Quote of the Day: Differentiating Self Interest from Greed

Charles de Montesquieu (1689-1755) was the first major figure during the Enlightenment to maintain that commercial activity restrains greed and other passions. In his classic work, The Spirit of the Laws (1748), Montesquieu expressed the novel view that the business of moneymaking serves as a countervailing bridle against the violent passions of war and abusive political power. “Commerce cures destructive prejudices,” he declared. “It polishes and softens barbarous mores . . . . The natural effect of commerce is to lead to peace.” Commerce improves society: “The spirit of commerce brings with it the spirit of frugality, of economy, of moderation, of work, of wisdom, of tranquility, of order, and of regularity.”

Adam Smith (1723-90) held similar views. He wrote eloquently of the public benefits of pursuing one’s private self-interest, but he was no apologist for unbridled greed. Smith disapproved of private gain if it meant defrauding or deceiving someone in business. To quote Smith: “But man has almost constant occasion for the help of his brethren . . . . He will be more likely to prevail if he can interest their self-love in his favour . . . . Give me that which I want, and you shall have this which you want, is the meaning of every such offer.” In other words, all legitimate exchanges must benefit both the buyer and the seller, not one at the expense of the other. Smith’s model of natural liberty reflects this essential attribute: “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.”

Smith favored enlightened self-interest and even self-restraint. Indeed, he firmly believed that a free commercial society moderated the passions and prevented a descent into a Hobbesian jungle, a theme echoing Montesquieu. He taught that commerce encourages people to defer gratification and to become educated, industrious, and self-disciplined. It is the fear of losing customers “which retrains his frauds and corrects his negligence.’

Finally, Smith supported social institutions—the competitive marketplace, religious communities, and the law—to foster self-control, self-discipline, and benevolence.

In sum, no system can eliminate greed, fraud, or violence. Socialism and communitarian organizations promise paradise, but seldom deliver. Oddly enough, it may be a freely competitive capitalist economy that can best foster self-discipline and control of the passions.

This is from economist and author Mark Skousen from a 2000 article published at the Freeman