TGIF: Benevolent Self-Interest

The most famous sentence in Adam Smith's 1776 treatise, An Inquiry into the Nature and Causes of the Wealth of Nations, appears in Book I, Chapter 2:

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.

It's a beautifully written sentence (except that he should have twice written "his" instead of "their"). He might have written, "It is not from the benevolence of producers that we expect consumer goods, but from their attending to their businesses." Ho hum. Who would have remembered it?

More importantly, however, Smith's sentence pointed to a core truth of full liberalism, or what he called the "obvious and simple system of natural liberty": namely, you cannot properly own other people and should not act as if you do. That's the pro-freedom, anti-slavery premise, written about 30 years before Great Britain would begin to stop the slave trade between African chieftains and Europeans, among others. Let's never forget that while the West did not invent slavery (far from it), the West, uniquely, did invent anti-slavery both in theory and practice. The first anti-slavery organization was founded by Quakers in 1774-75 in Philadelphia, my hometown. English Quakers followed in 1787. No known anti-slavery societies in Africa, Arabia, or Asia have come to our attention.

In his sentence Smith was saying that if you want someone (other than, say, a loved one or friend) to do something for you, you offer money or some product he wants in return. You transact business. The person behind the counter does not exist for your sake, and you should not expect him to work long hours out of duty. He has a life precious to him and need not justify his existence. He is an end in himself, as John Locke had written in the previous century. (Yes, Kant said it too, but for him it was not connected to the pursuit of happiness.)

Smith continued:

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....

Here I differ with Smith. Self-love, that is, concern with one's interests, is part of our humanity. No conflict exists between making the most of the one life one lives and goodwill toward others. We are engaged in a common challenge—living—and empathy naturally flows from that fact. It is a pernicious doctrine, indeed, that holds otherwise. Clearly, a merchant or manufacturer prospers by attending to his customers' preferences. Real liberals have always emphasized the fundamental harmony of interests in the market. The great libertarian journalist John Stossel calls this the "double thank you" that consummates transactions.

I suspect that the word selfish acquired its unfortunate and exclusively negative sense as a consequence—emanating from Jerusalem, not Athens—of a hidden agenda aimed at acquiring power. Smith regretted that moral philosophy had become detached from the Greek notion of the pursuit of happiness. The Wealth of Nations (Book 5, Chapter 1, Part III) includes this passage:

Ancient moral philosophy proposed to investigate wherein consisted the happiness and perfection of a man, considered not only as an individual, but as the member of a family, or a state, and of the great society of mankind. In that philosophy, the duties of human life were treated of as subservient to the happiness and perfection of human life. But, when moral as well as natural philosophy came to be taught only as subservient to theology, the duties of human life were treated of as chiefly subservient to the happiness of a life to come. In the ancient philosophy, the perfection of virtue was represented as necessarily productive to the person who possessed it, of the most perfect happiness in this life. In the modern philosophy, it was frequently represented as almost always inconsistent with any degree of happiness in this life, and heaven was to be earned by penance and mortification, not by the liberal, generous, and spirited conduct of a man.... By far the most important of all the different branches of philosophy became in this manner by far the most corrupted. [Emphasis added.]

He must have had a premonition about Kant, who developed his duty-based moral theory in the following decades. How Smith's passage relates to his first book, The Theory of Moral Sentiments, I will leave to others. We don't need to explain empathy in terms of sentiment or impartiality. Rational self-interest will get us where we want to go.

Continuing with Smith's point about market transactions (Book IV, Chapter 2):

But it is only for the sake of profit that any man employs a capital in the support of industry; and he will always, therefore, endeavour to employ it in the support of that industry of which the produce is likely to be of the greatest value, or to exchange for the greatest quantity either of money or of other goods.... [E]very individual ... intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

Then Smith goes a step further:

Nor is it always the worse for the society that it was no part of [his intention]. 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.

