Well blow me down!
In early 2009 I was invited to Beijing to participate in a ‘dialogue’ on ‘the knowledge society’ which was being run between various academic institutions in Australia and Peking University. The ‘dialogue’ was quite formal and diplomatic – I recognised the genre from some things I’d seen with John Button when in Asia. It involved a bunch of us sitting at a table with translators sitting in little booths. This made free flowing discussion a little tricky and as a result, instead, people made ‘interventions’ which were little set pieces and on the conversation rolled. It struck me as a strange conversation with the Chinese mouthing a lot of statements which, in the west, are regarded as platitudes.
We needed to avoid excess greed, not lose sight of wisdom, and stuff like that. This was partly the time of the discussion – we were still in the shadow of the GFC. Anyway, I rather liked this conversation for its strangeness, and as I learned in history, it’s amazing what you can learn by assuming people mean what they say, rather than assuming they’re just saying stuff to sound good. Then you can try and figure out what they’re getting at because they probably look at the world in a different way to you. Nevertheless as I listened to the discussion it seemed to me that we weren’t managing to rise above platitudes and something had repeatedly occurred to me as I’d listened. I hadn’t said anything because to make an intervention one had to make a little mini-speech. I like to improvise so I’m a bit wary of speeches, but I thought I’d have a crack. So I opened with something like this.
We have spoken this morning of many qualities that a true knowledge society must aspire to. We heard of many things. The need for
- Partnership and collaboration
- Knowledge about the environment
- Knowledge about science
- Knowledge about the social sciences
- Knowledge of each other’s literature.
Yet many societies have had much of this without either their people or their economies being prosperous and healthy in the widest sense. The most obvious example was the Soviet Union which had great learning and invested in technology and so on. Yet its institutional structure meant that things did not function effectively with each other. There were vast factors of production brought to bear, great skills and insight, a deep culture, and yet wherever they were brought into combination with each other, their relation was dysfunctional.
The difference between Soviet Russia and the West, and indeed China today is that institutions have been developed such that the relationship between these qualities, these factors of production, and indeed factors of life is more felicitous. They fit together and operate to each other’s mutual benefit.
One thing we have not heard about this morning, is self interest. We have heard about how bad greed is and how greed has brought us down. Indeed it has! I don’t want to speak in favour of greed. But I do think self interest is a critical ingredient in whether or not we can bring our capacities into productive relationship with each other.
It may not surprise you to know, dear reader, to hear how I developed my thoughts about fitting the interest of self and other together.
Adam Smith is regarded as the apostle of self-interest, and the theorist of self interest. Of course he was as against greed as we all have been here this morning – indeed if you read his works, passionately so. But, though some associate him with the idea that greed is good, Adam Smith should more rightly be regarded as the theorist who tried to work out the conditions under which self interest was coincident with the social interest. And of course his idea – in fact building on ideas that had been around for a while – was that, in pursuing their self interest, in the right circumstances people might actually also be pursuing in the most effective possible way the social or collective interest.
And so where power is diffused in the society, where markets are competitive, people are well informed, and treated with dignity, Smith shows that we have nothing to fear from their expressing their self interest in a well functioning market. That self interest will be coincident with social interest, even if the person seeking to satisfy their own interest has no intention, or even knowledge that he is serving the public interest.
Smith also argues that the pursuit of self-interest played its role in diffusing power through Europe. He explains how this occurred in various ways. For instance he argued that, in pursuit of more rent, the most powerful landlords were led – by nothing more than their petty vanity and pursuit of further wealth and baubles (provided by countries such as China!) – to cede greater autonomy to their tenants. For the only way to increase rent was to increase the productivity of farms and the tenants needed more autonomy to do so because they were the farmers and so they were the ones who knew how to improve farm productivity. And so the landlords ceded power to a class that gradually grew in power, through their industry, ingenuity and thrift as the landlords declined through their profligacy and vanity. Likewise manufacturers were growing in wealth through their industry, ingenuity and thrift.
In Smith’s words.
A revolution of the greatest importance to the public happiness, was in this manner brought about by two different orders of people, who had not the least intention to serve the public. To gratify the most childish vanity was the sole motive of the great proprietors. The merchants and artificers, much less ridiculous, acted merely from a view to their own interest, and in pursuit of their own pedlar principle of turning a penny wherever a penny was to be got. Neither of them had either knowledge or foresight of that great revolution which the folly of the one, and the industry of the other, was gradually bringing about.
