Work and the Pursuit of Self-Interest

The Productivity of Labor and the Theory of Wages

Work and the Pursuit of Self-Interest

There is little need to investigate at any length the doctrine of individual happiness and self-interest as advanced by Hobbes, Locke, Hume, Hutcheson, and Bentham. They believed in gen­eral that the criteria of human action were pleasure and pain; that human wants were insatiable; that for the most part every­one sought his own happiness above everything else; that work was not pleasurable; and that no one would work except as a necessity. They questioned the ability of material wealth to bring happiness but they presented no clear statement on this point. They recognized that men in general sought wealth, but criticized most wealth-getting as short-sighted.

The Physiocrats accepted the principle of individual self-inter­est as the basis of their economic system. The emphasis upon the right of the individual to determine his own course of action without government interference was the outgrowth of their be­lief in natural law. Quesnay, the leader of the Physiocrats, recog­nized that the rights of one person limited the rights of another, but he argued that an individual knew his own interests best and could be depended upon to carry out the laws of nature. Eco­nomic conduct, specifically, was to seek the greatest pleasure with the least effort.

Adam Smith in his The Theory of Moral Sentiments (1759) and his An Inquiry into the Nature and Causes of the Wealth of Nations (1776) appears to have two views of labor's incentives. This may be due to the fact that in one book he was speaking as a philosopher and in the other as an economist. Smith, in his earlier writings, emphasized the force of vanity in motivating human action. Men strive for more than they need and for more than brings satisfaction, simply to secure the approval of their fellows. The riches themselves are not only useless but harmful to the individual, and usually the rich man finds that the happi­ness he anticipated from them is an illusion. Nevertheless nature uses these characteristics of man to inspire him to labor. In the end man produces useful things for the benefit of others. At the time of writing The Wealth of Nations Smith had no criticism to offer against the pursuit of wealth. He apparently assumed that wealth had happiness value or utility-creating power in no small measure. Furthermore, it was the individual search for wealth, and not vanity, which spurred men to labor. Smith was consistent throughout in sponsoring the principle that nature can and will direct the selfish actions of men toward the social good. An all-pervading force somehow correlates all the individual pursuits of self-interest into patterns that are socially beneficial.

Smith, rightly or wrongly, is given credit for the creation of the economic man. This is merely a short way of saying that the average man seeks his own economic self-interest, that to secure wealth with the least effort is his chief motivating force and be­cause of this he seeks the cheapest market in which to buy and the dearest in which to sell. The followers of Smith accepted the psychological theories of The Wealth of Nations and completely overlooked the teachings of The Theory of Moral Sentiments. They expanded the identification of wealth with happiness which Smith's earlier book had denied.
The chief innovations of the classical writers were: the recog­nition of differences in intensity of desire; the law of diminishing utility; the importance of custom in determining the nature of the expression of self-interest; and the necessity of balancing wealth getting with the pain of so doing. All of these, in one way or another, were modifications of certain characteristics of the economic man. However, they continued to believe that man's self-interest led him to seek wealth.

It was because they refused to accept the definition of wealth proposed by Smith that men like Lauderdale, Rae, and those of the Austrian school broke with the classical tradition. They agreed that man's self-interest and his search for wealth were axiomatic, but they wanted the definition of wealth to include more than mere material goods, or objects with value in exchange.