How Selfish Are People—Really?
Events of the last ten years have sparked considerable controversy about the teaching and learning of ethics. But relatively little has been said concerning the deep-down underpinnings of our feelings about insider trading, malfeasance, and other betrayals of trust.
This is too bad, because some important new thinking about our conception of ourselves as human beings is going on—thinking that so far has attracted only a small audience outside the technical precincts where it is taking place.
Two broad historical streams contribute to our ideas of right and wrong. One is the ancient tradition of religious, philosophical, and moral discourse, the province of the Golden Rule, the Ten Commandments, the Sermon on the Mount.
Call this the humanist tradition. The other is the comparatively young tradition of the biological and social sciences. Chief among these is economics, with its central tenet that people, when they are able, tend to look out for themselves, choosing to maximize their advantage.
Perhaps because it is cloaked in the mantle of science, the rhetoric and content of the latter tradition has become increasingly influential in our public life, often eclipsing religion and other traditional sources of instruction.
This eclipse began with two disarmingly simple sentences published by Adam Smith in The Wealth of Nations in 1776. “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. We address ourselves not to their humanity but to their self-love and never talk to them of our own necessities but of their advantages,” Smith wrote.
He then cobbled up his shrewd view of persons as calculating and self-interested into the familiar “invisible hand,” a sweeping vision of the interdependence of all markets everywhere.
In Smith’s world, competition among persons who pursue their own interest promotes the general welfare of society more effectively than the efforts of any individual who might deliberately set out to promote it.
Some 80 years later, Charles Darwin offered a second and perhaps even more powerful justification for selfish behavior—his theory of natural selection. Aptly described as “survival of the fittest,”
Darwin’s evolutionary account of biological diversity was a powerful story of adaptation through the continuous variation of traits and the selection of those that improved “fitness.”
Differential reproduction and survival rates determined who survived and prospered and who didn’t. Those who were capable of “looking out for number one” in a biological sense would survive, while natural selection would quickly sweep away the less fit.
Better to open a shop, then, or manufacture a product than to curse the darkness; the market will harmonize self-interests more surely than usury laws and regulatory bodies.
Darwin’s insights were immediately translated into a coarse social gospel that was itself quickly swept away. In a far more sophisticated and compelling form, his theory returned 100 years later as sociobiology.
But in economics, the self-interest model of Adam Smith immediately acquired a deep hold on the popular imagination. Critics like Thorstein Veblen railed at the assumption of rational self-interest that was at the heart of the new conception—the view of man as “a lightning calculator of pleasures and pains, who oscillates like a homogenous globule of desire,” as Veblen snorted. But the successes of the new approach were very great.
The universal “laws” of supply and demand could explain relative prices, differing wage rates, the composition of production: people really did build smaller houses if the price of fuel went up! And as economists refined their analyses, they extended their searchlight into new and unfamiliar areas.
For example, the American astronomer-turned-economist Simon Newcomb appalled outsiders in 1885 when he discussed the willingness of citizens to give dimes to the homeless in terms of the “demand for beggars,” no different in principle from children giving pennies to organ-grinders in exchange for their services.
“Mendicity will exist according to the same laws that govern the existence of other trades and occupations,” Newcomb wrote. And, after all, who could doubt that plentiful alms might have an effect on the size of the street population?
The emotion of pity was thus recast as a taste for a warm glow that the consumer included in his or her utility function.
Indeed, a word must be said here about the “utility function” that economists build into their models of consumer behavior. The idea of a single mathematical function capable of expressing complex systems of psychological motivation is an old one in economics; at the hands of statisticians and theorists it has been refined to a remarkable extent as something called “subjective expected utility” theory.
As Nobel laureate Herbert Simon has explained, the model assumes that decision makers contemplate, in one comprehensive view, everything that lies before them; that they understand the range of alternative choices open to them, not only at the moment but also in the future; that they understand the consequences of every possible choice; and that they have reconciled all their conflicting desires into a single undeviating principle designed to maximize their gain in any conceivable situation.
Emotions such as love, loyalty, and outrage, like a sense of fairness, have little or no place in most of today’s utility functions; a narrow selfishness is pervasive. Undoubtedly, as Simon says, this construction is one of the impressive intellectual achievements of the first half of the twentieth century; after all, he is one of its architects.
It is an elegant machine for applying reason to problems of choice. Equally certainly, however (and again following Simon), this Olympian stereotype is also a wildly improbable account of how human beings actually operate, and a preoccupation with it is doing economists more harm than good.
With the exception of the brilliant 30-year campaign against perfect rationality by Herbert Simon (and the guerrilla war of John Kenneth Galbraith), the major universities have produced no sustained criticism by economists of the central tenets of utility theory.
Psychologists and sociologists, confronted with ubiquitous theorizing about the economics of decisions they previously considered their domain, have been quick to complain of “economic imperialism” but rather slow to launch counterattacks.
In the last few years, however, a small but growing number of persons has begun to come to grips with assumptions underlying economic interpretations of human nature. Robert B.
Reich and Jane Mansbridge have grappled with the significance of the self-interest paradigm for political philosophy, for example. Howard Margolis and Amitai Etzioni have propounded theories of a dual human nature, competitive and altruistic by turns.
Sometimes these disagreements come to the attention of outsiders in the press, like me, on the reasonable grounds that arguments over what constitutes human nature are too important to be left entirely to the experts.
Nevertheless, so powerful is the optimizing cost-benefit approach that economists have applied it to an ever-increasing range of human experience in the years since World War II, always with illuminating results.
Education has become human capital. Job hunting is now a matter of search costs, tacit contracts, and a desire for leisure. Segregation laws are explained as a preference for discrimination and a willingness to pay the higher prices it entails.
Love is an exchange relationship; decisions to bear children are analyzed as the purchase of “durable goods” of varying quality. Addiction, terrorism, arms control, the pace of scientific discovery—all have come under the economic magnifying glass.
Gary Becker, the foremost of the theorists who extended economic analysis into new areas, some years ago staked the claim that economics was the universal social science that could explain everything.
George Stigler, himself an economics Nobel prizewinner, joked that he looked forward to the day when there would be only two Nobel prizes, “one for economics, and one for fiction.”
At a certain point, all this rhetoric began to have real repercussions on everyday life. It’s one thing just to talk about the demand for beggars; it’s another actually to calculate the lifetime “consumption of pleasure” for an accident victim.
One group has extended the calculus of costs and benefits into law, seeking to substitute them for “fuzzy” notions of fairness and justice. Another group has analyzed the motives of interest groups and laid the foundations for deregulation.
Still another has discovered what it calls “the market for corporate control” and touched off the restructuring of American industry. “Public choice” economics has brought to bear a withering analysis of self-interest in political and bureaucratic behavior.
Indeed, there is hardly an area into which the steady gaze of economics has failed to penetrate—all of it a vision built on a conception of man as inherently, relentlessly self-aggrandizing. Long before there was a “Me-decade,” academics had taught us to see ourselves as Economic Man.
But how realistic is this conception? How selfish are people, really? For the most part, humanists have simply ignored the spread of the new economic ideas. Instead, they have continued to talk about right and wrong in their accustomed frameworks—everything from sermons to novels to TV scripts.