Monday, March 12, 2007

Once More on Butchers, Brewers, and Bakers

Once a false notion is loose in the world it spreads like a yawn among all who hear it and pass it on. And nothing is more subject to fallacious treatment that that most famous passage from Wealth Of Nations (WN I.ii.2: pp 26-7) about the ‘butcher, brewer, and baker’. I’ve certainly dealt with it many times on Lost Legacy (yesterday too, I believe).

Here’s the latest sample:

The first of these self-interested Republicans was probably Adam Smith who published his capitalist bible "The Wealth of Nations" in 1776 just in time to see it incorporated into the new American Constitution which then proved to be the foundation of freedom and prosperity on earth. But, in perhaps one of the most unfortunate public relations omissions in human intellectual history Smith wrote "It is not from the benevolence of butchers, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but to their self love." So there it is, regardless of the results of Adam Smith's capitalism, whether seen in the comparison between North and South Korea, USA and USSR/Communist China, East and West Germany, East and West Berlin, Cuba and Florida, or Nogales, AZ and Nogales, Mexico, capitalism was created for the "self-love" or the "interest" of the capitalist and so it is no damn good despite the supernatural results.”

The source this time is something calling itself “The American Daily (analysis with political commentary)”, 12 March, from Phoenix, AZ., a fairly trenchant political sheet from the wilder fringes of politics that pulls no punches in the knockabout world of partisan posturing. Its opening reference is to ‘the half insane, buffoon dictator from Venezuela, Hugo Chavez’, who most certainly is on his way to becoming a dictator, but while correctly described as such I don’t think he is ‘half insane’ or a ‘buffoon’. Dangerous yes; but he is so because he is sane and serious.

The author, Ted Baiamonte, titles his piece, ‘ “Socialism is Love” – Hugo Chavez’ and asserts, implausibly, that US Democrats “would love to do the same things here if only they could get rid of the mean, loveless, self-interested Republicans”, as hyperbolic a treatment of hyperbole as you’ll ever find. On these grounds, some readers wonder why I bother responding to the likely nonsense one can expect from such sources about Adam Smith. Surely, I am assured by correspondents on occasion, we should concentrate on expressions of view from worthy sources among scholars and should leave the tittle tattle of ignorance to fester in the darker corners it inhabits.

Yet, exactly that same passage from Smith is quoted by scholars of the most serious kind with similar conclusions about what he meant displayed in their most serious texts. Why should we discriminate against ignorance from whatever source it emanates? Moreover, the likes of the ignorant quoted above, get their misplaced ideas from somewhere (a half-remembered lecture in Economics 101 or something a Nobel scholar wrote in an Op-Ed?).

How scholars treat the ideas of Adam Smith (or any other contributor to economics) has consequences in the ‘trickle-down’ effect (to quote a phrase) they have when they hit bottom.

Smith is dealing with that most important human activity he called ‘bargaining’ and was dealing with the apparent enigma that two parties, the buyer and the seller, were self-interested sentient beings. The nature of the bargain was that the negotiators are saying in effect: ‘Give me that which I want, and you shall have this which you want’. But, and this was noted by Smith, how do they move to a bargain if they are both self-interested, and each insists on having his self-interests met in full? Most readers of this paragraph in Wealth Of Nations don’t pause long enough to answer the question. They plough on, disregarding their experiences of conducting similar transactions in their everyday lives, and think in terms of somebody winning and somebody losing. Fine, for considering options is a proper approach, but just leaping to the next sentence, reading it too quickly, and we get the usual misreading.

"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. We address ourselves[,] not to their humanity but to their self love [” and never talk to them of our own necessities, but of their advantage."](I have corrected the punctuation and completed the sentence as Smith wrote it).

Please pause here, and read that sentence carefully. Smith is talking about a person who is dependent on others (as is the characterisation of all of us in civilised society – the richer we become the more dependent we are on others, which is the great paradox of opulence), and in our dependence (i.e., the ‘constant occasion for the help of his brethren’) he discusses the how we get that help if benevolence is not sufficient to attaint the constant help we need.

At this point mystics peel off and begin lambasting Smith for decrying the role of benevolence, a monstrous calumny as a reading of Moral Sentiments would show; yet no mystic ever explains how everybody could rely on everybody else’s benevolence to benevolently provide us all with everything we need – where do all these benevolent goods come from? Benevolence is a virtue but our means are miserly and we can only be miserly with our benevolent gifts, which is why ‘nobody but a beggar chuses to depend entirely upon benevolence’ – they just ain’t enough to go round.

So, if benevolence is not an option, except as individual low level gifts (which I believe we should do from common humanity), and rampant self-interest (which is usually elided into ‘selfishness’, or worse, greed) is an obstacle, how do we conclude bargains (of which trillions are concluded every day, if not every hour among six billion of us)?

The solution was given in both Moral Sentiments and Wealth Of Nations (the gist of each were taught at the same time to the same students in his lectures at Glasgow University between 1751-64). In Moral Sentiments our behaviour is mediated by the presence of the impartial spectator, whose response to our arrogance is to ‘humble’, until we reduce our heated self-concern to the level at which the spectator can accept (see Moral Sentiments, II.ii.2.1: p 83 – passim); in markets our self-interested behaviour is mediated by the need to address the self-interests of the other party, NOT our own! In effect, we are showing the other party how what we want to transact (buy our dinner) serves the butcher’s, brewer’s, and baker’s interests (it’s how they get the wherewithal to buy from others what they want), and we ‘NEVER’ talk about how getting ingredients for our dinner ‘advantages’ our self.

Thus, exchange is about addressing the interests of others in order to serve our own interests (eating dinner). Markets are not based on greed; that is absolutely incorrect; if they were people would avoid them. In market societies we have a choice: we may veto any proposed transaction and seek an alternative. That is why markets and liberty go together. That is why markets become such powerful engines for wealth creation – the annual output of ‘the products of land and labour’.

Now having taken the opportunity to state all this, I hope those doubters can see the point of bothering to reply to the likes of Ted Baiamonte; he may not be a scholar, but he is writing what many scholars agree with, and he has one thing in common with such people; the are wrong for the same reasons as he is, as shown above. And now that you have read why they are wrong, you should not make the same mistake as those who read Adam Smith too quickly.

[Read Ted's article at: http://www.americandaily.com/article/17955]

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