"The first principle, on which the theory of a science of history can be plausibly argued, is that all actions whatsoever arise from self-interest. It may be enlightened self-interest, it may be unenlightened; but it is assumed as an axiom, that every man, in whatever he does, is aiming at something which he considered will promote his happiness. His conduct is not determined by his will; it is determined by the object of his desire. Adam Smith, in laying the foundations of political economy, expressly eliminates every other motive. He does not say that men never act on other motives; still less, that they never ought to act on other motives. He asserts merely that, as far as the arts of production are concerned, and of buying and selling, the action of self-interest may be counted upon as uniform."5

"Individuals in households and firms exchange property rights by a pricing system in markets, which thus coordinate billions of transactions spontaneously. Individuals may act with the motive of self-interest but the consequence is usually to serve the general interest because transactions will not normally be made unless they benefit both, or all parties. Neither does self-interest connote selfishness: people act from self-interest because it is the only interest they know and are equipped to judge. They do not profess to know the interest of others better than others do themselves. This is the profession of politicians."6

Economics, as a study, was first established in the 18th century by Adam Smith, who founded the so-called classical school, which included other British economists such as David Ricardo and John Stuart Mill. The classical school embraced the concept that economics concerned itself with the study of natural laws. It was John Maynard Keynes, who, in the 20th century, developed prescriptive theories; ones which were lovingly embraced by twentieth century politicians. In recent years more and more people of influence saw the immense social problems brought on by Keynes and his school; in the meantime the lonely lights of the classical school kept burning and were represented by the likes of Ludwig von Mises, Friedrich A. Hayek and Milton Friedman.

3 - Family System and the Extended Order:
There are two basic elements in society, ancient or modern: one is the economic system, with which I now deal and the other is the family system, the subject of a separate page. What needs to be said, here, is that the natural rules in these two systems are different. The family system deals with the innate or instinctual feelings of the "micro-order."9 It is completely natural, as Sir James Fitzjames Stephen observed, for people to chatter away about each other's affairs "in the way of mutual sympathy and compliment, and now and then to get into states of fierce excitement about them; but all this is not love nor anything like it. The real truth is that the human race is so big, so various, so little known, that no one can really love it. You can at most fancy that you love some imaginary representation of bits of it which when examined are only your own fancies personified."10

Stephen, of course, took a position quite opposite to that of Mill and the Utilitarians. The Utilitarians thought that the individual would ultimately be happier if he initially set aside, to a degree, his own interests for the greater happiness for the people.11 The essential difference (it is usually the difference in all philosophical disputes) between Mr. Stephen and Mr. Mill, is in their view of the nature of man. I quote Stephen:

"He [Mill] thinks otherwise than I of men and of human life in general. He appears to believe that if men are all freed from restraints and put, as far as possible, on an equal footing, they will naturally treat each other as brothers, and work together harmoniously for their common good. I believe that many men are bad, a vast majority of men indifferent, and many good, and that the great mass of indifferent people sway this way or that according to circumstances..."

I again quote Prof. Hayek:

"In dealing with our physical surroundings we sometimes can indeed achieve our ends by relying on the self-ordering forces of nature, but not by deliberately trying to arrange elements in the order that we wish them to assume. This is for example what we do when we initiate processes that produce crystals or new chemical substances ... In chemistry, and even more in biology, we must use self-ordering processes in an increasing measure; we can create the conditions under which they will operate, but we cannot determine what will happen to any particular element. Most synthetic chemical compounds are not "constructible" in the sense that we can create them by placing the individual elements composing them in the appropriate places. All we can do is to induce their formation."12

"But because of the delusion that macro-economics is both viable and useful (a delusion encouraged by its extensive use of mathematics, which must always impress politicians lacking any mathematical education, and which is really the nearest thing to the practice of magic that occurs among professional economists) many opinions ruling contemporary government and politics are still based on naive explanations of such economic phenomena as value and prices, explanations that vainly endeavour to account for them as "objective" occurrences independent of human knowledge and aims. Such explanations cannot interpret the function or appreciate the indispensability of trading and markets for coordinating the productive efforts of large numbers of people."13

