SYSTEMS MATTER Part 8: Self-Interest vs. Selfishness

by Dr. James W. Jackson

Founder, Project C.U.R.E.
Author, The Happiest Man in the World: Life Lessons from a Cultural Economist

When Adam Smith introduced the verbiage of “self-interest” into his economic and cultural reporting he laid himself wide open to misunderstanding, misinterpretation, and criticism.

A person of a different economic ilk, wanting to end all arguments regarding the intent and integrity of Adam Smith, and dismiss him as a greedy scoundrel, would only need to portray him as the champion of selfishness. Such a person needed only to claim, “Smith is the epitome of the bourgeoisie capitalist interested in only grabbing, at any cost, the wealth of this world at the expense of the poor and downtrodden.” The verbal assassination would have pretty much been accomplished at that point.

Instead of indulging in the semantics game, let’s stop and examine just what Adam Smith was saying:

. . .the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty in the attempting to perform, which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and in directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to, three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain, because the profit could never repay the expense to any individual or small number of individuals, though it may frequently do much more than repay it to a great society.(1)

Adam Smith presumes that every person wants to end up better off in life. If left to pursue voluntary transactions of business and barter with other free individuals, the only transactions that will be successfully completed are those transactions where both free trading partners end up better off. A system that promotes that freedom where everybody ends up better off not only encourages additional such transactions but greatly increases the total volume of successful business.

But the human desire to end up better off could be, but is not necessarily, selfish. To possess the desire to make good decisions and end up better off in life displays the admirable qualities of accountability. Good stewardship of life and of those things we possess reveals our willingness to accept and practice personal responsibility. Selfishness is the attitude and spirit where an individual insists on his or her own arbitrary demands on other people regardless of consideration or cost. It is the whole idea of me first . . . it’s all about me. That spirit of selfishness is counterproductive to good business because both parties do not end up better off.

That is why Adam Smith insisted that the government must not be greedy or selfish either. The greedy intentions of the government, or the individuals who control the government, are also counter-productive to the positive growth of an economy, because when they are greedy all parties involved do not end up better off.

Smith tried to build into the system checks and balances to control the selfishness and greed even of the government or Sovereign by saying that their reach and function should be limited to (1) protecting their citizens from outside danger or oppression, (2) the rule of law where the citizens are protected from other individuals within the country, and (3) the establishing and maintaining of certain institutions or services that could not be offered by a single person or a small group of individuals, e.g. courts, recording of public documents, road systems, etc.

The very government itself has the power and opportunity to induce its constituency, by promises of largesse, to believe that the government can exclusively make the citizens better off through receiving favors, grants, and subsidies from it. Those promises are based on a delusion that the government of the nation envisions, generates, and controls all the wealth of that nation, and has the right to distribute that wealth to whomever is willing to totally acquiesce to the government leaders making those promises. The government does not earn any of the money it promises to give away, but, rather, has to take the money away from individuals who have already earned it. Those promises of favors, grants, and subsidies are a form of buying-off the constituents.

When the government promises to take away from those constituents who have earned wealth in order to redistribute that wealth to those who did not earn the wealth, they are appealing to the selfishness of the recipients who would enjoy receiving largesse gained from the efforts of others rather than from their own efforts. A government or Sovereign may have the power to manipulate a model of redistribution through coercion, but, obviously, all the individuals in the deal do not end up better off. At that point the economic model moves into a model of contraction rather than an economic model of growth and production, and over the long haul it cannot remain sustainable.

As we will see later, the free market system depends on the possibility of voluntary and free political and economic choices within the framework of a fair and just rule of law. Throughout history there have been very, very few occasions where cultures and civilizations have experienced the phenomenon of the combination of political and economic freedom at the same time. Great Britain and the United States experienced that kind of exceptional freedom.

The resulting economic system did allow for the observing of what could happen if that political and economic freedom could come together and function successfully. There had never before been such a model created of economic growth, production, and expansion, and to think that the successful experiment had been realized in such a relatively short amount of time.

The exceptional results of the American experiment are largely due to the thinking and writing of several men of common ancestry divided by a large body of water called the Atlantic. They were able to compress, condense, and consolidate the dreams and the desires of the millions of people throughout the centuries who had longed for the opportunity to experience economic and political freedom.

