How Society Benefits from the Self-Interest of the Individual
Each week, a group of individualists in my neighborhood get together for drinks. And each week as I enter the restaurant and approach the host stand, I am greeted with, “Are you with the individualist group?” This always makes me chuckle, “individualist group” seems like a such a contradiction in terms.
Critics like to characterize individualists as hermits, unwilling to work with the rest of society and preoccupied with their own self-interest. To be sure, self-interest does play an integral role in the classical liberal tradition. But this does not make its followers antisocial by any means. In fact, without society, our self-interests could not feasibly be served. And without self-interest, society’s ends could not be met either.
As Dan Sanchez writes:
“The truth is, the self-interest-centered individualism of the centuries-old classical liberal tradition has never been antisocial. Indeed, from the beginning, one of its main objectives has been to explain and promote human communities.”
Echoing this sentiment, economist Peter Boettke says:
“The classical liberal political economists treat the individual not as atomistic, but as embedded within social settings – in families, in communities, in history.”
It is precisely the insights of liberalism that allow us to understand how individuals operate within larger groups, and how self-interest actually serves to benefit society as a whole. Mises touches on this when he discusses the importance of individuals working in societies in his book Liberalism.
We Need Each Other
“A man living in isolation has no moral rules to follow. He need have no qualms about doing anything he finds it to his advantage to do, for he does not have to consider whether he is not thereby injuring others.”
At first glance, such a lifestyle might sound appealing to some. But in practice, it would be quite miserable. For even though a man living in isolation has to worry about no one but himself, he is also left to worry about meeting all of his needs with no other resources but those he provides on his own.
To avoid such deprivation, we have chosen to join society and engage in specialization and voluntary exchange. By doing so, we are able to exchange the fruits of our own labor.
This social cooperation has allowed us to thrive as individuals and thus, as societies as well.
As Mises writes:
“For the life of the individual in society is possible only by virtue of social cooperation, and every individual would be most seriously harmed if the social organization of life and of production were to break down.”
If I was left with no other option but to forage for my own food, I would quickly go hungry. The hunter-gatherer lifestyle is not my area of expertise. But this goes both ways. Without my demand for sustenance, producers of such would also be unable to provide for other necessities in areas where they do not specialize. Each of us produces for our own benefit, specifically to serve our own self-interest. But by doing so, we also create value for others.
Adam Smith touched on this when he said:
“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 necessities but of their advantages.”
This reliance on others within a society is fueled by our own self-interests. But this encourages us to work together because, to put it simply, it is vital to our own quality of life and in many instances, our own survival.
Critics of the classical liberal tradition do not believe that the economy is capable of functioning without government oversight specifically because of individual self-interest. Many think that if an individual has the opportunity to do something terrible to another person, they will. But since the market operates through incentives and feedback, true liberals understand that individuals are capable of self-regulation.
If an individual wishes to be successful in his own field of expertise, he must take the rest of society into account. Doing harm to others only serves to do harm unto himself, especially in market interactions.
As Mises says:
“In requiring of the individual that he should take society into consideration in all his actions, that he should forgo an action that, while advantageous to him, would be detrimental to social life, society does not demand that he sacrifice himself to the interests of others. For the sacrifice that it imposes is only a provisional one: the renunciation of an immediate and relatively minor advantage in exchange for a much greater ultimate benefit.”
True, a producer could knowingly set out to harm a consumer by providing an unsafe product.
However, by doing so he risks his own reputation and thus, his own wellbeing. Let’s say that by committing harm by not thoroughly inspecting his produce, for example, a farmer saves himself time. But as a result, many consumers become ill and immensely unhappy with him. As a result, the consumers subsequently decide to take their business elsewhere.
Those few extra hours the farmer gained by neglecting to properly inspect his produce have now resulted in a loss of profits. And this loss in profits may continue until he is able to mend his bad reputation with consumers if he is able to do so at all. The farmer doesn’t need government force as an incentive to behave properly. He need only understand how incentives work.
A bad reputation means fewer people wanting to interact with you and voluntarily exchange with you. This is exactly why Mises writes:
“Whoever gives up a momentary advantage in order to avoid imperiling the continued existence of society is sacrificing a lesser gain for a greater one…The continued existence of society as the association of persons working in cooperation and sharing a common way of life is in the interest of every individual.”
But critics cannot seem to see past this idea that self-interest is somehow always immoral. They believe individuals should sacrifice certain whims and desires and become a part of society simply because the act of sacrifice is the essence of true morality. But Mises knows better.
“The meaning of this regard for the general social interest has frequently been misunderstood. Its moral value was believed to consist in the fact of the sacrifice itself, in the renunciation of an immediate gratification. One refused to see that what is morally valuable is not the sacrifice, but the end served by the sacrifice, and one insisted on ascribing moral value to sacrifice, to renunciation, in and for itself alone.”
“But sacrificing is moral only when it serves a moral end. There is a world of difference between a man who risks his life and property for a good cause and the man who sacrifices them without benefiting society in any way.”
Self-interest keeps the gears of society in motion. It is the reason societies have managed to endure for so long in spite of the vastly different personalities that exist within it. So to call classical liberals atomistic is not only frivolous, it also discounts the pivotal role these individualists play in society as a whole. We don’t have to agree on some of the finer points in life, but so long as we serve our own interest by producing and exchanging with others each member of society benefits. Therein lies the beauty of the free market.