"... it is the socialist's task to give a causal explanation of the changes undergone, in the course of history, by such social entities as, for instance, states, or economic systems, or forms of government. As there is no known way of expressing in quantitative terms the qualities of these entities, no quantitative laws can be formulated. Thus, the causal laws of the social sciences, supposing that there are any, must differ widely in character from those of physics, being qualitative rather than quantitative and mathematical. If sociological laws determine the degree of anything, they will do so only in very vague terms, and will permit, at the best, a very rough scaling."14

4 - The Market:
"The propensity to truck, barter and exchange one thing for another," as Adam Smith wrote, "is common to all men, and to be found in no other race of animals." Because of this propensity men reap the benefit of an extended order of collaboration: the "market." The market is an egocentric mechanism which drives a complex of interacting individuals or groups of individuals, all working consciously to advance themselves, and by so working advance society, albeit unconsciously, as a whole. The market is a natural system bringing forward what men want16, whether these wants, subjectively speaking, be "good," or "bad."17 The grand goal of efficient production and distribution is achieved by allowing each one within the whole of society to be the manager and judge of his own affairs. People are fed, clothed, housed and entertained, simply by being free to seek out their own personal goals.

Of all human powers operating on the affairs of mankind, none is greater than that of competition. It is the action of endeavouring to gain what another endeavours to gain at the same time. It is the striving of two or more for the same object. It is rivalry. In the words of Henry Clay: "By competition the total amount of the supply is increased, and by increase of the supply a competition in the sale ensues, and this enables the consumer to buy at lower rates. Of all human powers operating on the affairs of mankind, none is greater than that of competition."18

We might readily conceive of a market as a simple affair, as indeed it is in many particular situations as indeed it was when it first started out as one traveling prehistoric group ran across another. Today, the market has developed into a complex of interacting individuals or groups of individuals, as complex as society has become. The complex is supported by a pricing system in market exchange. I again turn to Prof. Hayek:

"We are led ... to do things by circumstances of which we are largely unaware and which produce results that we do not intend. In our economic activities we do not know the needs which we satisfy or the sources of the things which we get. Almost all of us serve people whom we do not know, and even of whose existence we are ignorant, and we in turn constantly live on the services of other people of whom we know nothing. All this is possible because we stand in a great framework of institutions and traditions - economic, legal, and moral - into which we fit ourselves by obeying certain rules of conduct that we never made, and which we have never understood in the sense in which we understand how the things that we manufacture function.
Some persons are so troubled by some effects of the market order that they overlook how unlikely and even wonderful it is to find such an order prevailing in the greater part of the modern world, a world in which we find thousands of millions of people working in a constantly changing environment, providing means of subsistence for others who are mostly unknown to them, and at the same time funding satisfied their own expectations that they themselves will receive goods and services produced by equally unknown people.
What intellectuals steeped in constructivist presuppositions find most objectionable in the market order, in trade, in money and the institutions of finance, is that producers, traders, and financiers are not concerned with concrete needs of known people but with abstract calculation of costs and profit. But they forget, or have not learned, the arguments that we have just rehearsed. Concern for profit is just what makes possible the more effective use of resources."19

"... the four tasks of economic systems everywhere. First, they must develop techniques of valuing scarce resources; second, they must evolve incentives to concentrate on the most productive methods; third, they must devise the means of assembling and distributing information on relative efficiency in alternative employments; fourth, they must create principles of allocating the output to the most urgent or highly valued uses. Yet these are precisely the methods and devices developed by the market.20

5 - Men of Business:
The man who just uses his head is to be suspected. Business men are perceived to be sneaky; there is good reason for it; they are in business. Their trade routes and their trade processes, as a general proposition, have been developed and gained by them due to their own "blood, sweat and tears;" they do not like getting jumped by thieves. When a true entrepreneur gets a hunch, he is not likely to tell anybody about it. He is generally not interested in telling anybody about his business; he just goes about it. "Merchants were objects of very general destain and moral opprobrium ... a man who brought cheap and sold dear was fundamentally dishonest ... Merchant behavior violated patterns of mutuality that prevailed within primary groupings."22 When somebody goes about adding to the available wealth, "out of nothing, without physical creation and by merely rearranging what already exists,"23 well, it stinks of sorcery. Such a persistent dislike of commercial dealings boils down to certain individuals not being able to perceive (maybe it's envy) how the successful business person goes about managing a business; and, as owner, takes the risk of loss for the chance of a profit.

