Adam Smith, a contemporary of America’s Founding Fathers, would conclude today’s culture of faux-capitalism is running off the rails. We’ll use a hypothetical American farmer from that period to illustrate what worked well then, but no longer works. Later, we’ll pull back the curtain to view the world from an economist’s perspective and also ask why so often the profession misses the mark.
Our First Economist was a moral philosopher, focused on questions about how to improve material well-being. What should individuals do? What should societies do?
What constitutes “right” action? How does one define unethical behavior? For Smith, pursuit of “self-interest rightly understood” was the path forward; the opposing path was one of brash self-interest, anathema because it placed individual acquisitiveness ahead of the common good.
To illustrate, we’ll place our hypothetical 18th Century farmer in his field with his capital: two horses and a plow. His entrepreneurial spirit creates prosperity for his family as well as benefits for his community. Industriousness coupled with the products he produces expand his community’s employment and wealth base.
Next, our scenario changes….
To be continued.
~ Jim Sawyer