People who dislike market-oriented society seem to despise what Smith celebrated. "It's not enough to provide wanted goods and services to strangers," they'd say, "You should do it because you love them." Profit is seen as a spoiler. In this view, the profit seeker lacks moral worth because he benefits from serving customers. However, that's a feature, not a bug: in the broader context, the pursuit of self-interest in a free society ultimately benefits us all.

Abolish the Corporation Tax and All Other Taxes on Investment

Corporate taxes and other taxes on investment constitute double and sometimes triple taxation. That's more unjust than taxation of labor or consumption. Businesses can't pay taxes; only people can. But who pays business taxes need bear no relation to whom the lawmakers targeted. The corporate tax has been known to reduce wages and dividends (to retirees of moderate wealth) and indirectly to increase prices to consumers. How's that help anyone? Capital accumulation is what raises labor productivity and wages. Thus, taxes on capital steal from workers, among others. As economist Roy Cordato writes:

Corporate taxes are hidden and fraudulent. The people who pay them do not know they pay them, and thus such taxes help mask the actual cost of government. If it is true that companies are finding ways to avoid these taxes and less revenue is being generated, then we should cheer those companies on. Ultimately corporate taxes should be abolished. Lovers of big government have no better friend than a tax that everyone thinks someone else pays.

Latest Interview

Michael Liebowitz and I had a conversation recently on his podcast, The Rational Egoist. Enjoy!

TGIF: Envy, Ignorance, Barbarism Triumph in New York

Democratic socialist Zohran Mamdani's mayoral victory in New York City is a triumph of moral barbarism, economic illiteracy, illogic, and just plain envy. Mamdani's campaign had a double pitch: billionaires should not exist, and "the people" deserve free stuff.

At first I thought his supporters did not understand the old free-market meme, TANSTAAFL: There Ain't No Such Thing As A Free Lunch. Nature provides only raw materials, which are useless in their original state. Ingenuity turns them into resources. But then I realized that while Mamdani used the word free, he also said he would get the money for the free stuff by further taxing the rich. The people who voted for him heard that, so they couldn't have thought that bus rides, daycare, and whatever else he has plans for would really be free—just free to them.

The demand that other people should pay—whether they want to or not, under threat of imprisonment—for what you want is monstrous on many levels. The economic harm from the variants of this demand has been documented theoretically and empirically many times over many years. You can look it up. Begin with Henry Hazlitt's Economics in One Lesson. Then read up on the Soviet Union, pre-1979 China, pre-1991 India, Cambodia, North Korea, Cuba, or Venezuela.

Like the laws of physics, the laws of human action (economics) cannot be repealed; if they are ignored, the consequences are catastrophic, especially for the most vulnerable, who are the ostensibly intended beneficiaries of giveaways. When bus rides are free, how long will it be before civilized people find them unusable? When rents are frozen, which Mamdani's supporters robotically demand, how long before apartments deteriorate even further or are taken off the market?

When the state forces other people to pay for what you want, that's slavery. Mamdani and his ilk insist on the right to medical care, housing, education, "affordable" groceries, etc. But how can such rights exist? Each of those services must be provided by individuals. Don't they have the right to life, liberty, property, and the pursuit of happiness? If A has a right to B's labor or the fruits thereof, then B must be A's slave. I thought good people were against slavery. Did I miss the memo?

Ayn Rand taught us that people's extraordinary achievements and resulting financial success do not justify declaring open season on them. They have the same rights as those who achieve less or nothing at all. Treating them as sacrificial animals is unjust (and self-defeating). Great producers of wealth have no duty to serve those who produce little or nothing, just as no one has a duty to serve the great producers. Each life is an end in itself requiring no justification. Respecting all people's rights, that is, living by reason not force, is constitutive of the self-interested life. (Selfishness, as most people use that word, is actually myopia, that is, under-concern, not over-concern, with self.) The code of self-sacrifice, as Rand pointed out, is incoherent because if applied universally, no one would be entitled to receive the booty. In practice, when someone preaches self-sacrifice, she said, someone is planning on collecting the sacrifices..