It was Thomas Carlyle who preached that "work is noble." To Carlyle, as was the case for Marx who came after him, labour was the real source of wealth. John Stuart Mill spread the same idea in his work Principles of Political Economy (1848) where he concluded that the production of wealth came about only through physical human activity.24 Mill concluded, wrongly, as so many economists have done since, that a value, as struck by the market, of any particular commodity or service, is the result of some person or persons labour, and not, which in fact it is, a signal that a person or persons have made the right (or for that matter the wrong) decision or series of decisions, encouraging others to do, or not to do likewise.

All the advances in our "modern" economy are due to the far sighted men who have searched out widely dispersed and constantly changing information and have then brought it together, for reasons that would best serve their own personal advantage. These men hardly give a thought of the side advantage to the larger group we call society, a thought, incidently, which is equally foreign to both the mind of the primitive man and the modern socialist.

Professor Hayek:

"The efforts of millions of individuals in different situations, with different possessions and desires, having access to different information about means, knowing little or nothing about one another's particular needs, and aiming at different scales of ends, are coordinated by means of exchange systems. As individuals reciprocally align with one another, an undesigned system of a higher order of complexity comes into being, and a continuous flow of goods and services is created that, for a remarkably high number of the participating individuals, fulfills their guiding expectations and values. ...
The whole market process then became understood as a process of transfer of information enabling men to use, and put to work, much more information and skill than they would have access to individually."25

"Few things are more amusing than the ideas of a well-intentioned young man, who is born out of the business world, but who wishes to take to business, about business. He has hardly a notion in what it consists. It really is the adjustment of certain particular means to equally certain particular ends. But hardly any young man destitute of experience is able to separate end and means. It seems to him a kind of mystery; and it is lucky if he do not think that the forms are the main part, and that the end is but secondary. There are plenty of business men, falsely so called, who will advise him so. The subject seems a kind of maze. 'What would you recommend me to read?' the nice youth asks; and it is impossible to explain to him that reading has nothing to do with it, that he has not yet the original ideas in his mind to read about; that administration is an art as painting is an art; and that no book can teach the practice of either."26

Capitalism is a system of markets, private property rights, decentralized power and individual responsibility for human behaviour. Versus collectivism with its bureaucracy, untraceable inefficiency, arbitrary allocation between individuals, jobbery, bribery, corruption and encouragement of underground trading. Capitalism has become, like socialism, one of those red flag words. Capitalism wears a bad rap; those who promote collectivism can be charged either with malicious defamation or with a failure to consider history, maybe both.28 Capitalism is a word that defines the spontaneous actions and choices of ordinary people as they go about employing their property to their advantage, primarily, and which, as it turns out, is to the advantage of the community in which capitalists operate. It is simply not true that capitalism is an evil impersonal force rolling on to a predetermined end, one which will do damage to all and sundry.

The fact is that it is free enterprise and the spur of competition that allow men to be productive and inventive. It is in such a free system that "nearly every economic ability sooner or later finds its niche and reward in the shuffle of talents and the natural selection of skills; and a basic democracy [voting by dollars] rules the process insofar as most of the articles to be produced, and the services to be rendered, are determined by public demand rather than by governmental decree." It is one of Will and Ariel Durant's lessons, that the "experience of the past leaves little doubt that every economic system must sooner or later rely upon some form of the profit motive to stir individuals and groups to productivity. Substitutes like slavery, police supervision, or ideological enthusiasm prove too unproductive, too expensive, or too transient. Normally and generally men are judged by their ability to produce ..."29

When pitting capitalism against socialism, best to remember to compare both systems as we have seen them function; you will choose a losing side if you support functioning capitalism versus the ideal of socialism; there can be no comparison between imperfect capitalism and perfect socialism. No doubt capitalism is imperfect and a number of the criticisms leveled at it are legitimate. Arthur Seldon:

"The long-standing criticisms of anti-market Fabians and democratic (non-Marxist) socialists were and remain four: first, capitalism is unstable - it fluctuates between extremes of high inflation and high unemployment, and sometimes combines both; second, it is inefficient because of monopoly; third; it is unjust because the market produces wide inequality in incomes and wealth; fourth, it degrades the environment because the market cannot take account of the external effects of private bargains in commercial trading. ...
The four faults of instability, inefficiency, injustice and insensitivity are common to socialism as well as capitalism. First, the extremes of fluctuations in unemployment and inflation disfigure socialist economies probably even more than capitalist economies. The difficulty in judging comparative capitalist and socialist unemployment and inflation is twofold: political and economic.30

