Self Interest Rightly Understood




by Lauren Hall Lilly for AdamSmithWorks 

An Inquiry into the Nature and Causes of the Wealth of Nations
(hereafter Wealth of Nations) is often characterized by detractors as justifying the pursuit of self-interest in lieu of real benevolence, charity, or virtue. Even more serious to some is a concern that Smith’s focus on self-interest justifies an unrealistic kind of trickle-down economics, in which pursuit of luxury by the wealthy creates economic growth for everyone else. 







The result of emphasizing self-interest over all else, critics contend, is a society based on the lowest possible denominator, characterized not by fellow-feeling, love of one’s neighbor, and a sense of community, but based instead on selfish materialism. But to view Smith’s overall theory as one merely devoted to self-interested acquisition is to ignore the nuance and complexity of how he believes social orders are created. It also ignores the intricacy of the term “self-interest” in Smith’s work. 









Rather than defending active vice as something that leads to virtue, Smith is critical of vicious behavior and argues in both Wealth of Nations and The Theory of Moral Sentiments that benevolent and virtuous behaviors are both necessary and desirable for stable social orders. Far from providing rationale for selfish material pursuits, Smith’s self-interest, properly understood, encourages a kind of virtue that protects both individuals and their communities. Smith’s self-interest is the foundation not just of economic order, but, along with sympathy, for the moral order on which the larger economic order rests. Self-interest, it turns out, is a key component in the creation of a stable, just, and orderly society in which individuals are secure and able to pursue their own goals.










Self-interest and Selfishness







Part of the misunderstanding of Smith’s work may stem from the tendency of modern readers to conflate self-interest with selfishness. Smith makes it clear throughout his works that these terms are not synonyms. While both are directed toward the self, self-interest is moderated and limited in a variety of ways that selfishness is not. This limitation is most clear in the discussion of the impartial spectator in The Theory of Moral Sentiments.









The impartial spectator (Smith’s version of a conscience), which is built up over long experience, generally looks kindly on the pursuit of self-interest. It is, after all, nothing more than what everyone pursues. At the same time, the impartial spectator, impartial as he is, draws a sharp line between self-interest that is neutral in its effects on others and self-interest that harms others to benefit oneself. Such selfish behavior, Smith argues, creates strong disapprobation in our fellow man: 









“To disturb his happiness merely because it stands in the way of our own, to take from him what is of real use to him merely because it may be of equal or of more use to us, or to indulge, in this manner, at the expence of other people, the natural preference which every man has for his own happiness above that of other people, is what no impartial spectator can go along with.”[i] 





The impartial spectator enforces external limits on self-interest, not the least of which is the condemnation of harming others for one’s own benefit. Self-interest is defensible as long as it is consistent with the demands of justice, and justice demands that we refrain from harming others. 








The felt judgement of the impartial spectator is supported by powerful internal motivators. While society is based in part on “[t]he uniform, constant, and uninterrupted effort of every man to better his condition,” according to Smith, it is also based on the need to be loved and earn the approval of those around us.[ii] These desires form the basis for a kind of socialized self-interest—the self-interest of individuals peacefully pursuing their goals, which include being members of a community. The desire of humans to be loved and approved of is what encourages individuals to pay attention to the impartial spectator in the first place. Our desire for sympathy and the approbation of others limits our self-interest to what is consistent with not harming others while at the same time fueling the progress that makes everyone better off.[iii]




This basic distinction between self-interest and selfishness is important for distinguishing Smith’s theory from its caricature as a defense of selfishness. The invisible hand that Smith postulates as the source of order in society, while it does not require active benevolence, does require justice. In other words, it requires that individuals not harm one another without provocation.[iv] Self-interest without justice makes society impossible because “[j]ustice […] is the main pillar that upholds the whole edifice. If it is removed, the great, the immense fabric of human society […] must in a moment crumble to atoms.”[v]  Fortunately, our desire for the approbation of our fellow humans binds self-interest to keep it consistent with the demands of sympathy and justice. Self-interest is therefore consistent with justice and propriety. Selfishness, the desire to better oneself without regard to even the demands of justice, is not.  










Self-interest, Sympathy, and Duty




In part because of the limitations imposed by sympathy and justice, self-interest takes on a social quality that goes well beyond the isolated individualism implied by the phrase itself. Self-interest and sympathy are, in fact, closely linked. 