The oppressive bigotry against the "rich" is unseemly because it is a resentment of achievement in itself. The exploitation claim is long-demolished nonsense. (Making a fortune off the taxpayers is another kettle of fish.) Moreover, it ought to be obvious that punishing people for their success will discourage the thought and effort that make success possible. Incentives matter. Considering that innovators earn only a small fraction of the value that they make possible for others, how does punishing success help the people Mamdani says he cares about? Thanks to innovators—in the technological and management senses—the "poorest" Americans are actually among the richest people who ever walked the earth. Extreme poverty has been plummeting for decades. The rest of the world has been catching up with the bourgeois West thanks to technology, increasing liberty, and global trade. What has Mamdani and the Democratic Socialists of America done to benefit anyone?

A final word about that qualifier democratic in "democratic socialism." It is meant to dupe the naive; that is, it is intended to dissociate socialism from the Marx-inspired tyrannies that produced a hundred million corpses beginning in 1917. Communist East Germany was officially the German Democratic Republic, just as communist North Korea is the Democratic Republic of Korea.

That this PR trick fools anyone anymore is hard to believe. Even if elections were held under socialism, how would that change it into something benign? Democratic or not, socialism is government planning of people's lives, in contrast to capitalism—the competitive market economy in which people make their own plans and peacefully coordinate with others through the price system and mutually beneficial free exchange. Periodically casting one vote among many for those who will formulate and carry out the plan would not fix what's wrong with socialism. Even under majority rule, the minority must obey or starve, as the nice Bolshevik Trotsky so charmingly put it. Any individual is a potential threat to the plan and therefore must not be tolerated. Central planning and social cooperation through individual freedom cannot coexist.

Either Mamdani does not know this or he won't acknowledge it. That destroys his claim to care about people. For him, the people are mere stage props (as are the Palestinians). His ideology would oppress them. Despite the democratic sales pitch, this child of the elite aspires to implement the most elitist of oppressive systems. Fanatic or grifter? You decide.

 

TGIF: Separating Powers

We may be sure that the "separation of powers" doctrine is of no interest to the vulgar egotist currently residing in the White House, which happens to be undergoing the most glorious renovation the world has ever known. Or so we hear. But it stands to reason that the doctrine is vital to personal liberty. No imagination is needed to understand what concentrated political power is likely to mean for the individual and society.

The name most closely associated with the separation of powers is Charles Louis de Secondat, baron de La Brède et de Montesquieu (1689-1755), a judge, philosopher, and historian whose 1748 book, The Spirit of Law, sometimes called The Spirit of the Law[s], heavily influenced the founders of the United States and the framers of the U.S. Constitution. Living in a censorial regime, Montesquieu originally published the work anonymously.

I won't attempt to divine what Montesquieu really thought about the doctrine. A glance indicates that this is no simple matter, as indicated by his several seemingly conflicting statements and competing scholarly interpretations. I will only venture to say that the doctrine is essential to limiting government, if government we must have. (I'm not convinced.) Any principle or taboo that would inhibit the growth of the state and leave room for individual freedom is to be desired. As Thomas Jefferson wrote, "The natural progress of things is for liberty to yeild [sic], and government to gain ground." Thus, he also said, the proper attitude toward government is not confidence but vigilance.

At any rate, it doesn't really matter how committed Montesquieu was to the doctrine. We can make up our own minds. Quoting Montesquieu on behalf of the doctrine should be useful to liberty-minded people. So let's do it. The passage is from Chapter VI: Of the Constitution of England. Montesquieu wrote:

The political liberty of the subject is a tranquillity of mind arising from the opinion each person has of his safety. In order to have this liberty, it is requisite the government be so constituted as one man need not be afraid of another.

