Adam Smith is said to be the founder of modern economics.[1] Yet, contrary to a widespread view, Smith regarded individuals as driven by moral motives as well as self-interest. This is most clear in his Theory of Moral Sentiments, but ideas of justice and morality also pervade his Wealth of Nations.[2]
It took economics a while to get rid of this argument. In two classic works published in 1871, William Stanley Jevons and Carl Menger placed individual self-interest at the foundation of economics. Three years later, Léon Walras built neoclassical general equilibrium analysis upon a similar assumption. For the next 100 years or more, self-interested, utility-maximizing, “economic man” was the centerpiece of mainstream economic theory.
But also in 1871, Darwin published his Descent of Man, with its evolutionary explanation of cooperative solidarity and morality, which took over one hundred years to be confirmed broadly by theoretical and empirical research. In that same year, Darwin had provided an evolutionary vindication of Smith’s view of human motivation. But it was ignored by most economists.
It is one of the great ironies of history that portraits of Smith and Darwin appear respectively on £10 and £20 banknotes in the UK. I do not think that these designs were intended to remind us that moral and evolutionary considerations are central to our understanding of a money-driven economy. But they are.…When morality is ignored as not being substantive, then the result is that morality is equated with legality, so that if it is legal it is moral. Powerful elites then use their power and influence to shape the law so that what society regards as being immoral or unethical is made legal and there is not penalty involved in acting immorally or illegally. Elites are famously shameless, so that reputational stricture does not apply to them or restrain their behavior.
Most of the economic development in the developing world–particularly in Latin America, Africa, and many parts of Asia–is through the economic self-development of the illegal economy. In Lagos, Nigeria, the largest city in Africa, over 80% of the working people are in the underground economy.
Much of the global trade between the developed and developing countries is through the illegal economy. For example, poor people in Nigeria working in illegal markets can save enough money to travel to China, where they buy Chinese goods illegally and then have them smuggled back into Nigeria for sale, avoiding restrictive trade laws and huge import duties. There are some estimates that as many as 300,000 Africans are living in Guangzhou, the south China trading city formerly known as Canton.
This confirms Adam Smith’s insight that the evolved human propensity “to truck, barter, and exchange” is so strong that it can be expressed in a complex economic life even without the support of a legal system, because people can solve their own economic problems for themselves through self-organizing social orders.
For example, Neuwith describes how street merchants in Lagos have set up their own private courts for settling disputes between dealers and customers. One arbitrator explained: “Arbitration is our work. Most often we arrive at a peaceful solution. This is how we have harmonized the market.” This is what one should expect from human beings who have evolved natural instincts for cooperation.
Smith thought illegal economic activity could be seen as an expression of the “system of natural liberty” or “natural justice.” So he suggested that we should identify a smuggler as “a person who, though no doubt highly blamable for violating the laws of his country, is frequently incapable of violating those of natural justice, and would have been, in every respect, an excellent citizen, had not the laws of his country made that a crime which nature never meant to be so” (Wealth of Nations, Liberty Fund edition, p. 898).Let the free-for-all begin.
Smugglers are part of the greatest evolutionary story of humanity, which is the progressive improvement in human life that comes from human beings asserting their freedom to trade.
JB: You’ve called an idea that’s cherished in economics “a monumental mistake.” Specifically, the belief that Adam Smith’s “invisible hand” ensures markets self-organize for the best overall outcomes.
Biological self-organization — Darwin’s “invisible hand” — often delivers disaster. What can self-organization, or spontaneous order, in biology teach economics?
DSW: Self-organization isn’t intrinsically good (it can be functional or dysfunctional).…
Economists will never get it right until they switch their mentality from physics to evolution (see Newton pattern vs. Darwin pattern).
... propagandists who are opposed to evolution often try to blame Darwin for the policies later known as social Darwinism. However, these views were primarily associated with the English sociologist Herbert Spencer. In his 1851 bestseller Social Statics, Spencer developed most of the ideas attributed to social Darwinism when he argued that the poor should not be helped through government programs, but should be allowed to die for the betterment of society: — Deconstructing Social Darwinism (for an alternative view see Damon Root, The Unfortunate Case of Herbert Spencer: How a libertarian individualist was recast as a social Darwinist)
While this perspective ["survival of the fittest"] may be common among those primates who live in the concrete jungle of Wall Street, it doesn’t hold true for the natural world more generally.
Darwin understood that competition was an important factor in evolution, but it wasn’t the only factor. Cooperation, sympathy, and fairness were equally important features in his vision for the evolution of life. In The Descent of Man he wrote, “Those communities which included the greatest number of the most sympathetic members would flourish best, and rear the greatest number of offspring.”
By working cooperatively, by sharing resources fairly, and by ensuring that all members of society benefited, Darwin argued that early human societies would be more “fit” than those societies where members only cared about themselves.Scientific American
