Rational Self-Interest

Sunday “sermon” time…..

Adam Smith argued that a market economy serves the common good by allowing individuals to operate on the basis of self-interest. I agree. The problem is, too many of our contemporary “Captains of Industry” don’t understand where their own self-interest ultimately lies.

The worst thing about avarice is how shortsighted and ultimately unproductive it is, even for those whose pursuit of ever-fatter bottom lines is all-consuming.

That’s because a more equal society is in the long-term best interests of even those people who don’t feel any obligation to feed hungry children or find jobs for ex-offenders or make health care accessible to poor people. First, there’s the fact that– in order to remain competitive in a constantly changing global economy– America needs to use everyone’s talents. Social injustices that prevent people from reaching their potential are a drag on that competitiveness.

Second, it is cheaper to deal with problems at the front end than at the back. When we cut programs that help poor folks, we may save a few dollars in taxes, but (as substantial research confirms) we end up paying far more, in costs ranging from lost productivity to prisons.

But it’s the third argument that ought to make us stop and think. As I have argued before,democracies require stability in order to survive.

In countries where there are great gaps between the rich and poor, in countries where some groups of people go through their lives being marginalized or despised while others enjoy privileges and respect, in countries where some people are exploited in order that others might benefit—that stability is hard to come by. A wealthy friend of mine once put it this way: “I’d rather pay more in taxes than spend my days worrying about angry mobs rioting in the streets or desperate people kidnapping my children.”

Most of us understand that—as Elizabeth Warren has pointed out–no one succeeds solely by his own efforts. There is a social and physical infrastructure required to support and enable entrepreneurship and wealth creation, and we taxpayers have built and maintained that infrastructure. And that’s fine. Adam Smith was correct that we all benefit when someone builds a better mousetrap, or improves on another guy’s widget. But when someone profits from his better mousetrap, the people who paid for and maintained that infrastructure–the people who invested in his business via the support systems that enabled him– have a right to a return on that investment in the form of taxes.

A genuine devotion to one’s own self-interest requires us to recognize the degree to which we depend on social stability and an adequate infrastructure–both social and physical.

The contemporary Oligarchs–with their greed and contempt for the common good–are  undermining the very system that has allowed them to succeed. What they fail to recognize is that when the system fails, they will fail with it.

 

12 thoughts on “Rational Self-Interest

  1. As our numbers race beyond 7 million; as our collective use of the atmosphere as a dumping ground for waste ancient carbon continues to obsolete our civilization’s infrastructure; as the rapid growth of our collective knowledge requires each of us to know less and less of all of it; as our technology continues to shrink the apparent world; as our voices now carry around the world; as we approach the limits of resources for so many from a finite planet; our circle of caring inevitably grows from inside our skin, to including related skin, and ultimately to those who are only related by species. We have inevitably forged one world before we could decide it.

    Are we both deserving of and capable enough to maintain our creation?

    Some certainly are. But enough?

    Or perhaps the question is can our culture adapt as fast as the environment that we create changes?

    Dunno.

  2. I wonder if the head of Discovery Communications is feeling generous this morning as the news reports that his compensation is $156.1M. I do not care how good you are at leading a company, that is an obscene amount of money for anyone. Do the maintenance and and administrative staff who keep the company running day to day get justly compensated for their contributions that allow that kind of obscenity?
    While traveling around the country, we noticed more and more gated homes and buildings in wealthy enclaves. Gated to protect themselves from the poor and marginalized? Fear of the “other”? Take your pick.
    Interesting to note that most of the people necessary to maintain those secure enclaves cannot afford to live anywhere near where they work. But, of course, they are too lazy and entitled to want a minimum wage job that requires a two hour one way commute so why try to appease those whiners. Pay people a decent wage, provide the infrastructure that allows everyone to thrive.

  3. This was brilliant. I often think back to the era when top earners were taxed at a huge tax rate…..and I can remember thinking that there was no incentive to succeed because of the tax rate. Building the middle class relieved the upper class from fronting all the taxes. Do any of the electorate currently supporting super rich even though most of the electorate is voting against their own self interest, understand that the present ultra rich are stashing their money and tomorrow those people who plan to be the next generation of super rich could be paying that huge tax rate again.