The main difficulty, as Joan Robinson, Professor of Economics, Cambridge, pointed out, is that economists are not strictly enough compelled to reduce metaphysical concepts to falsifiable terms" (Robinson, of course, picks up on the philosophy of Karl Popper). Professor Robinson continues and concludes: "The leading characteristic of the idealology that dominates our society today is its extreme confusion."31

Black eyed susans have to be one of my favorite wild flowers. Along the ditch of the main road leading to Nova Scotia's picturesque south shore they grow in profusion in what appears to be the worst of soils. I have tried to dig them up and turn them lose in my garden, to no avail. It seems such attempts to intervene in spontaneous order rarely result in anything closely corresponding to a man's wish.

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Capitalism:-
§ "Capitalism is based on self-interest and self-esteem; it holds integrity and trustworthiness as cardinal virtues and makes them pay in the market place ..." (Alan Greenspan.)

Indifference:-
§ "To-day's dinner subtends a larger visual angle than yesterday's revolution. A mote in my eye is bigger to me than the biggest planet." (Holmes.)

Men of Business:-
§ "The most sensible people to be met with in society are men of business and of the world, who argue from what they see and know, instead of spinning cobweb distinctions of what things ought to be." (Hazlitt.)
§ "... every human benefit and enjoyment, every virtue and every prudent act -- is founded on compromise and barter." (Burke.)

Self-Interest:-
§ "Caution is the confidential agent of selfishness." (Woodrow Wilson.)
§ "... on the whole, selfishness plants best, prunes best, makes the best commerce and the best citizen." (Emerson.)

Self-Reliance:-
§ "Everyone is the manager and judge of his own affairs." (Legal maxim.)
§ "Most powerful is he who has himself in his own power." (Seneca.)

Socialism:-
§ "There's small choice in rotten apples." (Shakespeare, The Taming of the Shrew, 1594.)
§ "A committee is a group of persons who keep minutes and waste hours." (Author unknown.)
§ "A communist is nothing but a socialist with the courage of his convictions." (Attributed to George Bernard Shaw.)

Wants & Needs of Men:-
§ "It is not love that one wants from the great mass of mankind, but respect and justice." (Stephen, Liberty, Equality, Fraternity, 1873.)

[TOC]
NOTES:

¹ "Montaigne," Representative Men at p. 141.

² See blupete's essay, "The Nature of Man," and, particularly, that part on self-interest.

³ "On Mr. Mill's Theory of Value" as found in The Fortnightly Review Vol. xix, 1876.

⁴ It should not be understood that because one pursues a course of activity that is to that person's own advantage or welfare, that it is, therefore, to the exclusion of regard for others. It was Frederick Bastiat who wrote, "If we are free, ... Does it follow that we shall no longer recognize the power and goodness of God? Does it follow that we shall then cease to associate with each other, to help each other, to love and succor our unfortunate brothers, to study the secrets of nature, and to strive to improve ourselves to the best of our abilities?" No, of course not!

⁵ "The Science of History" as found in Essays of British Essayists (New York: The Colonial Press, 1900) vol. II, pp. 280-1.

⁶ Capitalism (Oxford: Blackwell, 1991) p. 160.

⁷ Economics is certainly a good example of a topic which state paid academics study endlessly putting out one ponderous tome after another. "Some economic historians have written chapters designed to answer such questions as to whether trade arises from industry or industry from trade, whether transport develops markets or markets give occasion for transport. They have concerned themselves with inquiries as to where the demand comes from that makes production possible. Whenever a real problem is encountered, it is passed over with some such comment as that 'a crises arose' or that 'speculation became rife,' though why or what nature is rarely disclosed. And, when details are given, logic is often thrown to the winds. ... Ignorance of the elements of economic theory led historians to give political interpretations to every favourable trend." (T. S. Ashton.) "The Treatment of Capitalism by Historians," as found in Capitalism and the Historians (University of Chicago Press, 1963) pp. 54-5.

⁸ I liken an economist to a person who goes about the "business" of attempting to analyze a billiard game. It is, I suggest, a very difficult problem to predict one shot in the game, let alone the movement of the balls throughout the entire game. It must be borne in mind that the field of economics has undergone a remarkable expansion in the 20th century, and that today, economists are employed in large numbers in private industry, government, and in our institutions of higher education. Economists are the modern day Merlins of our society. Politicians, greedy for power, point to economists in their attempt to justify the expenditure of the people's resources on an artificial Keynesian system, a system which does not deliver to any but those who run it.

