Economics is realized by the principle of satisfying self-interest through service to others.
One must produce before being able to consume, whether it be for self or others. It just so happens that producing for others and expanding the circle of trade yields the highest living standards for all concerned. In this way, self-interest is channeled into peaceful and productive social cooperation.
Expending resources in ways that do not satisfy consumer desire is, by definition, uneconomical and, when unimpeded by political intervention, will be met by loss in the marketplace rather than profit.
Profit and loss feedback is essential to discipline entrepreneurs and firms toward more economical resource use by ensuring the product serves the customer.
Self-interest is an inescapable fact of all human action, yet it is the discipline of a marketplace free from coercion that directs that self-interest toward serving others.Some people, such as Thomas Huynh at Sonshi.com, lament self-interest and yearn for selfless leaders that ‘care’ for the ‘safety and comfort of others’ by dispassionately accepting risk. The example of a general officer refraining from glory seeking and promoting the ‘general welfare’ of the nation elicits the ideal. Yet this is pure fallacy.
The fundamental error begins by assuming that self-interest is the ‘basis of economics’ when in point of fact it is embedded in all human action. Every action is oriented on moving from the present state of affairs to a perceived condition of improved satisfaction. In this way, every human being is a ‘profit seeking’ entrepreneur, even if the gains are merely psychological or emotional.
Mother Theresa took care of the poor in Calcutta because she found her compassion expressed by doing so. The Dalai Lama teaches the Dharma to fulfill his purpose as a descendent in the Yellow Hat lineage. The homeless bum scrounges for change on the street so he can buy a bottle of hooch to sip on under a cardboard shelter. All three act to satisfy what interests them.
The fact that human beings employ resources, beginning with the physical body and extending o to every conceivable material resource in space and time implies some form of economizing must accompany every human action.
Yet this is not what most people think of when discussing economics. The economics that increases the general standard of living is more accurately described as catallactics, the science of exchanges. Economizing resources for one’s own use, no matter how efficient, will only minimally increase the individual standard of living.
No man is an island, and humans do not live well in isolation. The whole purpose of law is to establish rules for people to live and exchange among one another in relative peace so that they can enjoy the benefits of social cooperation.
It is only through exchanging goods and services with others that yields exponential material growth. It was by adopting strong private property rights that enabled the capital accumulation necessary for technological innovation, competing legal jurisdictions that forced dispute adjudicators to render fair opinions, and bourgeois virtues that valued entrepreneurship that enabled the industrial revolution to occur.
These necessary elements coming together lifted humanity out of the relatively stable and flat rate of growth in the 19th Century. It was the secure space provided by property rights, the rule of law, and respect for entrepreneurship that generated the meteoric rise of living standards enjoyed today. And it was not dependent upon ‘selfless leaders’ acting for the ‘good of the nation’ but highly self-interested individuals competing to earn profits for themselves, by creating value for others, that enabled humanity to move up the Hierarchy of Needs and enjoy greater material security.
Similarly, supporting the rights of others, uniform standards of justice, and the freedom of contract, is in one’s own interest because it sets the conditions for personal achievement according to individual desires. Peace and social harmony is both the necessary precondition for attaining one’s goals as well as the benevolent product of widespread adoption of these views.
Rather than trying to encourage others to become more ‘selfless’, social priorities should orient on fortifying property rights, ensuring just and impartial dispute resolutions, and honoring the risk-balanced actions of service providers braving the uncertainty of consumer demand in a free market.
In an environment where greed induced resentment of capitalism is rampant and, accompanied by calls for the coercive redistribution of private property, this where more ‘selflessness’ is required. This is a time where more principled leadership and the active defense of liberty is in order.