When the legislative and executive powers are united in the same person, or in the same body of magistrates, there can be no liberty; because apprehensions may arise, lest the same monarch or senate should enact tyrannical laws, to execute them in a tyrannical manner.

Again, there is no liberty if the judiciary power be not separated from the legislative and executive. Were it joined with the legislative, the life and liberty of the subject would be exposed to arbitrary controul; for the judge would be then the legislator. Were it joined to the executive power, the judge might behave with violence and oppression.

There would be an end of every thing, were the same man, or the same body, whether of the nobles or of the people, to exercise those three powers, that of enacting laws, that of executing the public resolutions, and of trying the causes of individuals....

Here, then, is the fundamental constitution of the government we are treating of. The legislative body being composed of two parts, they check one another by the mutual privilege of rejecting. They are both restrained by the executive power, as the executive is by the legislative.

To say the least, this is out of step with today's chief executive, who presses for autocratic power on virtually every front—from redesigning the White House to "emergency" tariffs to detention and deportation without due process to extrajudicial murder on the high seas and in Somalia. His attempt to control speech and generally dictate the terms of our economic relations betrays a failure to appreciate an even more important separation: of the government and our private lives. He didn't begin the erosion of those separations; that happened long ago. But he certainly has accelerated it.

If political power must exist, it must be contained, and the way to do that is dispersion among branches and levels. To be sure, the separation of powers and the related checks and balances could impede efforts to roll back power, but preventing new expansions of power seems the higher priority now. No one said that establishing full liberty would be easy.

Mr. Trump no doubt regards the separation-of-powers doctrine as a mere petty annoyance, something his enemies only recently concocted to thwart his grand ambition to be adored a thousand years from now. With barely any exception, the legislative branch of the central government has had no stomach to challenge him. Fortunately, some courts have pushed back. How The Maestro takes a major setback at the Supreme Court, if one should occur, will be instructive.

TGIF: The Libertarian Apostle of Peace

With Donald Trump furiously, ineptly, and fraudulently campaigning for the Nobel Peace Prize, it may interest liberals—the classical variety, libertarians—to know that the first Nobel Peace Prize, awarded in 1901, was shared by one of their own. This was a man who espoused the same political-economic philosophy as his fellow Frenchman Frédéric Bastiat and Englishman Richard Cobden. Its pillars were freedom, unrestricted trade, and peace.

That man was Frédéric Passy (1822-1912). Passy shared the prize with Henry Dunant, founder of the International Committee of the Red Cross and originator of the Geneva Convention. That was no small honor. Passy was cited “for his lifelong work for international peace conferences, diplomacy and arbitration."

According to the Nobel Foundation’s website:

 In both age and prominence, he was the dean of the international peace movement. Both as an economist and as a politician, he maintained that free trade between independent nations promoted peace. Passy founded the first French Peace Society, which held a congress in Paris during the 1878 World Exhibition. As an independent leftist republican in the French Chamber of Deputies, he opposed France's colonial policy because it did not accord with the ideals of free trade.

Passy was also one of the founders of the Inter-Parliamentary Union, an organization for cooperation between the elected representatives of different countries. Despite his age, Passy kept up his work for peace after 1901.

Don't let the word leftist in the first paragraph throw you. Since the French Revolution, members of the national legislature who opposed the monarchical ancien regime sat on the left side of the chamber; defenders sat on the right. Thus the "left' included socialists like Proudhon and individualist free-market radicals like Bastiat. It was a historical quirk.

Passy's more in-depth biography at the Nobel site states:

An admirer of Richard Cobden, he became an ardent free trader, believing that free trade would draw nations together as partners in a common enterprise, result in disarmament, and lead to the abandonment of war. Passy lectured on economic subjects in virtually every city and university of any consequence in France and continued a stream of publications on economic subjects.

