in return for a certain amount of tedious labor, because they have been conditioned to a new goal. It has been said that if sex were taught in school in the same manner that other subjects are, few people would want to have sex without some kind of added incentive. Similarly, there are pressures at work, when self-interest is repeatedly espoused and employed politically, economically, and organizationally, that make us feel selfishness is right and that make us forget our tendencies toward benevolence and helpfulness --particularly benevolence and helpfulness that costs us little, yet means much to others.

In regard to (2), if you believe everyone else is acting selfishly, and would not help you unless you make it in their self-interest to, then it would often be rational to act selfishly yourself. There would be less point in helping others if doing so would help them get ahead of you or get more than you that they will not share with you. There would be little point in your making efforts on behalf of others since no one will do it for you. People who act selflessly in a selfish society would just be the chumps who other people take advantage of, and who do not get as much out of life as they would if they tended to their own concerns instead of helping other people who would not help back. One of the greatest harms of the Smith argument that people act in their own economic self-interest is the self-fulfilling nature of its own promotion. Insofar as people erroneously come to believe that everyone else is acting only in their own greedy, short-sighted, and purely selfish, self-interest, it would be rational for them to act that way themselves. Hence, the successful promotion of the Smith doctrine without reference to the particular kind of self-interest Smith had in mind --cooperative, benevolent, and mutually advantageous self-interests-- tends to promote too much of the socially harmful kind of self-interest, rather than the socially beneficial kind.

And total, or unsocial, selfishness is not the most pronounced normal or natural trait of individuals. A great many people will go out of their way for others if they can help; and most people will do things for others if it does not cost them very much to do it. The main, natural, operating principle of most individuals is not so much seeking their self-interest but cooperating to the extent it is not to their self-detriment. It is satisfying to help people who appreciate your efforts, as well as those who reward your efforts, and you tend to want to continue helping them. It is satisfying because you like helping deserving people; it is not satisfying because, and you do not do it because, it is in your self-interest. It is quite natural to help a neighbor with a problem he cannot quite solve himself --whether by having a helpful idea or by actually pitching in with a certain amount of labor and time-- as long as it is not something that requires great risk or a hated effort on your part, and as long as you help him out in a way he appreciates or that is to his benefit even if he may not realize it. It is pleasurable to do things that make other people happy or that benefit them. It is pleasurable because we like to do that; we do not do that because it is pleasurable. Of course, people pretty soon stop trying to help others who take advantage of them or who don't appreciate their efforts, but that is because they are working for no good reason at all (not even the other person's happiness) and are actually losing ground by their work. That still comes under the operating principle of not wanting to do things that are to your own detriment. Although we do not always seek our own self-interest, that does not mean we need to be martyrs or sacrificing for no good reason. People sometimes do make a certain amount of sacrifice for others, but usually it is for a reason they believe to be worth it. People's self-interest does not always need to be aroused to provoke them to action. There is too much obviously selfless volunteer work done for both friends and for strangers or a whole community to argue that greedy self-interest is the prime motivating factor in human relationships. 

And pursuit of self-interest is not always even successful and sometimes shouldn't be. We would hope that people would not help someone like Hitler even if it were to their own material advantage. And we tend to feel sorry for people we like who go into a line of work they dislike even though they may make a great deal of money that they do want. The money gained is not worth the non-monetary costs.

In terms of Smith's butcher, brewer, and baker, it is equally plausible to assume not that these three are actively seeking their own self-interest, particularly with each transaction, but that they are simply working at jobs they somewhat enjoy, jobs that help others because of the way a given system or community has developed, and jobs that they believe also make their lives easier or more pleasant for them than if they were not cooperating with other people. Many kinds of cooperative division of labor tend to make life better for almost all involved, even if a given transaction may not be to a particular party's advantage or to either party's mutual advantage. If everyone does their fair share and helps each other out, more people will ultimately benefit than if everyone either labors by himself in isolation or if no one trades labor except for where he sees immediate, direct personal benefit. And, unfortunately, even when cooperative division of labor is a detriment to some of the people involved (people whose lives would be better if they were not involved in it, because they are giving up far more than they are getting in return), it is often difficult for them to see they are worse off; so they will still labor within the system though their real self-interests are not being met in the way they believe they are.

