Actually, There Are Free Lunches Galore in Healthy Liberal Societies
Generosity and compassion are woven into their social fabric, as Adam Smith well understood
The following is an excerpt from Hinds’ book In Defense of Liberal Democracy: What We Need To Do To Heal a Divided America, published in 2021.
[S]ocieties based on self-interest exclusively cannot develop the capacity to install a social order based on cooperation. They lack the natural restraint that individuals moved by both self-interest and social interest provide to their own societies. Reliance on social values, the willingness to cooperate and establish horizontal relationships, the maintenance of political and economic freedom, and the discipline to respect the rights of your neighbors are manifestations of the same entity: a healthy, mature, creative society.
The Fusion of Self-Interest and Social Interest
One-dimensional economic thinking is common. Even economists interested in institutions can see them one-dimensionally—believing that Alexander Hamilton, Thomas Jefferson, Benjamin Franklin, John Marshall, and others who created democratic institutions and the rule of rights in the United States did so only with their own economic interests in mind. Many economists also believe in the superficial notion that there is no such thing as a free lunch, which ignores the multidimensionality of liberal societies and fails to recognize the true value of social interest.
Economics was not always so superficial. Adam Smith, who is normally considered the intellectual father of modern capitalism, did not believe that there is no such thing as a free lunch. He wrote a book on social interest and thought it his best work. The Theory of Moral Sentiments begins with these words, which introduce Smith’s multidimensional vision of society:
How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.
That is social interest. Furthermore, Adam Smith did not believe in attributing behavior, moral or immoral, to any single drive. He attributed it to the interrelations of various factors, some of them linked to the nature of morality (propriety, prudence, benevolence, and licentiousness) and the rest to the motive of morality (self-love, reason, and sentiment)[. …] [H]e believed that a free will controlled the decisions of human beings.
In their book Humanomics: Moral Sentiments and the Wealth of Nations for the Twenty-First Century, Nobel Prize winner Vernon L. Smith and Bart J. Wilson discuss the role of trust, caring, generosity, and empathy in the normal conduct of the economy and society in general. They note that economic self-interest cannot be the source of the “rules to be followed,” the institutions that frame a liberal society. Instead, they wrote:
Fundamentally, it is the human capacity for sentiment, fellow feeling, and a sense of propriety that is the stuff of which human relationships, and the general rules-to-be-followed, are made.
They follow with a scathing criticism of how modern economics has deviated from the classical thinking of Adam Smith, which included ideas and people in economic analysis:
The new equilibrium concepts were defined too narrowly over outcomes, a substitution that seemed superior in the context of institutions-free general equilibrium market analysis and the partial-equilibrium analysis of game theory. At some point even the human being was dropped as the subject of our general inquiry as a social science. … We have lost sight of the fellow feeling by which human beings gravitate toward one another, and we have lost sight of the sentiments that excite human beings to act and by which human beings judge their own and one another’s conduct.
Intellectually broad and culturally deep economists like John Maynard Keynes have noticed that ideas were in fact more important than economic interests in the making of history:
[T]he ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than it is commonly understood. Indeed, the world is ruled by little else … soon or late, it is ideas, not vested interests, which are dangerous for good or evil.
Others have been intrigued by the possibility of harmonizing self-interest and social interest, which may seem to be contradictory, but only when we see them from a one-dimensional perspective. They are not contradictory in a multidimensional world, where self-interest prevails naturally in some dimensions while social interest prevails in others. John Stuart Mill, philosopher and economist of the nineteenth century, revealed the infinite ways in which social interest and self-interest can fuse to create a healthy, expansive society:
I never, indeed, wavered in the conviction that happiness is the test of all rules of conduct, and the end of life. But I now thought that this end was only to be attained by not making it the direct end. Those only are happy (I thought) who have their minds fixed on some object other than their own happiness; on the happiness of others, on the improvement of mankind, even on some art or pursuit, followed not as a means, but as itself an ideal end. Aiming just at something else, they find happiness by the way.
Victor Frankl expressed the same idea after surviving Auschwitz:
For success, like happiness, cannot be pursued; it must ensue, and it only does so as the unintended side-effect of one’s dedication to a cause greater than oneself or as the by-product of one’s surrender to a person other than oneself. … Then you will live to see that in the long run—in the long run, I say!—success will follow you precisely because you had forgotten to think of it.
Fyodor Dostoevsky said the same through one of his characters, “For the secret of man’s being is not only to live but to have something to live for.”
The words of these authors express the wisdom that give multidimensional societies their success. They blend the satisfactions obtained from getting beyond oneself to work for a superior motive related to others. This wisdom, of course, can be gained and lost. And it can be gained or lost only at the individual level. That is the real secret that explains the formation of creative institutions. The seed of liberal democracy grows to fruition in environments in which people have complex objectives in life—excel in some pursuit, raise a family, help the community and their country—that exceed the desire to make money.
Mill’s words are consistent with my analysis in [In Defense of Liberal Democracy] and belie the notion about classical liberalism that it is the system invented to defend the interests of those who are devoid of social interests, those who think that only they have rights, who define as morally good anything that favors them economically and as immoral everything that dents their economic well-being. Liberal democracy asks sacrifices from individuals but provides enormous benefits in exchange—benefits that wildly exceed the economic dimension.
This is a truth that modern society seems to be forgetting. The cost of this neglect is becoming apparent. With the joy of communal life gone and with the one-dimensional pursuit of wealth replacing it, the logic of one-dimensionality, the kill-or-be-killed vision, has taken over everything, from business to politics. This cost explains the paradoxical fact that the population of the United States is deeply unhappy while the country has never been as rich. The famous slogan “Make America Great Again” should refer to the recovery of the social interest that the American society has lost in the past several decades.
The realm of liberal democracy is within the individual, which is where the defense of liberal democracy should take place. This defense has to be based on values, not just on the idea that capitalism produces more wealth.
In Defense of Liberal Democracy
Copyright © 2021 by Manuel Hinds
Used with permission by Charlesbridge Publishing, Inc.
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This excerpt from Hinds' book an excellent choice. I have no formal education in economics and have always thought (rightly or wrongly) of the discipline to be - in essence - the study of human behavior.
I agree 'The realm of liberal democracy is within the individual...", and that it is there that its defense and preservation must occur. My question is, how may enough individuals be influenced in a positive manner along these lines to create a 'critical mass', so to speak, sufficient to accomplish the task? This seems to me to be a very heavy and complicated lift, given individual human beings' natural tendencies toward 'narrow' self-interest.