There is a well-known passage in Adam Smith’s Wealth of Nations (book I, chapter 2) that runs thus:
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 advantages.
Although Adam Smith sometimes displays more knowledge both of human nature and of how an economy actually operates than do today’s supporters of a free market, nevertheless, it would appear that this passage can reasonably be regarded as nothing more than a simple affirmation of basic self-interest, self-interest which is held to be the proper and only effective motive for economic activity. But let us look at this statement both in light of its application to the individual tradesman or craftsman—the butcher, the brewer the baker—and as applied to the economy and society as a whole.
When we look at the individual craftsman or merchant about whose motives Adam Smith’s speaks with such confidence, we might raise two questions. The first concerns the “self-love” and “advantages” which are alleged to be the sole motive of these tradesmen. For self-love, or self-interest, is susceptible of two meanings. By the first is meant an ordered and proper regard for oneself, a regard compatible indeed with love of neighbor and even sanctity. But by the second is meant a self-interest which is disordered in that it has no care for the needs of others and seeks its own desires exclusively. If it happens also to benefit another, this is neither here nor there. This second type is one of the effects of the sin of our first parents, one of the results of original sin. Since Smith contrasts self-interest with both “benevolence” and “humanity” it is reasonable to think that he is speaking of the second, of the disordered kind of self-love.
Supporters of the kind of economics that stems from the tradition of Adam Smith generally take as one of their fundamental points that this second type of self-interest is wonderfully fitted to supply the needs of society. The butcher wants money, we want meat, the exchange is perfect. Christian supporters of this type of economics might assert that they do not necessarily praise the butcher’s motives, but that, since they exist and are so ubiquitous, we must acknowledge and make use of them. Otherwise we will attempt to conduct our economy on false principles and end up having to use the heavy and inefficient hand of the state to motivate producers and sellers.
But how curious is this idea! It is certainly odd that Christian defenders of self-interest are quite comfortable with accepting behavior based on man’s sinful tendencies as the foundation for the economy, something they would denounce in any other area of social life. For example, if one were to argue that the abolition of marriage and the free mixing of the sexes was the best way to propagate the human race, since this is based on people’s natural and ineradicable inclinations, this would hardly be acceptable to them, but with scarcely a demur they allow, and often indeed praise, behavior founded on human greed as the best way to run an economy, and this despite the fact that Sacred Scripture and the entire tradition of the Church condemn the motive of greed at least as strongly as the motive of lust.
Secondly, if we look more closely at Smith’s assertion, is he in fact correct in thinking that the butcher or brewer is motivated solely by self-regard of the second sort discussed above? It is true that we expect a natural desire on the part of a butcher or a brewer to make a living by his trade, but this natural and proper concern for his own welfare does not necessarily mean that he is motivated solely by self-interest. Every physician expects to make a living by the practice of medicine, but the expectation is that he is as much interested in the welfare of his patients as he is in earning his fees. There is clearly nothing wrong in someone hoping to gain a living for himself and his family by means of his work. Indeed, such an expectation is natural and laudable. But it must be carefully distinguished from behavior based solely upon greed. Most of the time people’s motives will be mixed. Quite often this is not something to cause concern. But what Adam Smith does is to assume that the probably mixed motives of a tradesman, mixed between pure desire for gain, a desire to support his family, a love of his craft, and a desire to serve the public, can be reduced simply to one motive, the pure desire for gain. Not only is this usually false, but by proclaiming that we appeal not to “their humanity but to their self-love,” he helps create a situation in which more and more tradesman will begin to think of themselves, not as entrusted with meeting a public need, but as simply out to make as much for themselves as possible.
There is no essential difference between the provision of health to the community and the provision of meat or beer or bread. In each case the provider offers something necessary for human life and expects to earn a living by what he does. But the cultural expectation is that the physician is motivated by more than mere gain while the butcher and those of like trades are motivated solely or mostly by gain. As I suggested above, this cultural expectation plays some part in creating or fixing motives in the minds of individual economic actors. If a physician feels some shame because his motive is merely gain, in some cases at least he will work to better his motives by trying to incite himself to service to the community as well. And for the butcher, on the other hand, if he is continually told that self-interest is all that society has a right to expect from him, whatever nobler motives he originally had will tend to become buried under a single-minded pursuit of gain. The English economic historian Richard Tawney sums ups this very well in the following passage from his book, The Acquisitive Society.
The idea that there is some mysterious difference between making munitions of war and firing them, between building schools and teaching in them when built, between providing food and providing health, which makes it at once inevitable and laudable that the former should be carried on with a single eye to pecuniary gain, while the latter are conducted by professional men who expect to be paid for service but who neither watch for windfalls nor raise their fees merely because there are more sick to be cured, more children to be taught, or more enemies to be resisted, is an illusion only less astonishing than that the leaders of industry should welcome the insult as an honor and wear their humiliation as a kind of halo. The work of making boots or building a house is in itself no more degrading than that of curing the sick or teaching the ignorant. It is as necessary and therefore as honorable…. It should be at least equally free from the vulgar subordination of moral standards to financial interests.