  4. Tax rates get a bad rap. Those who start off with more than anyone, under even the most equalizing rate scheme ever practiced, always still end up with more than anyone.

  5. I’m going to look at “Rational Self-Interest” from a different perspective; the forced perspective of the majority of consumers. Those of us on fixed and/or low income levels are forced to put our self-interest first and we must do it rationally or lose what little we do have at hand. Many have already run out of savings, are living on 401Ks meant for their retirement years, lost homes, eat cheaper, less healthy food, unable to maintain health standards due to sky rocketing medical and medication costs. The oligarchs think and operate from that level of avarice leading them to ever increasing prices to afford their ever increasing amounts of wealth due to their level of “Rational Self-Interest”. Short-changing the consumers relating to providing jobs and quality goods or services at reasonable rates, forces consumers to cut back – or cut out -spending in many areas. The oligarchs are in essence cutting off their nose to spite their face because sooner rather than later, we consumers will be forced to buy less and less or not buy at all in order to survive with only basic survival needs. Food, medications, maintaining roofs over our heads and clothes on our backs, trying to educate children, owning operable vehicles will not continue enriching those “corporate power brokers” who are the oligarchy. They will be forced to dip into their own pockets to maintain the life style to which they have become accustomed. Probably not in our lifetime but our children’s and grandchildren’s; nothing lasts forever and that includes the massive wealth of the few when the many consumers run out of options to continue supporting them. Their “Rational Self-Interest” can someday become their undoing. Remember the Crash of 1929; the Great Depression, the dust bowl; it has happened before, which is probably why the GOP who are owned by the 1% are pushing toward war…any war…to assure they will be able to maintain amassing their fortunes.

  6. In the classic Vanity Fair article, where he concisely introduces the 1%/99% problem, Joseph Stiglitz ends with the following:

    The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.

  7. I cannot resist asking if this Daily Kos news item qualifies as for this blog, “Rational Self-Interest”? It is probably rational to Gohmert and his aide, or he wouldn’t be Gohmert’s aide; and it is obviously Gohmert’s self-interest. Making any connection between the Kennedy-Nixon debates on television and anyone’s baldness is why I question adding this particular news item on this particular blog. I did believe it should be added somewhere before he changes his mind and buys a toupee.

    “America’s dumbest Congressman not running for president after all. For now.”

    An aide stated, “Texas Rep. Louie Gohmert believes his lack of hair would be a major hindrance to trying to run for president”

    “To more completely describe his actual beliefs, Congressman Gohmert notes the Kennedy-Nixon debates created a line of demarcation beyond which television became the critical factor in being elected President which also meant there would be no more bald Presidents in his lifetime.”

  8. Rational self interest is typically associated with capitalism but I disagree. I think that it’s more a product of liberal democracy than a product of who owns the means of production.

    Freedom means that everyone is restricted from imposing their interests on others, so that we can all operate under our self interests.

    We are each and all free to operate as we will as long as it’s not at the expense of others either at the moment or over time.

    Capitalism seems to flourish in liberal democracies but so does socialism. As long as consumers and workers are free to choose among and between the ownership of means seems quite inconsequential.

  9. Instead of simply pursuing the design and construction of a better mousetrap, the path to the top now includes inevitable forays into politics, most often as a major source of campaign funding. The generous business man’s mind is focused on estimating a return on investment; the political donation has become another business expense which has proven to have a very high ROI and thus is likely to continue to grow. Like many businesses, the leader has a team of advisers that monitor market conditions and ROI. They know when to move money, layoff, hire, downsize, divest,etc. Most of them seem to ignore the social context in which the business operates; the accountants have trumped the social scientists. There are a few exceptions, but I think this is true for the majority. It is all shortsighted or blind, but it’s hard to make a compelling argument to a guy that’s knocking down multi-millions annually.

  10. When unemployment insurance was legislated, it was to prime capitalism’s pump with consumer buying power. Businesses can’t flourish if customer’s have no money to buy what businesses are selling.

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