In America, Thomas Jefferson was writing about a new nation that would be the first in history established on the principle that every person is entitled to pursue his or her own values. On the other side of the ocean, Adam Smith was writing about the possibilities of a free market where individuals could pursue their own objectives of voluntary transactions. Both believed that the role of the government should be that of an umpire and not a participant. Each believed that the pursuits of one’s own values and interests were not necessarily greedy or selfish, but necessary for everyone to end up better off.

Those men of creative vision believed that an entire group of people could move forward and achieve the goal of personal as well as national wealth. It was possible to pursue self-interest without being selfish or greedy, and the end result would be a unique model where everybody ended up better off.

 Next Week: Essentials of Free Market
            (Research Ideas from Dr. Jackson's writing project on Cultural Economics)

© Dr. James W. Jackson   

Permissions granted by Winston-Crown Publishing House

  

www.jameswjackson.com  

 Dr. James W. Jackson often describes himself as "The Happiest Man in the World." A successful businessman, award-winning author and humanitarian, Jackson is also a renowned Cultural Economist and international consultant, helping organizations and governments to apply sound economic principals to the transformation of culture so that everyone is "better off."

As the founder of Project C.U.R.E., Dr. Jackson traveled to more than one hundred fifty countries assessing healthcare facilities, meeting with government leaders and "delivering health and hope" in the form of medical supplies and equipment to the world's most needy people. Literally thousands of people are alive today as a direct result of the tireless efforts of Project C.U.R.E.'s staff, volunteers and Dr. Jackson. 

To contact Dr. Jackson, or to book him for an interview or speaking engagement: press@winstoncrown.com

SYSTEMS MATTER Part 7: SELF- INTEREST

by Dr. James W. Jackson

Founder, Project C.U.R.E.
Author, The Happiest Man in the World: Life Lessons from a Cultural Economist

There are really only two ways of trying to coordinate the activities of the people of this world into systems of culture and economics. First you must sell those people on a delusion and false promise that they will become better off from their buying into your offer to collectively take care of them . . . if they will fully agree to submit to your centralized system of control, even if it includes coercion; or second, by the voluntary cooperation of individuals based on the pursuit of their own self-interest.

One of Adam Smith’s keenest observations reported in his book, An Inquiry into the Nature and Causes of Wealth of Nations, is that each nation found by Smith to be wealthy was promoting an economic system that allowed for individuals to have the freedom to make choices that served their self-interests. Interestingly enough, all attempts by those individuals to enhance their own interests were, at the same time, furthering the interests of others.

Smith interpreted this to mean that individual pursuit of self-interest will unintentionally produce collective good for the general society. A system could be successful by combining the freedom of individuals to pursue their own objectives with the intense collaboration and cooperation of others in producing our food, clothing, housing, or any other conceivable need.

Smith’s insight was that both parties agreeing to an exchange can benefit and that, so long as cooperation is strictly voluntary, no exchange will take place unless both parties benefit from the deal . . . everybody has to end up better off! No coercion, no outside force, interference, or violation of freedom should impede the free cooperation of individuals, all of whom can benefit from the transaction. That is why, as Smith put it, an individual entering into a deal with another individual may intend only his own gain, but, at the same time, like an invisible hand, promote an end that was no part of his intention. That end is the simple fact that the other individual in the transaction also ends up better off. As Adam Smith would say it:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. (1)

I discovered, in my own business dealings in our Jackson Brothers Investments enterprise years ago, that to pursue and conclude a successful business deal it was more advantageous to not address myself to the other person’s humanity or talk to him about my needs or necessities, but to the advantages he would experience should our proposed deal be put together. The deal must be good for both parties or it will not successfully go together and stay together.

If, by some stroke of good fortune, a person could ever discover the depth of this one cultural and economic principle, the fatal flaw of collective, centralized socialism would be exposed and understood. For example, the cultural economic model Marx and Lenin were unwisely espousing was a model of contraction and not one of growth, production, and expansion. It was doomed to fail from the start. Wealth is built on production. Socialistic redistribution is built on contraction.

The redistribution system keeps taking away from the corpus itself, as well as the incentive to replace it and develop new growth. At some point the redistributive model will go bankrupt. Never has it worked over the long haul. If there are human institutions, including revolutions, that can induce individuals to extend themselves for the glory goal first and their self-interest second, such earthly institutions have not yet been found.