I realize that a common objection to this is that it is unrealistic, that even if it works to some extent in the case of highly educated physicians, it surely cannot be expected to work in the case of every Tom, Dick or Harry. But while I do not deny that sin and sordid motives will always be present in human society, do we expect people who are told that there are no moral standards which apply to them to behave better than those who are instructed as to their rights and their corresponding duties? Conservatives (in the American sense), who generally champion free-market economics based on self-interest, are usually quite vocal in stressing the need and utility of high moral principles in other areas of life, but when it comes to economics, they seem to regard behavior based solely or mostly upon greed as all that can be expected.
I might note that, at least by Christians, greed is considered as a deadly sin, and that to inculcate the doctrine that one need think only of one’s own needs and desires in his economic activity is to warp and pervert the souls of those who imbibe such ideas, deprive them of the opportunity to develop virtues, and possibly put them on the road to hell. I find it hard to think that any economy which points many of its participants on the way to eternal punishment is a healthy economy, regardless of how much stuff it boasts that it can produce.
Now let us turn our attention from the individual producer, his possible motives and the possible fate of his soul, to look at some of the social effects that follow from Adam Smith’s dictum about the motives of tradesmen.
If we take Adam Smith at his word, that butchers have only in mind their own interest, their own self-love, their own advantages, then why, one must ask, do we expect the public’s need for meat or beer or bread to be well supplied by them? If they really are utterly self-interested, will they not continually seek means by which they may supply the public with inferior products and shoddy goods? Now the defenders of an economy based upon self-interest will reply that this is impossible, at least in the long run, because if producers and sellers attempt this, then the public will not buy from them and others instead will step into their places and make and sell quality goods. This theory works well on paper, and perhaps can be elegantly expressed by means of a graph, but it has little foundation in reality. If it were the case, would we not trust every used car dealer to give us a fair appraisal of the condition of a car, would not sellers of securities never misrepresent the condition of the firm whose securities they offer for sale, would not consumer fraud be as rare as snow in July? It is no accident that caveat emptor, let the buyer beware, is an oft-repeated slogan in the U.S. For if a seller really has only his self-interest at heart, then he will cheat his customers whenever he thinks he can get away with it. That he can convince someone to buy a product is his sole concern. The seller gains by selling his product. If he calculates that the fraud will not be detected or that he will be able to successfully escape responsibility for it, then (in Adam Smith’s view), there is nothing to deter him from cheating people as much as he can.
The incidence of consumer fraud and of shoddy products will vary considerably depending on many factors. That they are not more common is in part a tribute to the fact that, even within the culture of competitive capitalism, many people do rise above Smith’s account of a tradesman and his motivations. But it is also a tribute to government laws enacted against fraud, against selling tainted food, and so on. The fact that industries try to and sometimes succeed in capturing the regulatory process and controlling the agency that is supposed to regulate them is not an argument against regulation. Rather it points up the fact that until a new ethos and a different kind of regulatory process are created, both based upon Catholic social doctrine, capitalism will always exhibit selfish competitive strife as well as increasing efforts to make use of governmental power on behalf of private interests.
Another objection that is raised to what I say here by those who assume that only self-interested conduct can be expected from the generality of mankind, is that although free-market capitalism is not perfect, it is foolish to try to build an economy on the idea of service, since that will necessarily result in a vast increase of state power to supervise people’s conduct. Instead of the effective, if imperfect, device of making use of people’s natural inclinations, we will need an army of bureaucrats and inspectors to micromanage and scrutinize every aspect of the economy and of business behavior. And so, if we allow self-interest to operate as the mainspring of economic activity, we bring about the best situation there could be, with as plentiful a supply of quality goods as we could hope to obtain.
It is certainly true that no system is perfect and that since the Fall of our first parents every institution of mankind is flawed. All we can do is to try to create the best designed institutions that we reasonably can, and try to inculcate virtue in those who are part of them. Therefore, is an economy based mostly or solely on self-interest the best we can hope for? Such an economy, I grant, is better than a pure command economy, one in which officials of the central government determine all important economic decisions. But we are not faced with only these two extremes. There are many ways we can organize an economy. Distributism offers an alternative to all forms of socialism and to self-interested free-market economics as well. Under distributism producers and sellers would not be told that they should look out solely for their own advantages, but they would be encouraged to foster all worthy ideals as motives for their work. Regulation and supervision of the economy, a necessity for the fallen children of Adam, would for the most part be carried out not by government officials but by the guilds (occupational groups) which are an important feature of distributism. Such actions on the part of the guilds would carry the force of law for all engaged in a particular kind of production, just as in medieval Europe the guild regulations could be enforced by municipal officials when necessary. But distributism does not mean a command economy, rather a decentralized economy in which production is adjusted to the reasonable needs of mankind, rather than to whatever a producer can convince people to buy via business propaganda, as Ludwig von Mises called advertising.
Ultimately the butcher, the baker and the candlestick maker will die, and when they do, they will be judged neither on how much money they have made nor on how much they have sold, but whether they have honestly worked at their trade, have offered the public quality goods and have looked upon those with whom they dealt as their brothers. If we think that our economic activity necessarily conflicts with such goals, then we need to reexamine our understanding of the economy.
For here on earth we have no lasting city, and even less no lasting trade or craft or profession, and if by exercising our trade or craft we render ourselves unworthy of eternal life, we have done no favor to ourselves, to the public, or to anyone at all.