If Trump wants the prize badly enough, maybe he should embrace free trade. The free-trade movement routinely linked peace, liberty (including property), and unrestricted global commerce as an integrated program. "If goods don't cross borders, soldiers will," a liberal once said. The connection should require no explanation. Cobden, who with John Bright brought an end to Britain's hunger-imposing grain tariffs, eloquently pointed out that trade and violence were opposites.

The Nobel biographical essay notes that, like Cobden, Passy worked to substitute arbitration for war and old-fashioned balance-of-power diplomacy. In those days, that was a standard liberal principle. As a member of France's Chamber of Deputies from 1881-89, he staunchly opposed colonization.

Passy was also a friend of the Belgian libertarian economist Gustave de Molinari (1819-1912), author of "The Production of Security" (1849), apparently the first explicitly anarchocapitalist essay, which applied competitive market principles to rights protection. In 1904 Passy wrote a prefatory letter to the English edition of Molinari’s book The Society of the Future (sometimes translated as The Society of To-morrow, first published in French in 1899). Passy praised Molinari as

the doyen of our economists—I should say of our liberal economists—of the men with whom, though, alas! few in number, I have been happy to stand side by side during more than half a century. Their principles were proclaimed and defended in England through the mouths of Adam Smith, Fox, Cobden, Gladstone, and Bright. In France they were championed by Quesnay, Turgot, Say, Michel Chevalier, Laboulaye, and Bastiat. And my belief grows yearly stronger that, but for these principles, the societies of the present would be without wealth, peace, material greatness, or moral dignity.

The Nobel website essay concludes:

Passy’s thought and action had unity. International peace was the goal, arbitration of disputes in international politics and free trade in goods the means, the national units making up the Interparliamentary Union the initiating agents, the people the sovereign constituency. Through his prodigious labors over a period of half a century in the peace movement, Passy became known as the apostle of peace.

Freedom's advocates should rejoice at Monsieur Passy's deserved recognition as a leading peace-mongering free-trader.

TGIF: The Absurdity of Democracy

If the continuing incompetence of Congress over passing a budget and reopening the U.S. government doesn't show the absurdity of unlimited representative republicanism, what could do so? Whether or not to extend COVID-era special subsidies for medical insurance appears to be the main issue, but other issues are undoubtedly involved. If it isn't one thing, it's another. That's politics.

The problem is that the government has its hands in everything. That means a constituency exists for each thing the government does. If you want to upset and mobilize a group of people, call for an end to some privilege or restriction, which must come at the expense of the freedom and wealth of everyone but the favored beneficiaries. That's how "democratic" government works, after all. This sets off a mad quest for favor, which some contenders will be more capable of securing than others. Don't fall for the canard that the bureaucrats and politicians rationally produce useful things. If something looks, quacks, and waddles like a canard, you can be sure it's a canard. "Who rules" is a secondary question. The first should be: what are the rules?

Rejecting democracy—representative republicanism, more precisely—does not entail accepting authoritarianism in any form. Quite the contrary. It entails full acceptance of the protection of individual liberty and property rights—the rights to life, liberty, and the pursuit of happiness, as Thomas Jefferson, inspired by John Locke, put it in the Declaration of Independence. If we cannot have market-ordered, individualist, anarchism, then at least let's keep the government strictly limited to barring physical force. If it ventures beyond that boundary, it sets off a civil war over the people's private wealth and liberty. If you seek the consequences, look around. They are blindingly evident.

As Adam Smith wrote in The Wealth of Nations:

All systems either of preference or of restraint, therefore, being thus completely taken away, 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 of 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.

But isn't pervasive government necessary to engineer a decent society? No, it is not. Thomas Paine, no anarchist he, understood this. As he wrote in The Rights of Man:

Great part of that order which reigns among mankind is not the effect of government. It has its origin in the principles of society and the natural constitution of man. It existed prior to government, and would exist if the formality of government was abolished. The mutual dependence and reciprocal interest which man has upon man, and all the parts of civilised community upon each other, create that great chain of connection which holds it together.