The difference between self-interest that is helpful and self-interest that is harmful is the difference characterized by the high road of capitalism and the low road. The high road of capitalism is the one traveled by those who seek to maximize the kind of self-interest that is also helpful to others. It seeks to bring about transactions that provide real mutual benefits, not transactions that are purely selfish, one-sided or unfair or which bring about only short-sighted, narrowly focused, ephemeral benefits that may ultimately cause much more harm than good. The low road of capitalism is the one traveled by those who seek the most self-gain regardless of whether there are benefits or burdens to others. It is traveled by people who are often short-sighted, greedy, and purely selfish -- people who believe that no transaction is wrong which is not illegal, and that even illegal transactions are acceptable if there is little chance of detection, conviction, or intolerable punishment. In a technological age where individuals can multiply benefits or damage thousands of times more than people unaided by technology, it is highly unlikely that the attitudes of those on the low road of capitalism can bring about the societal benefits Smith, the Friedman, and others expect of capitalism. That can only be done by those on the high road. The low road is one of legalism and technicalities or loopholes, not one of moral concern, compassion, and wisdom. And it should be fairly obvious that the law cannot do the work of conscience and moral sensibility. Written words do not always accurately capture the idea or spirit intended; and the police and courts cannot be effective where large numbers of people have no conscientious regard for each other, for obeying the law, or for doing what is right. The high road cooperative self-interest of Smith's (and others') baker is not the low road, selfish self-interest of those who legally cheat others or prey on their suffering, of those who legally poison fields and streams and sell weapons to those who would use them against innocent victims, or who support legislators that pass laws that give them unfair advantage. The low road leads to little social benefit and much potential harm; and it leads to much suffering and an unfair distribution of the few benefits and many burdens it does manage to engender. As Smith, I do not expect benevolence alone to effect the help we all have occasion for, but that does not mean we cannot distinguish one kind of self-interest from another and cannot promote that self-interest which is in the interest of others also, and do what we can to discourage, or at least not further promote, the kind of self-interest which is socially harmful.

However, even if this socially beneficial "right kind" of self-interest is successfully promoted and fostered, problems (3) and (4) from above remain. (3) What, if anything, guards against or insures that networks do not come into conflict with each other or act counter-productively toward each other? Or the more general form of this latter question, what guards against or insures that networks which seem to work, actually do work in the most productive, efficient, or best way they could both for the individuals themselves involved in each network, and for everyone outside of that network, whether they are in a different network or not? (4) What insures that everyone will be able to enter into a network who wants to or needs to? Cannot networks conceivably stop adding members when all their members are sufficiently satisfied with the whole enterprise and their part in it? And if so, what of individuals who might need to or like to join, and who might be able to contribute, but who simply than do not have the opportunity because there is no niche or perceived need for them? 

Earlier I described the Invisible Hand mechanism as working like a self-building kind of jigsaw puzzle where each piece worked to find its own meshing pieces, so that by doing so, the whole puzzle came together. That kind of mechanism makes sense for enterprises where there are only specific "matches" for each individual piece, and where no pieces have one side that will match more than one other piece. If you consider a Rubic cube that tries to assemble itself in this method, a problem can arise. Anyone who has ever worked a while with a Rubic cube sees that the further one gets with it, the more difficult it becomes because one starts to have to temporarily give up some matches one already has in order to make a greater number of matches. This becomes more complex and involves a greater number of what I call "neighboring" matches the further one progresses. You may have to temporarily break up three neighboring individual block matches in order to achieve six. You may have to temporarily break up six in order to achieve nine or twelve. If we were to construct a self-working Rubic cube where each individual block had to find neighboring matches, blocks that found such neighboring matches first would have no reason to give up those matches just because other blocks were then unable to find matches for themselves. Once (1) competition for "neighboring niches" enters into this sort of mechanism, and (2) once sufficient neighborhood matches for some individual blocks is "satisfying" or "comfortable" to them, it becomes more difficult for the optimal result (i.e., in this case, the fully "solved" cube) to occur. That is because individual blocks with neighboring matches (i.e., regional or local niches) will not want to give up their gains in order to speculatively help another block find its niche, especially when there is no guarantee the "sacrificing or helping" block will not lose its own niche by doing so. 