It was thus, that, through the greater part of Europe, the commerce and manufactures of cities, instead of being the effect, have been the cause and occasion of the improvement and cultivation of the country. So I would like to put self interest back on our list of things that we need to nurture – responsible, ethical self interest.
The broadening of self interest beyond commercial interest. Human sociality, serendipity and the internet
And we should be mindful of the fact that the internet, and particularly that incarnation of the internet now known as ‘Web 2.0’ or to be more descriptive ‘collaborative web’ now offers up a whole new world to us – like the New Worlds opened up to Europeans after the Renaissance whether it was the Americas or the southern skies, the power and breadth of self interest is now asserting itself in incredible ways on the internet that we could not previously have imagined.
So we have things like
- Open source software
where people express particular desires of their own – whether they’re driven by love of the subject, or altruism, or the compulsion to prove that they’re right or that someone else is wrong or by the desire to fix some bug in their own software – and through a process that sometimes seems like alchemy, through the actions of firms and people seeking to serve their own needs (including to express themselves) a global public good is produced for all.
These things are the product not just of knowledge inputs, and not particularly of commercial self interest – although there is some of this – but rather the product of the way in which the internet is now scaling up natural human sociability and gregariousness – our very human desire to engage, to communicate, to persuade. (Adam Smith thought that our instinct to “truck barter and exchange” which he put at the foundation of his economics was perhaps itself an expression of an even deeper human inclination to communicate and persuade.)
Facebook is another great revolution of human sociability, but the people who put it together didn’t do it because ‘knowledge’ (for instance of sociology) was an input. Their natural human sociability was what was driving them, or if it wasn’t what was driving them – commercial motivation played it’s part and is playing an increasing part of course – it’s what has driven Facebook’s users and thus its success.
I spoke about the implications of this for Government and also of the way in which intellectual property was now getting fairly seriously in the way of progress.
How can I recall this in all this detail? Because at the break one of the Chinese delegates came up to me and said that he was particularly interested in my comments about Adam Smith and the diffusion of power and asked me to email him what I’d said. I said I would but also privately mused on Bart Simpson’s question “Who the hell are you?” Well he turned out to be the Junior Minister for Education. So I wrote the email and sent it off. I have no idea if he got it or not. Despite sending a reminder I never got an acknowledgement.
Anyway, here I was reading a paper mysteriously entitled “A ‘Third Culture’ in Economics? An Essay on Smith, Confucius and the Rise of China” and blow me down if it doesn’t say this:
Recently, Adam Smith received a lot of attention in China, even on the highest level of government, with Premier Wen Jiabao referring to Smith repeatedly (see e.g. http://www.fmprc.gov.cn/eng/zxxx/t535971.htm) There are extensive commentaries on Smith (e.g. Luo Weidong 2005). The reason is the ongoing reception of the ‘Theory of Moral Sentiments’.
And following the link provided in the article, sure enough we find Web Jiabao entertaining the troops at Davos:
The society that we desire is one of equity and justice, is one in which people can achieve all round development in a free and equal environment. That is also why I like Adam Smith’s Theory of Moral Sentiments very much.
In 1776, Adam Smith wrote the Wealth of the Nations. And in the same historical period, he wrote the Theory of Moral Sentiments. Adam Smith made excellent arguments in his Theory of Moral Sentiments. He said in the book to the effect that if fruits of a society’s economic development can not be shared by all, it is morally unsound and risky, as it is bound to jeopardize social stability. If the wealth of a society is concentrated in the hands of a small number of people, then this is against the popular will, and the society is bound to be unstable. . . .
LB [Lionel Barber]: Premier Wen, I realise we’re running short of time. I had my own quote from the Theory of Moral Sentiments.
WJ: Well, I think for quite some time this book has not attracted due attention or attention that it deserves. I think it is as important as The Wealth of Nations. He made a reference to the invisible hand only on two occasions in these books. One, he refers to the market; the other, he talks about the morality. And please go ahead with your quote.
LB: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others and render their happiness necessary to it, though he derives nothing from it except the pleasure of seeing it.”
WJ: I think this is very well said, and I have been reading the book and this book I carried with me in my suitcase on the trip.
If you go to the original source you will find that this is mixed up with Wen Jiabao’s defence of a one party state at least at the national level which kind of spoils the party – though at least he gives a better account of himself than the PM of Singapore who recently gave a speech saying that Singapore could not afford more than one party because it couldn’t field more than one ‘A team’!! But it was intriguing to come across this evidence of why the Junior Minister for Education might have been so interested in Smith’s take on economic and political development!!