“Rational self-interested maximizers” ruin the world…
One of the most damaging popular ideas is the belief that the best outcomes emerge from everyone pursuing their “self-interest” in a free market. There is a kind of “folk libertarianism,” affirmed even by people who do not self-identify as libertarians, that sees nothing wrong with the “rational” pursuit of one’s own “ends,” even if in practice that amounts to “caring about very little beyond getting rich.” This is because market transactions are “voluntary” and therefore only occur when they create “mutual benefit.”
You hear this defense from businesspeople every time someone grumbles about how the skewed distribution of resources seems a little unjust: “But,” they say, “I am a creator of jobs and wealth. I give people work, which they take because it benefits them. I sell goods, which people buy because they desire them. I force nobody to transact with me, therefore my transactions occur because they make other people better off.”
If you believe this, you not only think that there’s nothing wrong with enriching yourself, but you may go so far as to think it’s downright benevolent! How kind it is of me to sell subscriptions to Current Affairs, a magazine that brings its readers inestimable happiness. Why should I give to charity when business is already a charity? Theorists of the wonders of mutual self-interest may cite a famous passage from Adam Smith:
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 butcher cuts the meat and I buy it, and everyone is better off. (Excepting the animal.) I do not have to care about the butcher, and the butcher does not have to care about me, it is enough for us to simply care about advancing our own interests.
You can see why some are attracted by the libertarian idea that most important principle in social philosophy is “minding your own business”—if you “don’t hurt people and don’t take their stuff,” as FreedomWorks’ Matt Kibbe summarized it, you have the ingredients of a sound social order. Or, as a famous libertarian philosopher put it, “It’s enough for a man to understand his own business, and not to interfere with other people’s.”
You will not be surprised that, as a noisy socialist, I do not find this idea satisfactory. I think those who solely pursue their own material interests, even if they are do so in a law-abiding and nonviolent manner, are bad people. But also, if we all followed this framework (which fortunately we do not), we would produce a much worse society. If everyone simply “looks out for #1” and is trying to maximize their gain, we become much less well-off than if we are cooperative and value the interests of others as well as our own.
You can see this from the classic puzzles of economics. Economists, for example, are unhealthily obsessed with the “prisoner’s dilemma.” In the prisoner’s dilemma, two co-defendants, interrogated separately, must decide whether to stay silent or betray the other. If they both betray, they both go to prison for two years. If one of them betrays, but the other stays silent, the silent one will go to prison for three years and the snitch will go free. If they both stay silent, they’ll both get one year in prison. One reason the scenario interests people is that each prisoner trying to “maximize his advantage” will betray the other guy, leading to worse outcomes for both than if they had cooperated. The “rational” pursuit of self-interest by all parties can lead to sub-optimal outcomes.
The same is true in the other that other chestnut of economics, the “tragedy of the commons.” This describes the situation in which resources owned in common will be destroyed by the operation of “rational self-interest.” In a famous 1968 article, Garrett Hardin envisaged a situation in which village herdsmen used an unowned pasture for grazing. If everybody uses only the amount of land necessary to keep the land sustainable, there is no problem. But, Hardin said, “as a rational being, each herdsman seeks to maximize his gain,” and “each man is locked into a system that compels him to increase his herd without limit.” This means that each herdsman’s cows will gobble up more and more of the pasture, ultimately leading to the destruction of a commons that could have served everyone fairly well. Therein lies the tragedy: in a quest to defeat the other guy, we end up defeating ourselves.
Of course, there’s a pretty simple way to avoid these situations: don’t have a society in which “rationality” is defined as “trying to maximize your individual gain.” If there is an ethic of solidarity among prisoners, for instance, there is no longer a dilemma: if everyone believes betraying someone is wrong, that snitching is the worst thing a person can do, then the interrogation sessions will yield a socially optimal outcome (for the prisoners, though perhaps not for law enforcement).
The same is true in the labor movement, which faces similar “dilemmas.” If no worker cares about any other worker, and each is just trying to maximize their own gain, workers will be pitted against each other and they will end up worse off than if they had banded together against their employer. Imagine the following: we have two workers looking for jobs. The capitalist absolutely needs at least one worker to keep the factory running.
The capitalist offers a wage of $5 an hour. Worker A says “I’m not working for peanuts.” Worker B says “I’ll take it.” Worker B gets the job, Worker A gets nothing. Now, imagine that both Worker A and Worker B say they’ll take the job. The capitalist replies: “I’m sorry, the wage is now $3.” The capitalist knows that both workers need jobs are bids them down to the lowest possible wage. Ah, but now imagine a situation in which Worker A and Worker B consider their destinies intertwined. They have taken the words of “Solidarity Forever” to heart: What force on earth is weaker than the feeble strength of one / But the union makes us strong. They both refuse to work until the capitalist gives them $15 an hour each plus a dental plan. Because the capitalist can produce no wealth without labor, he is forced to capitulate.
