Tuesday, August 30, 2011

A different take on Adam Smith

This morning I was rewatching a Milton Friedman clip from one of his appearances on Phil Donahue's show when I realized I had been interpreting a famous Adam Smith quote incorrectly - or at least differently from Friedman's interpretation.

Smith said in Book IV, Chapter 2 of The Wealth of Nations:

By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.
Book IV
I added my own emphasis to the key word.

I have always taken this as Smith saying that he's never seen much good happen as a result of people who made their personal business and consumer decisions with the intention of helping overall society instead of themselves.

Examples include the well-intentioned "Buy Local" movement, fair trade companies and the buy black campaign. In all these cases, noble consumers make personal sacrifices in hopes of making the world a better place, but these schemes fail to return any positive results.

I have one caveat - if I believed there was a large problem with inhumane working conditions that could be solved by boycotting those companies, such as actual slave labor, than I would support such a boycott. As it stands, I don't. However, that is a little different in avoiding contributing to harm instead of promoting good. It's subtle, but it's there.

But what Friedman said Smith meant was something different - when merchants claim they are doing something for the good of the public at large, they are really bootleggers hiding behind Baptists.

Merchants aren't above making claims that shopping at their store will benefit other people when their real goal is to increase their own profits. Friedman is saying that not much good is done when people claim they are acting in the public interest. The "Buy Local" movement is actually a great advertising scheme for merchants, as they can still attract customers with higher prices or smaller selections. I completely understand why they'd jump on this bandwagon.

But as Friedman would say, the rest of us our fools to take their word for it.

Whatever Smith meant, both interpretations hold a lot of truth.

1 comment:

  1. I've had (roughly) your take on it, but I've seen that clip also.