Human's Selfish Nature

Chapter 2, Section 4: Human's Selfish Nature

From the perspective of history of economic thoughts, "selfishness" became a postulate only after the rise of neoclassical economics in the late nineteen century. In this newly emerged field, wide application of calculus from mathematics gave birth to marginal analysis, and made the concepts of maximization and minimization well accepted. That human act to fulfill selfish desires then became the postulate "under constraints individual maximizes self-interest" — or minimizes cost. The simple call of "selfish" is just a convenient saying.

After the rise of neoclassical economics, this branch of learning about human behaviors became scientific and professionals in the field started to view "selfishness" as an objective postulate. After that, whether human nature is really selfish or not doesn't matter any more. Of course, today many economic scholars still don't discriminate personal value and scientific dialectics very well, and confuse emotion and analysis heavily. On the other hand, connection of personal value or subjective judgment with objective analysis can sometimes perfect economics stunningly. Virtuosos of classical economics such as A. Smith, D. Ricardo and J. S. Mill had such  simple and sincere a personal value that's worth being admired and followed.

So it's correct, that the scientific postulate of "selfishness" we are using today came from the subjective judgments of past worthies. In Smith's classic Wealth of Nations published in 1776, the two paragraphs on selfish behaviors and market operation are the most popularly quoted sayings in economics. I have read them again and again, every time I ruminate I can gain new enlightenment and feel the heaviness within. He wrote: 

"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 favor, and shew 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 the far greater part of those good offices which we stand 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 ...

"Every individual, therefore, endeavors as much as he can, to employ his capital in the support of self-interest maybe of the greatest value. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own security and his own gain; and he is in this led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it."

After years of digestion of Wealth of Nations, I think Smith's view on "selfish" requires supplementation from two aspects. First, though Smith correctly pointed out selfish can promote effectually the public interest, he overlooked the harm that selfish can as well bring to the society. The latter plays importantly in the problems of transaction cost and property right, which have been the focus of my research. Philosophically, emphasis on the harm is the main difference between my Economic Explanations and the Wealth of Nations, so to say. However, my major conclusions, instead of discrediting Mr. Smith, have strongly reinforced him. Nevertheless, as I have a better understanding of selfishness, my explanations on behaviors shall be superior.

Second, Smith failed to indicate selfish is human nature. In his view, selfish is compelled: it's not someone desired, people just have to be selfish. This "survival of the fittest" viewpoint — many problems in Wealth of Nations were viewed in this way — subsequently influenced C. Darwin's (1809-1882) shattering work, On the Origin of Species.

My teacher Alchian published an important paper, Uncertainty, Evolution and Economic Theory, in 1950 and it ignited a massive debate on scientific methodologies that spanned for nearly two decades. The "idiots and gas stations" example I gave in Chapter 1, Section 4 was inspired by that paper.

Alchian's view shared some similarity with Smith's, but the former came much fiercer. Smith meant selfish is for survival; Alchian asserted it doesn't matter whether idiots are selfish or not, because after elimination the behaviors of left idiots inevitably accord with those when they are. (Translator: Alchian's assertion must be based on there is at least one selfish individual in the society. In fact, his result was just extrapolated from the dynamic view point of a society as an interaction system, where the selfishness of selfish people, if not all, is a sufficient driving force.)

In 1976, biologist R. Dawkins published The Sellish Gene. In that book he cited various examples and proved that selfish is innate in animals, inherited and unchangeable. The book gave rise to a new branch of learning — bioeconomics. Another teacher, J. Hirshleifer, of mine is an advocate of this new learning. More than a decade ago he wrote to me and said the learning was gonna have a bright future.

To be concluded, there are four views in "selfish". Smith thought it's compelled; Alchian always took selfish as a postulate, though, he asserted idiots would bring the same result; Dawkins took it inherited. I don't have any invention about selfishness myself, and just think a theory the simpler the better. My choice is to view selfish as a postulate of constrained maximization, a tradition from neoclassical economics. Once constraints are properly handled, explanation power won't be less.