Tuesday, August 09, 2005

The common good

Last night I said, essentially, that you can do us all a favor by making more money. Eh? Isn't this supposed to help only you? And in fact, most people think, somehow money goes (with a big sucking sound, in fact) to the moneymakers and away from the rest of us breadwinners.

But that's not how the economy works. (Not that I am one of those moneymakers). Once upon a time (in 1776 in fact), a fellow named Adam Smith pointed out that to make money, you have to persuade your fellows to part with theirs; and to persuade them, you've got to offer them something they themselves value, but are less capable of doing themselves. (Otherwise they'd just do it themselves, no?) So you specialize in something. Everybody who participates in this value-for-money system, or market, ends up specializing. And this "division of labor" effectively organizes the economy (spontaneously, without centralized planning) to become a gigantic production machine.

So self-interest creates mutual benefit. Notice that "self-interest" here does not involve deception, or clubbing your neighbor for a piece of meat. It means exchange. Nor does this work out as an endorsement of selfishness and indifference to your fellowman's well-being; one can be a good participant in the market, and devote part of one's money and time to charity and neighborly assistance.

Such counter-intuitive paradoxes are a continual source of wonder. As I said before, great stuff.

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