Friday, June 20, 2014

MICKEY MOUSE IS NOT A GUIDE TO ADAM SMITH'S 'BUTCHER, BREWER AND BAKER' EXAMPLE

Jason Brennan is an assistant professor of economics and public policy at Georgetown University’s McDonough School of Business and author of Why Not Capitalism? He posted (19 June ) in Fortune, HERE  
“What the Mickey Mouse Club says about capitalism” 
“While a socialist utopia may be wonderful, a capitalist utopia is even better. Move over, Adam Smith. The new moral champion of capitalism is Mickey Mouse.
Thanks to the Great Recession, capitalism has another PR problem. Marx is back, according to Foreign Policy. College students are demanding new courses in socialist ideology. A ponderous economics treatise advocating confiscatory taxes is a national bestseller.
Such suspicion of capitalism comes and goes with every recession. Socialist economics rises from the dead only to die again. What remains alive, each time, is Marx’s moral critique of capitalism.
Even Adam Smith claims that capitalism is a compromise with selfishness: “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.” Capitalism bribes us to work for the common good. Capitalism economizes on virtue; socialism needs more virtue than we can supply.”
Comment
Adam Smith was not a “champion of capitalism”.  He never knew nor used the word capitalism (a word first used in English in 1854 in a novel by Thackeray - Smith died in 1790).   Neither did Smith know about socialism, an ideal that had not yet been articulated in English, nor tried in Russian or Chinese - though when it was tried it failed miserably and with great suffering by tens of millions of people who switched back to some form on capitalism and state run markets.
Hence the views on which forms of organsiation of societies was better, if not best, remained untried until the 20th century in various forms. That US College students are demanding lessons on ‘socialist ideology’, instead of or supplementary to modern analyses of what we know today as ‘capitalism’ is not surprising given what passes for ‘capitalist’ ideology, as represented by neo-classical economics, especially when hypothesised  into mathematical theories of ‘rational expectations’, ‘utility maximisation’ and ‘general equilibrium’, which bear no resemblance to the real world.  Hence theories of socialism or capitalism do not correspond to the experiences of either ideologies supposedly driving their systems in the real world. 
The short quotation from Adam Smith refers to the famously misunderstood example of the “butcher, brewer, and baker” in Wealth Of Nations.  The quotation has nothing to do with selfishness, and given the real scarcity of the physical means to universal benevolence - if everybody depended on everybody else's benevolence, who would supply them with everything they need? Only an imaginary entity (God?) has unlimited resources to be  absolutely benevolent.  Humans are thereby self-interested in their exchange relationships. Absent the human capacity for exchange, the alternative is violence and submission to oppression.  I have demonstrated this many times on Lost Legacy.  
Smith's example is about how people try to co-operate by exchanging some of what they have for what some of they want since human societies and human language emerged naturally.  They do this co-operatively by mediating their self-interests in their behaviours by using ‘persuasion’ and ‘bargaining’ and by each addressing their potential partner’s self-interest, not just their own.  They try to show how it is in their partner’s interest to co-operate on acceptable terms that addresses sufficient of their partner’s self interests for them to conclude an acceptable bargain that meets some (maybe, not all) of their initial views on their self-interest (see Wealth Of Nations, Book 1, chapter 2, paragraph 2). It is in this manner that  people exchange things they have for other things they want - implicitly they transact in markets by offers and responses: 'IF you give me some of what I want that you have, THEN I shall give you in exchange, some of the things that you want, which I have'.  This is the self-interested bargainer's conditional proposition: 'If - Then'.
What light Mickey Mouse throws on these questions is anybody’s guess, though Mickey Mouse is a cartoon character controlled by his author’s and illustrator’s imaginations.
That Jason Brennan authors Smith's example as to do with selfishness is a tribute to Jason's imagination - and on this occasion, it is also a dis-service to Adam Smith’s quite different points in respect of the “butcher, brewer, and baker”.

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