⁹ These innate or instinctual feelings or emotions which impact the family system are governed by tradition, viz., evolved rules for living. The attitudes and emotions appropriate to behaviour in small groups, attitudes supported by the political doctrines of "socialism", are attitudes which, as F. A. Hayek states in his book, The Fatal Conceit (University of Chicago Press, 1989), are archaic and primitive and, while essential to the operation of the family are harmful to the extended economic system. As Hayek observed "conflict between an individual's emotions and what is expected of him in an extended order is virtually inevitable: innate responses tend to break through the network of learnt rules that maintain civilization." Hayek was to continue, in his observations, that if "we were to apply the unmodified, uncurbed, rules of the micro-cosmos (i.e. of the small band or troop, or of, say, our families) to the macro-cosmos (our wider civilisation), as our instincts and sentimental yearnings often make us wish to do, we would destroy it. Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two sorts of world at once." (See Hayek's The Fatal Conceit, pp. 6,18 & Appendix D, page 152.)

¹⁰ Liberty, Equality, Fraternity, 1873.

¹¹ "As between his own happiness and that of others, utilitarianism requires him to be as strictly impartial as a disinterested and benevolent spectator. In the golden rule of Jesus of Nazareth, we read the complete spirit of the ethics of utility." (Mill's essay on Utilitarianism, Chapter 2).

¹² The Fatal Conceit, p. 83.

¹³ Ibid., pp. 98-99.

¹⁴ The Poverty of Historicism, 1957, (Routledge, 1969) p. 26. The fundamental thesis of this book is that the belief in historical destiny is sheer superstition, and that there can be no prediction of the course of human history by scientific or any other rational method. It is dedicated to the memory of the countless men and women of all creeds or nations or races who fell victims to the Fascist and communist belief in Inexorable Laws of Historical Destiny.

¹⁵ The word "society" gives one the impression of a large cooperative group; it presupposes or implies that the group is engaged in "a common pursuit of shared purposes that usually can be achieved only by conscious collaboration." The word is derived from the Latin societas, meaning an interconnection of one individual with another or others, it is where one personally knows another. Now the plain fact is, in this life, there is not too many other individuals that any one of us personally know. (See Prof. Hayek's book The Fatal Conceit, Chapter Seven, "Our Poisoned Language.")

¹⁶ An analysis of Smith's Wealth of Nations (Bk 1, CH. 2) yielded this: "Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another" that in which we are in need of. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." In our dealings with others we get what we want by appealing to their wants. Outside of being a beggar, we get what we want "by treaty, by barter, and by purchase."

¹⁷ Curious how "the more things improve the louder become the exclamations about their badness. ... as the evil decreases the denunciation of it increases; and as fast as natural causes are shown to be powerful there grows up the belief that they are powerless. ... it is not a question of absolute evils; it is a question of relative evils ..." (Spencer, as found in his introduction to the book, A Plea for Liberty (New York: Appleton, 1891).

¹⁸ In a speech to the American senate, 1832.

¹⁹ See Prof. Hayek's book The Fatal Conceit, pp. 14,84,104.

²⁰ Capitalism (1990); (Oxford: Blackwell, 1991) p. 51.

²¹ Ibid., p. 210.

²² Wm. H. McNeill, from his 1981 lecture, "A Defence of World History," Royal Society Lecture, as cited by Prof. Hayek in his book, The Fatal Conceit, at page 90.

²³ The Fatal Conceit, pp. 91,94.

²⁴ "Property, book II."

²⁵ The Fatal Conceit, page 95 & 97.

²⁶ The English Constitution,1867 (Oxford University Press, 1928) at p. 105.

²⁷ Ibid.

²⁸ "Economic performance under capitalist government is more exposed to criticism than economic performance under socialist government because the exponents of capitalist values are less committed by philosophical belief to capitalist government than are the exponents of socialist values to socialist government." (Arthur Seldon's Capitalism, p. 286.)

²⁹ The Lessons of History (New York: Simon & Schuster, 1968) pp.54-5.

³⁰ Capitalism, pp. 191-2.

³¹ Economic Philosophy (1962) (Pelican, 1966) p. 28.