Savitri Era of those who adore, Om Sri Aurobindo and The Mother.

Friday, November 21, 2008

Not all individual putsuits of self interest necessarily and unintentionally benefit society

Adam Smith on Natural Liberty from Adam Smith's Lost Legacy by Gavin Kennedy
Sauvik Chakraverti writes, 19 November, in Antidote, (‘libertarian opinion from Indyeah)’: "Adam Smith... And Marathi Politics’ HERE

Many readers of Wealth Of Nations, however, mistakenly confuse the precepts of Natural Liberty – philosophically an element of moral philosophy – with those associated with laissez-faire economics. Smith was careful to distinguish the jurisprudential roots of Natural Liberty which was applicable in all societies, independently of their subsistence basis of their economies, from the political economy of commercial societies. Cointrary to myth, he did not advocate laissez-faire economics though he was familiar with the Physiocratic terminology of some of its members (he met and discoursed with them in Paris and elsewhere, and in correspondence and the exchange of manuscripts but he never used the words laissez-faire in anything he wrote).

Tellingly, he made many references to either curbs on the behaviours of ‘merchants and manufacturers’ and to interventions that he considered necessary by governments to curb the freedoms of some of the same people, of whom he was suspicious of their tendency to act against the interests of consumers. There are over 50 instances of him mentioning the less than beneficial actions of self-interested individuals in Books I, II and III of Wealth Of Nations.

On such set of commercial entrepreneurs that he wrote extensively about were the bankers of Scotland and the rest of the UK at the time. After a long discourse in Book II, chapter 2, on banking operations and some of managers and customers' dangerous failings on occasion, he drew a line between Natural Liberty and total commercial freedom:

“To restrain private people, it may be said, from receiving in payment the promissory notes of a banker, for any sum whether great or small, when they themselves are willing to receive them, or to restrain a banker from issuing such notes, when all his neighbours are willing to accept of them, is a manifest violation of that natural liberty which it is the proper business of law not to infringe, but to support. Such regulations may, no doubt, be considered as in some respects a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments, of the most free as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed.” [WN II.ii.95: p 324]

I think this is clear enough. It separates ‘freedom’ as a legal concept and as a practical policy by a qualifying restraint where a person’s freedom has deleterious consequences on the public good. Clearly, not all individual putsuits of self interest necessarily and unintentionally benefit society; hence mythical theories of the invisible hand imposed on Adam Smith by 20th-21st century economists are a manifest violation of Adam Smith’s intellectual integrity and a gross abuse of his legacy. In short, a violation of his Natural Liberty rights. My thanks to Sauvik Chakraverti for creating this opportunity to comment on this important distinction.

No comments:

Post a Comment