This is simple stuff, but the lesson is important: by holding firm together, by refusing to act on individual self-interest alone, we end up better off. And it’s why unions hate “scabs” so much: the scab who crosses a picket line is like the prisoner who betrays—they ruin the possibility of achieving the outcome most beneficial to the working class as a whole. They do not see that a world in which other people acted the same way would yield the worst set of outcomes.
The “tragedy of the commons,” then, is not really about the commons: the tragedy in Hardin’s scenario is that his herdsmen think “rationality” means “trying to maximize your own gains even at the expense of other people.” If, on the other hand, the herdsmen have a cooperative ethic, and refuse to do anything that would harm the interests of others, the commons are preservable indefinitely. “Ah,” our economist replies, “but what about ‘free riders’?” If the commons are available to all, even if 99% of users act responsibly, if one person comes along and decides not to obey the norm, and takes an unsustainable amount, they can ruin it for everyone else.
This is true, but note what it means: the moment a libertarian shows up, with their amoral uninterest in the welfare of others, a perfectly good cooperative arrangement will be destroyed. All it implies is that no society that wants to achieve optimal outcomes for all should tolerate libertarians in its midst. They should be banished to their floating sea-cities where they can backstab and betray one another at their leisure.
In reality, in situations “tragedies of the commons” are possible, people find various ways to cooperate and keep the libertarians in line. Elinor Ostrom’s fascinating Nobel Prize winning work Governing the Commons gets beyond abstract economic theorizing and examines the ways in which people actually manage public commons to ensure that they don’t get destroyed. Some have used the theory of the “tragedy” to argue that everything must be privatized: Ostrom quotes economists saying things like “the only way to avoid the tragedy of the commons in natural resources and wildlife is to end the common-property system by creating a system of private property rights” and “the establishment of full property rights is necessary to avoid the inefficiency of overgrazing.”
This turns out to be nonsense, as shown by an examination of successfully-managed commons that do not employ privatization. It turns out we are not, as Hardin implied, “locked in” to our tragic destiny: we can change it, if we are so determined. (There are unsuccessfully managed commons, and I am not suggesting that the “tragedy” does not occur—see overfishing—or that human beings are selfless angels. I am saying that this is avoidable, and that a society of capitalists achieves worse outcomes than a society of socialists. If you don’t believe me, consider the fact that competitive institutions like corporations and militaries are in many ways internally collectivist: they constantly emphasize teamwork, trust, and shared culture.)
Cooperation and trust make rational sense: with them, we succeed, without them we destroy one another. When it becomes acceptable to betray others, or take more than your fair share, everyone ends up losing. As Joseph Schumpeter noted, “no social system can work” in which everyone is “guided by nothing except his own utilitarian ends.” It shouldn’t take much thinking to realize that selfishness is destructive: when children fight over a balloon instead of sharing it, they end up popping it, when nations look after their own interest alone, they can end up in mutually destructive warfare, and when companies try to maximize their individual profits, they end up destroying the planet. Competition can stimulate innovation, or it can cause collective ruin.
The good news is that human beings on the whole tend to be a cooperative species. Samuel Bowles and Herbert Gintis report the results of social experiments showing that people “care about the well-being of others and value fairness and other norms of decent behavior” and these preferences are “ubiquitous” around the world. In simulated “games” where people have the chance to decide how much money to give another person, they generally don’t try to take as much for themselves as possible, but obey standards of fairness. They look askance at those who harm others. This, Bowles and Gintis write, is “essential to sustaining society and enhancing the quality of life”—in our day-to-day existences, a world in which everybody acted like “homo economicus” (a sociopath who simply wants to maximize their own gain) could not last long.
What, though, of the butcher in Smith’s example? Surely our interactions with this humble petit bourgeois merchant show the wonders of mutual self-interest in action? But here I’d like to return to the dead pig. What is in two parties’ mutual self-interest may very much not be the interest of a third, who has no say in the matter. That may seem a silly example, but we have a very real one today: as economist Rob Larson has written in these pages, climate change is what you get when you don’t look at the well-being of the whole.
Individually satisfactory transactions – I give McDonald’s a buck, they give me a hamburger – can and do contribute to collectively catastrophic outcomes. We may maximize our pleasures today by ruining the possibility of future generations sharing these same pleasures. Because we measured success only by looking at a small sliver of the sum total of human interests, we ended up with an outcome that serves some at the expense of many.
Clichés have a tendency to be true. We get more done together than we do alone. To the extent we are capable of altruism and solidarity, we produce a better world, and to the extent we are capitalists who think “there is no such thing as society” and pursue our individual interests, we mess things up for everyone. When workers of the world unite, there is no limit to what they can achieve. Solidarity forever!
(header image: US Rowing Gold Medalists 2012 London Olympics, from left, top row: Esther Lofgren, Caryn Davies, Eleanor Logan, Zsuzsanna Francia and Taylor Ritzel. (Bottom) Meghan Musnicki, Erin Cafaro, Mary Whipple and Caroline Lind.)