The Real Welfare Gain from the Holidays

One of the most famous quotations in economics points out how the market system enables each person’s self-interest to benefit others:

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 self-interest.

That’s from The Wealth of Nations.

But self-interest alone can’t and doesn’t sustain a successful economy like ours. We humans are wired to care about the welfare of family, friends and even total strangers. Adam Smith himself recognized this. In The Theory of Moral Sentiments, he noted that

How selfish soever man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others and render their happiness necessary to him though he derives nothing from it except the pleasure of seeing it.

I doubt our society could survive long if we weren’t influenced by our altruistic instincts in small and large ways every day. There’s no better time than now to think about and act on these “principles in our nature” that give use pleasure in bringing happiness to others. Perhaps that’s the ultimate enlightened self-interest.

Enjoy the Holidays!

3 Replies to “The Real Welfare Gain from the Holidays”

  1. There’s a bit about altruism in the “invisible hand” part of Wealth of Nations — Book IV, chapter II, paragraph IX, to be precise:

    “By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was not part of it.

    By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.”

  2. The implication is the altruism is never in ones self interest. I don’t think this is true, and in particular I don’t think it is true regarding family and close friends. I think much of such altruism is eventually rewarded. Even if it is not, society as a whole, and the individual as part of that society benefit from people at large acting altruistically. But in order for the group at large to do so, individuals need to take the lead.

  3. Thanks for this post.

    Varela and Maturana described “selfishly altruistic” and “altruistically selfish” in an eight grade biology book called “Tree of Knowledge” that includes social concerns in motivations of Self. Fernando Flores taught about concerns that we are and concerns that we have, which includes concerns for the sociability, membership, and the World.

    In both of these cases and the cases you described, welfare comes from the individual who has a concern for society and the welfare of others. It is not regulated or governed, and it supports our ability to maintain the free market sensibilities that made it possible for us to be selfishly altruistic in the first place.

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