Smith observed that humans are most sympathetic toward those who are most closely tied to their own safety and happiness. This creates a powerful link between sympathy and self-interest.[vi] When society consists of family, friends, and acquaintances, the gap between sympathy and self-interest is small indeed. Precisely because our self-interest is bound up in the happiness of those we care about, their happiness becomes part of what we pursue in our desire to better our own condition. 








The benefits of localized self-interest extend beyond those we love. Self-interest is the invisible hand that, when combined with sympathy, forms the moral order on which the economic order rests. Smith argues









“[t]hat wisdom which contrived the system of human affections, as well as that of every other part of nature, seems to have judged that the interest of the great society of mankind would be best promoted by directing the principal attention of each individual to that particular portion of it, which was most within the sphere both of his abilities and of his understanding.”[vii] 





The purpose of self-interest is not only to drive the larger economic engine of society. It also ensures that individuals direct their moral energy in a way that is consistent with their limited abilities and knowledge. 









Self-interest, then, becomes the germ from which virtuous, other-regarding behavior grows. By binding self-interest to the wellbeing of those closest to an individual, both self-interest and sympathy help create duties to others, albeit on a small scale. Because individuals care about the wellbeing of those who most directly affect their happiness, they are more sympathetic to the needs of those people and more likely to help them. Parents provide for their children, friends aid friends, and neighbors assist neighbors. Individuals fulfilling duties to their loved ones form the foundation for the larger social, political, and economic order. Because people are taken care of by their families, friends, and neighbors, government can focus on narrower national goals.  









Smith cautions the reader against the lure of viewing benevolence as the purpose or goal of all individual action in society in order to protect this bottom-up order.  Smith argues that benevolence is desirable only after individuals have attended to their own self-interest. Only after they have taken care to ensure that they and those who depend on them are adequately clothed, housed, and educated can they turn their eyes to benevolently helping others outside their intimate circle. Fulfilling these basic duties to themselves and those they love is as much as most people are competent or knowledgeable enough to achieve. 









Smith rejects the idea of universal benevolence, instead providing a narrower but no less important purpose for the average person: “the care of his own happiness, of that of his family, his friends, his country.”[viii] He further reminds the reader that “contemplating the more sublime, can never be an excuse for […] neglecting the more humble department.”[ix] Self-interest is not a morally neutral motivation that the impartial spectator simply tolerates. Nor is it simply the absence of injustice. Instead, self-interest is the motivation for active moral duties to both self and others. 










Virtue

These small duties required by self-interest compound to create a more robust set of virtues that are in themselves important for both social and individual happiness and are sometimes called the “bourgeois virtues.”[x] Smith argues that “[i]n the middling and inferior stations of life, the road to virtue and that to fortune, to such fortune, at least, as men in such stations can reasonably expect to acquire, are, happily in most cases, very nearly the same.”[xi] Men in such modes of life find that “[p]rudent, just, firm, and temperate conduct” is the best way to pursue their self-interest. The fact that in so doing they help create a stable moral and economic order is incidental.[xii] 









Smith makes this argument again in Wealth of Nations, arguing that in manufacturing and industrial towns, the working classes are “industrious, sober, and thriving.”[xiii] The subtext in both works is that allowing individuals to pursue their self-interest through work without being inhibited or controlled by governments, great courts, or other external forces (which, even if the mean well, are corruptors of the invisible hand) encourages virtuous and industrious citizens.









The centrality of self-interest for virtue helps explain why Smith underscores the importance of work as a “sacred right.” Smith criticizes mercantilist policy on both economic and moral grounds, but on the latter his criticism is unusually strong. To prevent people from “making all that they can of every part of their own produce, or from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind.”[xiv] Respect for self-interest, because it is the seed for the most basic duties to ourselves and to our loved ones, creates a corresponding duty to refrain from interfering with self-interested activity that does not harm others. 









Self-interest, in this sense, provides a foundation for Smith’s arguments for limited government. This argument is not based in a simplistic understanding of selfish license, but is instead based in virtue that is grounded on seemingly minor duties to self, family, and friends and their importance to society as a whole. All other duties and rights ultimately grow out of this socialized self-interest.











