Friday, December 23, 2011

The Real Welfare Gain from the Holidays

One of the most famous quotations in economics points out how the market system enables each person’s self-interest to benefit others:

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 self-interest.

That’s from The Wealth of Nations.

But self-interest alone can’t and doesn’t sustain a successful economy like ours. We humans are wired to care about the welfare of family, friends and even total strangers. Adam Smith himself recognized this. In The Theory of Moral Sentiments, he noted that

How selfish soever man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others and render their happiness necessary to him though he derives nothing from it except the pleasure of seeing it.

I doubt our society could survive long if we weren't influenced by our altruistic instincts in small and large ways every day. There’s no better time than now to think about and act on these “principles in our nature” that give use pleasure in bringing happiness to others. Perhaps that’s the ultimate enlightened self-interest.

Enjoy the Holidays!