In a communal setting, individuals will continue to put effort into the scheme only as long as the hippy endeavor is capable of giving them what they were looking for when they signed up. Individuals continue to make precise calculations of what they feel their physical and mental capital is worth in trade. They cannot be persuaded to make a bad trade over the long haul by promises of some distant reward. They may waste a few years of their life chasing the illusion, but, eventually, they will walk away from the painted hippy bus.

The collective state could not fool the shoe factory workers in Armenia into extending themselves, even though their comrade overseers fed them the deceptive hope that if they kept working with all their might, things would get better. The workers indicated to me that the most common greeting to one another as they arrived for work at the big warehouse each morning was, “As long as the comrades pretend they are paying us a decent wage, we will pretend that we are working a decent shift.”

After a certain point, workers do not intend to work harder in order that everyone else will obtain a little bit more; because that usually means that they have to give up things like leisure. That reticence is especially true where a significant part of the whole group has no intention of working harder, but still expects to receive more.

In a model based on growth and production the worker can pursue that self-interest goal by discovering and choosing an innovative way to work less but more efficiently. Suddenly some new invention or method is hatched and the same effort is put forth, but the level of production is increased. There is no such option available in the contraction or redistribution model of Marx and Lenin. People under such a system have no incentive to work harder or be more innovative because they cannot keep the fruits of their labors for themselves. Productivity inevitably falls.

In a very real sense, what my new friends in Armenia had found out was that they were being offered less for working more. It came as no surprise that continually less was being produced for the system as a whole. And even if the army boots were produced and shipped nobody could wear them. The goods did not satisfactorily meet the demand of the redistributive system. Therefore, the economic system continued to contract and did not grow. The wealth of the nation decreased.

When designing a nation’s economic and cultural system that does not allow for individuals to pursue self- interest, the leaders always eventually come to the same conclusion as did Marx, The class struggle necessarily leads to the dictatorship of the proletariat. In common language that means that more rules are imposed. More individual freedom is taken away. At the end of every violated rule is ultimately a gun.

Eventually, all the promises of the revolution run dry, the people realize that the redistributive system has gone bankrupt, and there is no such thing as free. When that happens, and there are no material rewards as incentives to expand output, the leaders must always resort to coercion, force, and punishment. The workers must then make uneconomic trades of their labors.

In the old Soviet Union, for example, the most severe penalties were reserved for economic crimes. Those crimes could even be as simple as bartering with your neighbor some eggs you saved out of your chicken project in exchange for a bit of coal he had not yet burned that winter. Those infractions were deemed as draining the productive effort from the official economy.

In 1961 the death penalty was reinstated for economic crimes, and even in 1966 it was reported that one fourth of all crimes in the Soviet Union involved misappropriations of state property. (2) It was state property because everything was state property. Those trades for the workers’ labors did not conform to the imposed ideology.

There is a positive correlation between economic freedom and prosperity. The genius of the free market concept is that it does not try to coerce or compel the individuals to work. Instead, leaves the individuals free to choose to work and it rewards their work by letting those individuals keep the fruits of their labor. Back in 1776, Adam Smith reported it this way:

That security which the laws in Great Britain give to every man that he shall enjoy the fruits of his own labour, is alone sufficient to make any country flourish . . . The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance . . . capable of carrying on the society to wealth and prosperity.(3)

Indeed, systems matter!

Next Week: Self-Interest vs. Selfishness

            (Research ideas from Dr. Jackson’s new writing project on Cultural Economics)

© Dr. James W. Jackson   

Permissions granted by Winston-Crown Publishing House

  

www.jameswjackson.com 
 

Dr. James W. Jackson often describes himself as "The Happiest Man in the World." A successful businessman, award-winning author and humanitarian, Jackson is also a renowned Cultural Economist and international consultant, helping organizations and governments to apply sound economic principals to the transformation of culture so that everyone is "better off."

As the founder of Project C.U.R.E., Dr. Jackson traveled to more than one hundred fifty countries assessing healthcare facilities, meeting with government leaders and "delivering health and hope" in the form of medical supplies and equipment to the world's most needy people. Literally thousands of people are alive today as a direct result of the tireless efforts of Project C.U.R.E.'s staff, volunteers and Dr. Jackson. 