The Insufficiency and Importance of Economics

One of the most cited passages in Smith’s work is frequently provided as evidence of the selfishness of commercial activity. In this passage from Wealth of Nations Smith claims that 









“[i]t 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.”[xv] 





What should we make of this and other passages that seem to imply that self-interest does not require an active sense of virtue or duty? This passage is often interpreted as proof that Smith accepts self-interest at the expense of benevolence, charity, and compassion. But here Smith is discussing the butcher and the baker in their economic capacities, not in their full human capacities. The butcher or the baker who required his family to pay for their dinners would be the most unnatural of humans. Smith argues elsewhere that “A parent without parental tenderness, a child devoid of all filial reverence, appear monsters, the objects, not of hatred only, but of horror.”[xvi] 









While self-interest must prevail in the economic sphere, Smith never argues that economic interest is or should be the sum total of all human activities. It is precisely because the butcher and baker must care for themselves and their families that they cannot give away meat or bread to whoever comes calling.  









By caring for themselves and their families first, butchers and bakers of the world create a spontaneous order that supports economic growth and thus benefits even far-flung strangers. Smith’s socialized self-interest contributes to the invisible hand not just by driving economic progress, but by founding that progress on a stable foundation of flourishing families and communities. As Smith argues in the famous passage on the invisible hand in Wealth of Nations, “[b]y pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”[xvii] This rule applies to the humblest man as well as to the great and wealthy. Even the wealthy, through their pursuit of luxury, assist others by providing jobs to the butchers and bakers who then use their income to support themselves and their families, creating a virtuous cycle. [xviii] 










Low but Stable Virtues




Of course, there are limits to the power of self-interest. Not only must self-interest be limited and constrained by sympathy and justice, but Smith acknowledges that the virtues that result from self-interest are indeed somewhat “low”[xix] in the order of virtue as a whole. These are the bourgeois virtues, mentioned earlier. 








Smith expresses concern about the effects of a commercial society based on the pursuit of self-interest in his Lectures on Jurisprudence. In commercial society “[t]he minds of men are contracted, and rendered incapable of elevation. Education is despised, or at least neglected, and the heroic spirit is almost utterly extinguished. To remedy these defects would be an object worthy of serious attention.”[xx] Smith was unable to finish his final work on jurisprudence, where he may have intended to flesh out a solution to this problem. But his defense of commercial life in The Theory of Moral Sentiments and Wealth of Nations still stands. Despite its drawbacks, commercial life based on self-interest is still the best of all possible worlds. 









The pursuit of socialized self-interest is the basis for a peaceful, orderly society where most people can pursue happiness in their own way most of the time. It is not a world that asks great things of people and it is not a world that demands or requires greatness, courage, or nobility. 









Taken together, Smith’s account of self-interested activity is both more complex and more defensible than is often presented. A society based on self-interest ensures that our duties to ourselves and our families and friends are fulfilled, even if it does not expect or support great acts of charity or 








[i] Adam Smith, The Theory of Moral Sentiments (TMS), 82.

[ii] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (WN), 343.

[iii] Smith, TMS, 83. 

[iv] Smith, TMS, 86.

[v] Smith, TMS, 86.

[vi] Though Smith is clear that sympathy does not derive solely from self-interest.  See The Theory of Moral Sentiments, 14.

[vii] Smith, TMS, 229.

[viii] Smith, TMS, 237

[ix] Smith, TMS, 237.  Smith repeats this argument again for emphasis, arguing that “The most sublime speculation of the contemplative philosopher can scarce compensate the neglect of the smallest active duty.”

[x] See Deirdre McCloskey, The Bourgeois Virtues, University of Chicago Press: Chicago, IL (2006).

[xi] Smith, TMS, 63. 

[xii] Smith, TMS, 63. 

[xiii] Smith, Wealth of Nations, 335.

[xiv] Smith, WN, 582. 

[xv] Smith, WN, 26-27.

[xvi] Smith, The Theory of Moral Sentiments, 220.

[xvii] Smith, Wealth of Nations, 456. 

[xviii] Smith, The Theory of Moral Sentiments, 184.  As Smith argues, the common people “…derive from [the great man’s] luxury and caprice, that share of the necessaries of life, which they would in vain have expected from this humanity or his justice.”

[xix] “Higher” virtues include the warrior virtues or the virtues of the saint.[xx] Smith, Lectures on Jurisprudence, 259.