Why we do what we do

June 27, 2008

I lifted this from an econblog I frequent at Marginal Revolution.  It’s a nice piece of work from Adam Smith and I wanted to collect it to remind  me  why capitalism works so well to improve the standard of living for the masses, far better than most people realize.  This is from Smith’s Wealth of Nations, Book 1, Chapter 2. 

But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. 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. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens. Even a beggar does not depend upon it entirely.

Though I’m not sure what to make of the last two sentences.  I don’t believe people give money to beggars out of benevolence.  I think givers get something from giving that appeals to their own self-love.  Perhaps a good feeling they helped someone in need or an ease to the discomfort they get from the sad stare of the unfortuanate person on the receiving end. 

Addendum:  I actually lifted this from Cafe Hayek, not Marginal Revolution.

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3 Responses to “Why we do what we do”

  1. Adam_Y Says:

    I’m with you on the donating money to charity front… it can’t be altruistic, and that doesn’t mean it’s a bad thing, just that like most interactions it must provide something beneficial to both parties.

    Whether it is an easing of guilt, or a desire to make your own world a little nicer (give money to beggars… then beggars do not require money… then no beggars)…

    As I said, that’s not a bad thing. If altuism was at play then one person would be happy about the transaction. As it is two people are happy about it… bonus.

  2. Seth Says:

    Thanks for the comment Adam. I agree. Bonus. Many people want to believe they give altruistically, which negates the altruism. Like you, I’m not saying it’s bad to give to get a good feeling. What irks me is when someone tries to use their altruistic capital (the reserve they’ve built up from giving) to judge the merit of other mutally agreed upon interactions.

  3. Adam_Y Says:

    That’s a great idea – altruistic capital… I imagine that it is rather linked to the economy too. The credit crunch and a recession always highlight the disparity in altruism… that is if people were truley altruistic the money given to charity wouldn’t drop half as quickly as it does.

    That and the fact that the poorer sections of society (in the UK at least) tend to give a disproportianate amount charity. That’s mostly because they see the benefit and that they can empathise, whilst to the slightly better off poverty and disadvantage are somewhat abstract.


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