Ruling class Ignorance

To say that greed is a good thing is a denial of the social nature of the human being. Greed necessarily implies selfishness, a refusal to consider the circumstances of other human beings. Human beings are indeed capable of selfishness, of great selfishness, but selfishness is destructive of human society and cohesion. As a result, human beings generally resist the selfish impulse as they intuitively understand that it is both damaging to the self, and to the social. The idea that selfishness is an important driver in economic activity is supposed to come from the writings of Adam Smith. The most successful academic economist is Paul Samuelson whose book, 'Economics' has sold millions and has been read by millions of students throughout the years. My edition is the 15th edition, published in 1995. I don't know how many editions have been published at this time, but even 15 is a very impressive pedigree. In my 15th edition, Samuelson writes

The orderliness of the market system was first recognised by Adam Smith….Smith proclaimed the principle of the invisible hand. This principle holds that, in selfishly pursuing only his or her personal good, every individual is led, as if by an invisible hand, to achieve the best good for all….Smith’s insight about the functioning of the market mechanism has inspired modern economists….

The problem here is that Smith said no such thing, what Smith said was that in pursuing our own interest every individual is led, as if by an invisible hand...etc. and, as I showed yesterday, Smith argues that it is in all of our interests that workers are well paid and enjoy good conditions of employment. In Book 4 ch 2 of the Wealth of Nations, Smith writes

By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only 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.

Our own interest, our self-interest, is a quite different thing from selfishness, in other words, Samuelson got it wrong and was responsible for sending modern economic theory down a blind alley. He was not alone in this, but he was very influential. Samuelson did not do this deliberately as he is not a neoliberal, but what it suggests is that Samuelson did not actually read Smith and was only repeating what he himself was told when he was a student. As Smith continually stresses, our self-interest is often the promotion and the happiness of others, even when there is no immediate benefit for us. Indeed Smith condemns the attitudes displayed by the Boris Johnsons of the world as corrupt and used to sustain a divisive class system. In the 'Theory of Moral Sentiments' he writes

This disposition to admire—and almost to worship—the rich and the powerful, and to despise or at least neglect persons of poor and mean condition, is (on one hand) necessary to establish and maintain the distinction of ranks and the order of society, and (on the other) the great and most universal cause of the corruption of our moral sentiments. Moralists all down the centuries have complained that wealth and greatness are often given the respect and admiration that only wisdom and virtue should receive, and that poverty and weakness are quite wrongly treated with the contempt that should be reserved for vice and folly.

 

As I said yesterday, we should be very sceptical of the pronouncements of anyone who boasts an Eton and Oxbridge education, Smith himself certainly was. What the Boris Johnsons of the world deal in is propaganda, not academia, and in doing so display both their ignorance and their arrogance. I ask you to contemplate this person as a future Prime Minister. You have been warned.

 

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