What would be required for a self-working Rubic cube to "freely" optimally resolve itself is the existence of a plan by which all blocks could see they would only temporarily give up local matches in order to allow everyone to have their own local match. There is always the possibility that a dictator block with sufficient power and insight could force blocks to temporarily give up their positions, but there is no reason to believe such a block would help others return to their position once it has achieved its local niche. And anyway, if results are equal, then since voluntary cooperation is preferable to forced cooperation, the voluntarily self-correcting Rubic cube would be preferable to the forcibly self-correcting Rubic cube.

With regard to actual social systems instead of fanciful self-resolving jig-saws puzzles and Rubic cubes with character traits, the points are the same. (1) If X number of people in a society can form associations that are self-satisfying, they have no reason based on self-interest of any of the three sorts, to go to any effort to expand that association to be inclusive of people not necessary to make that association work. (2) Individual cooperation may produce a satisfying local arrangement but one that is not nearly as satisfying as a more universal arrangement; or individual cooperation might produce an arrangement that is not as satisfying to as many individuals, the same amount each, as a broader association would be. (3) An optimal, or better, resolution or arrangement might be so complex that insight into the "big picture" and then planning, and coordination might be necessary to bring it about because individuals working alone or in small combinations may not be able to see beyond their local needs and satisfactions. (4) All other things being equal, if such a plan is discovered, voluntary cooperation, if it can be achieved, is a better method of obtaining the desired coordination than is forced cooperation. 

There is no reason to believe that the mechanism of the invisible hand -- the creating of vast networks by the interweaving multiplication of mutually beneficial, isolated transactions of the individuals involved in them-- necessarily works in the best interests of all those involved, and certainly not of those left out, when the enterprise becomes impersonal, when there is competition for niches that are limited by short-sightedness and selfish greed, rather than by limited resources, and when there is a comfort level of success reached by those in a working system who have no personal or individual necessity to expand the system to take in more people.

There is also no reason to believe that networks or systems cannot and do not form which are more harmful than beneficial either to many of those involved or to those outside who are nevertheless effected by the system. Relying on people's perceived self-interest to be their real self-interest, and relying on people's local or immediate self-interest to be the same as the larger or long term interest of society is to have unwarranted faith in the mechanism.

This does not mean there needs to be centralized control in order to have the most efficient result. That would be the mistake of throwing out what works with the invisible hand model in order to correct what does not work. There is a difference between central planning with voluntary cooperation, and central controlling. And there is a difference between isolated planning and cooperative planning. In a complex situation, centralized control with isolated "top-down" planning and no monitoring feedback is as prone to failure as is no planning or coordination at all. Maybe even more. The Rubic cube is not easy to resolve even when it is being worked by one person in control of all the blocks; centralized control in a complex situation does not guarantee sufficient understanding to promote success. Further, for a complex social setting, rather than a merely mechanical situation, centralized control can lead to individual worker emotional and psychological alienation and dissatisfaction that make even the otherwise "logically or mechanically right" general plans susceptible to failure. The benefit of the market is that it takes into account what people want and will accept (and even can influence what people want and will accept to a certain extent). Dictatorial centralization does not do that and can commit egregious errors of judgment. However, the market, insofar as it only addresses perceived interests, and those sometimes very local or short-sighted, does not necessarily address or respond to real interests or important interests which are not recognized by enough people to generate market changes. Centralized planning tries to take into account real interests and needs, but too often fails because it does not meet people's perceived needs (particularly the need for freedom of choice and some control as a provider/worker and as a beneficiary/consumer/ customer). 