To contact Dr. Jackson, or to book him for an interview or speaking engagement: press@winstoncrown.com

Better Off

by Dr. James W. Jackson
Founder, Project C.U.R.E.
Author, The Happiest Man in the World: Life Lessons from a Cultural Economist

I think it’s time that someone should bring to the discussion table the difference between the concept of “greed” and the idea of the pursuit of someone’s “best interest.” The two concepts are not the same. However, the intent to confuse the two has some ideological appeal and, as usual, time aids in the erosion of many traditional words and concepts.

Historically, greed has been considered as one of the “Seven Deadly Sins.” It is a sin of excess and inappropriate expectation . . . the “me first – regardless of cost or consequences.” Greed is not always easily identifiable in the beginning, and that makes it confusing. But, be assured that sooner or later, harbored greed will surface into observable behavior. Another thing I have noticed is that greed delivers a different result than what was anticipated in the beginning, and sad and terrible consequences of greed may take a long time to surface.

Pursuing one’s best self- interest, however, is not necessarily greed or selfishness. It has to do with appropriate expectations and comes along as a necessary component in the “free choice” package. When you are given daily alternatives it is the expected behavior to choose that which is highest, best and most fulfilling. Of course people pursue their own self- interests, thus the beauty of individuality and divergent creativity. Pursuit of their own self- interests includes seeing their families become “better off.” Pursuit of their own self- interests includes their concerns for their friends and neighbors being “better off,” as well as the entire citizenry of their communities.

I am a businessman and an economist . . . a compassionately involved cultural economist, dedicated to helping other individuals in the wholesome fulfillment of their self- interests.

I often tell people that “I have decided to give the best of my life for the rest of my life helping other people be better off.” So, what on earth does that mean? Albert Schweitzer acknowledged, “I don’t know what your destiny will be, but one thing I do know: the only ones among you who will be really happy are those who have sought and found how to serve.” Serving other people includes the concept of helping them become “better off.”

Lately, I am running into more articles and interviews where I hear frustrated folks bashing the concept of anyone advancing or moving ahead in their circumstances, saying, “They are getting more education and trying to acquire more skills just because they want more of the pie, and I get less of the pie as a result. They are just greedy, and it’s not fair,” . . . or . . . “The earth is sufficient to meet every man’s need . . . if only those profit people would just stop their greed.”

I have two dear friends, husband and wife, each is a talented medical doctor. They are highly motivated, full of energy, and are Nigerian. Their burning passion was to build a 50 bed hospital in Port Harcourt, Nigeria with a fine radiology department, laboratory and well- equipped operating room. Impossible!

Dr. I.C. Ekwem and Dr. Linda Ekwem heard about Project C.U.R.E.’s work in Nigeria. They pursued me aggressively and even secured the money, purchased airline tickets, came to Colorado, and stayed at our home in Evergreen. They shared their dream and passion with Anna Marie and me. They showed us what they had already done to accomplish their dream. I really wanted to help them become “better off,” so we helped them finish and furnish their dream hospital. Today, the Ebony Hospital stands as a miracle near the shores of the Gulf of Guinea and the Atlantic Ocean in Port Harcourt, Nigeria.

The doctors Ekwem were aggressive, passionate, and persistent in pursuit of their self- interests. They wanted to see their hospital become a reality. Today, they are “better off,” and hundreds of patients are alive and not dead, and thousands more are healthier . . . all are “better off.” But I implore the cultural levelers to never bash my friends as “greedy” and assign them to their contrived category of “selfish.” Acting in one’s self- interest is not the same as being selfish. Making good choices that serve one’s best interest is different than greed.

Dr. James W. Jackson often describes himself as "The Happiest Man in the World." A successful businessman, award-winning author and humanitarian, Jackson is also a renowned Cultural Economist and international consultant, helping organizations and governments to apply sound economic principals to the transformation of culture so that everyone is "better off."

As the founder of Project C.U.R.E., Dr. Jackson traveled to more than one hundred fifty countries assessing healthcare facilities, meeting with government leaders and "delivering health and hope" in the form of medical supplies and equipment to the world's most needy people. Literally thousands of people are alive today as a direct result of the tireless efforts of Project C.U.R.E.'s staff, volunteers and Dr. Jackson.

To contact Dr. Jackson, or to book him for an interview or speaking engagement: press@winstoncrown.com