**📅 Date:** [[2025-01-04-Sat 〚Adam Smith's View on Human Nature ▪ Market Competition〛]] **📌 Time**: *Wealth of Nation* - 1776 **💭 Note:** ➤ In small circles, we talk about love; in large circles, in the range of strangers, we talk about rules. (Because of this, Adam Smith found a solid foundation for the market economy, and that's why we regard Adam Smith as the father of the market economy.) ➤ Your feelings of sympathy (or empathy) are stronger for those closer to us, both in terms of physical proximity and emotional connection. ➤ Will the market economy dilute interpersonal relationships? #👾/Question ⇩ 🅻🅸🅽🅺🆂 ⇩ **🏷️ Tags**: #💰/Economy **🗂 Menu:** ➤ ⌈[[Cost]]⌋ ➤ ⌈[[💰 Uncertainty, Evolution and Economic Theory -Armen Alchian 1950]]⌋ **📑 PDF**： **🌐 Link**: ----- ### Are people really rational or not? >[!info] Whether humans are rational or irrational has nothing to do with economics. What economics cares about is not the question of whether people are rational or irrational, but how people can survive, under what conditions, people are more likely to survive, and what kind of behavior is more likely to survive. ==In this way, economics has found a stable foundation, which has nothing to do with whether people are rational or not.== ## 1. Human selfishness drives social progress ----- - Are people inherently selfish or not? ##### **Opinion 1** Economics is built on the premise of human selfishness, but in fact, people are often not selfish, so economics may not be correct. When people are selfish, economic theory is right, but when people are not selfish, economic theory is wrong. ##### **Opinion 2** People can sometimes be selfish, but they should also be moral. - Especially for businessmen, on the one hand, they have to struggle and fight in the marketplace, but at the same time, the blood flowing in a businessman's veins should be moral. Many people say, Adam Smith's "The Wealth of Nations" (Wealth of Nation, 1776) , advocates that people are selfish. >[!quote] >"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 no 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." - _The Wealth of Nations, Book IV, Chapter II_ People also point out that Adam Smith wrote another book, called =="The Theory of Moral Sentiments, in 1759 ==. From the title of this "The Theory of Moral Sentiments", **talks about how people should have morality, so people should have duality, on the one hand, they are selfish, but on the other hand, they should be moral**. Is Adam Smith's view really self-contradictory? ### "The Theory of Moral Sentiments" was published in 1759 ### "The Wealth of Nations" was published in 1776 - It's a longer book and more famous >[!info] "The Theory of Moral Sentiments" is a total reflection of Adam Smith's entire theoretical framework, and "The Wealth of Nations" is part of it. ## 2. Human nature is selfish but also has sympathy and love >[!abstract] Adam Smith first said that people are selfish, and those who are not selfish at all, who don't even love themselves, and who abandon themselves, are not respected in society. > >But Adam Smith then said that people are not only selfish, they also have sympathy, that is, they have the ability to put themselves in others' shoes. He regards what he thinks is the happiness or unhappiness of others as part of his own happiness or unhappiness: when you're happy, I'm happy; when you're in pain, I also feel the pain. This is a natural ability, called "sympathy," which everyone has. ## 3. Human compassion is limited and decreases with distance ------- >[!quote] “Human sympathy decreases rapidly as the distance between people increases.” Ex: What's the ratio between the number of contacts in your phone and the number of people who are really willing to drop everything and help you regardless of the cost? #### A story from "The Theory of Moral Sentiments": >[!quote] >"Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all the labours of man, which could thus be annihilated in a moment." --- Part III, Chapter III _《The Theory of Moral Sentiments》_ what will he do? - He will first take out a map to check how far China is from London, to see whether this earthquake would affect London. Upon seeing that it is half a globe away, he will feel safe in London. - Then what will he do? He will mourn for the Chinese people who died, post a candle on his social media, and lament the fragility of humans and the power of nature. - Then what will he do next? He will return to his life, caring about his daily routine and diet. At this time, if he cuts his finger, the importance of this event far exceeds what happened in China. - Note that this is a proper English gentleman, and this is the extent of his compassion. This is the normal reaction one should have, that's all. ==how emotional responses and feelings of sympathy can be influenced by distance and connection== ## 4. Love alone is not enough, strangers need market coordination ------- >[!info] We spend our entire lives, a lifetime, struggling to win and maintain the friendship and love of a few people, but we need the help of thousands of people at all times. - If we look at what we eat, wear, and live in, how many people are involved, how many people are helping us, but they don't love us, they don't know us. What to do? How to fill this huge gap? **The answer is the market**. - A market is a place where strangers deal with strangers, a place where strangers serve strangers. ## 5. The dichotomy of interpersonal interaction: small circles rely on love, and the larger world relies on the market --------- >[!abstract] Dichotomy of interpersonal interaction > People are selfish, they have sympathy, they can love, but love is very limited, as the distance between people increases, love will decrease. > >We can't rely on love, love is not enough. What we rely on is the market. The market is a place where strangers interact with strangers. >[!quote] > "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." --- _The Wealth of Nations" (1776)_ Business is the greatest charity, and thus, we see the following continuum: >[!summary] ==People are selfish —> They have love —> Love is limited and can't expand —> Hence, we need a platform for strangers to help each other, which is the market==. We won't apply the rules of interacting with strangers to our small circles, nor will we apply market rules to our families or friend circles. Similarly, we won't demand that strangers in society meet the requirements and standards that we have within our families.