It seems to me there are ways to combine the advantages of both the market and central coordination, while reducing the disadvantages of both. That primarily is to have accurate and important information continuously available and flowing at the appropriate times between workers and planners (when they are different) on the one hand and between planners and consumers. The latter is done by many companies now in regard to surveys of consumer interests and also test-marketing products. But it is done in order to discover consumers' perceived self-interests, not necessarily their real interests. And it is often done while withholding information that the consumer needs in order to be able to make a rational choice. There are, of course, forces at work to prevent such a free flow of information, but those forces are able to operate to a large extent because of the mistaken pervasive notion that satisfying perceived self-interests, or perceived local interests, however one does it, as long as one does it legally, is justified and beneficial to society.

Further, there are similar wrong, purely greedy, short-sighted self-interest forces at work to impede collaboration between workers and planners (or managers). One important element in a society that I could not represent with the Rubic cube is the possible interaction between planners and workers. Workers have knowledge of immediate and local problems even though they may not, from their work alone, see "the big picture". But planners who see a larger picture may not have sufficient understanding of the local details and problems to be able to plan or coordinate satisfactorily. The understanding of both perspectives is necessary in order to increase the chances of success. And that understanding often needs to be very current in both realms --global and local. It may do no good for a worker to become a planner, if the work environment changes once he becomes a planner; the "worker knowledge" he had may not any longer be the same working knowledge he needs to make plans for the future instead of only making plans that would have worked in the past. This is a difficult problem to solve in most complex situations, but one that needs to be addressed.

1. Although discussions of this sort talk about people's self-interest, they really are about people's perceived self-interest, which may not be their actual self-interest. People can, and do, make mistakes about what is in their self-interest; sometimes they come to see their errors later themselves; sometimes they do not, but would agree they had made a mistake if they knew all the facts. The question about crime (i.e., intentionally harmful) networks above also could be asked as well about networks formed that unintentionally harm the members and others though everyone may mistakenly believe they are doing great good and working in everyone's best interest.  (Return to text.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2. There is a great deal of social and/or ethical knowledge that is unconscious or tacit. In a close-knit, fairly homogeneous community, unregulated and unspecified behavior is more likely to be acceptable than in a diverse community. Expectations tend to be met without anyone's even realizing they or the other person even had them. What seems normal behavior to the one person seems normal to the other. The success of the Invisible Hand relies heavily on (most) everyone's rowing in the same social and ethical directions generally, without having to spell out all the details of every transaction in some sort of precise, legalistic document. Trust and mutual understanding are important in transactions because legal documents and sanctions cannot be as effective as people's responsible inclination to do the expected thing, and to know what that is. In a diverse or heterogenous society, the Invisible Hand is less likely to work because culturally developed similarity of behaviors and expectations will not be as common. The principles of the Invisible Hand will still be operative, but the results will not be as likely because people are less likely to meet each others' expectations in completing mutually agreed upon transactions, even where they have the will to do so. Over time misunderstandings of these sorts can be worked through, but business relationships and cultures need to be developed in order to do that. 

A simple, amusing case of cultural differences involving a sales transaction occurred for me the time I visited England and stayed with a friend's parents. In order to show my appreciation for their hospitality, I bought them an electrical appliance they did not have, but which I knew they would like. The price seemed very low to me and I kept inquiring of the sales clerk why that was - thinking that I might be missing something. The clerk assured me that was a normal price in England and that the quality of the product was exceptionally good. My suspicions were somewhat relieved, but as I started to leave the store with the gift, he asked what sort of (electrical) plug I needed. I didn't understand the question, because in America all electrical plugs for appliances of this sort are the same. He explained that in England, houses built before a certain date of standardization had any of three or four sorts of electrical outlets, so appliances did not come with plugs already attached. I figured this is where a substantial extra cost would be charged, and was prepared for the worst. But he explained the cost of the plug had already been included in what I had paid; he only needed to know which one to give me. In other circumstances, even in one's own country, one is not always so fortunate. Periodically one finds out that products or services are not as complete as one expects, and the cost to make them complete can be substantial.  (Return to text.)