The following article is part of a series. Read Part IPart II and Part III.

If we believe that man is evil in his nature, therefore that a person himself is dog eat dog (animal), then the hard hand of a ruler is called for. If we believe that people in and of themselves, in their nature, gravitate toward good, then it is possible to loosen up the reins and live in a society that is more laissez-faire.
- Tomas Sedlacek in Economics of Good and Evil

Warning: NSFW

This week the latest episode of Dan Carlin's Hardcore History was released. At one point, Dan quotes Lt. Col. Dave Grossman, from the book On Killing: The Psychological Cost of Learning to Kill in War and Society, in saying that it is the "proximity to the victim that determines how resistant to killing people tend to be."

It is a rather obvious, yet profound, point that is made in a more humorous way by the comedian Louis CK (warning: lots of vulgarity) as he discusses the difference between how he reacts to nameless, faceless person in an adjacent car and how he would treat a person standing next to him in an elevator. In the separation of the car, he spews hate, but in the elevator he is far more tolerant. When it comes to human morality, proximity matters.

Adam Smith is most well known today for The Wealth of Nations and, in that book, his single (perhaps offhanded) mention of the Invisible Hand is the most famous passage. To say we have literally built our entire growth economy around this notion -- that a market where everyone works in their own selfish, self interest will magically produce optimum outcomes for society -- would not be an overstatement. Here is that quote, as it's commonly presented:

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.

...he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

Adam Smith. Image from  Wikimedia . 

Adam Smith. Image from Wikimedia

Interestingly, as listeners to our podcast heard last year when I interviewed Econtalk host Russ Roberts on his book How Adam Smith Can Change Your Life, Smith's primary obsession was not with economics. It was with morals. His first book -- The Theory of Moral Sentiments -- is a fascinating prism through which to view The Wealth of Nations.

If we listen to the leading voices of today's economics profession, we are told that we are consumers, a rational, utility-maximizing creature of their models that has taken to being called Homo Economicus. Yet, Adam Smith -- whose invisible hand has been used to justify all manner of private vice in the name of the common good -- clearly recognized that people are motivated by far more than their own rational self interest. In The Theory of Moral Sentiments, he wrote:

Regard to our own private happiness and interest, too, appear upon many occasions very laudable principles of action.

And later:

Kindness is the parent of kindness; and if to be beloved by our brethren be the great object of our ambition, the surest way of obtaining it is, by our conduct to show that we really love them.

The Czech economist Tomas Sedlacek argues that there is an invisible hand, but that it is not constrained to simply the realm of the market. It crosses into the realm of the social, the psychological and the historical. It compels us to act and react as a society in certain ways which often are not, in a purely economic sense, wholly rational. From Economics of Good and Evil:

For small acts (hunting together, work in a factory), small love is enough: Camaraderie. For great acts, however, great love is necessary, real love: Friendship. Friendship that eludes the economic understanding of quid pro quo. Friendship gives. One friend gives (fully) for the other. That is friendship for life and death, never for profit and personal gain.

In times past, the butcher, the brewer and the baker -- particularly in the age of Adam Smith -- would all have been people we personally knew. They lived up the street. Our kids would have played with their kids. We would likely have gone to the same church, received the same moral teachings and been part of the same circle of peers. To say our transactions were purely market-based is missing a lot. I care about the butcher, the brewer and the baker, not in some abstract way that I generally care for humanity, but in a very real way because I know them. 

Sedlacek shares this insight as well and compares love -- yes, I assure you, he is an economist -- to a force that behaves differently based on proximity.

It could almost be said that “small love” is a kind of gravitational force which, while weak (and almost imperceptible in comparison with other forces), is similar to charity in that it is a weak love, difficult to detect in comparison with other loves (which are intense and concentrated on one or a couple of people). But just as with short but strong (nuclear) forces and distant and weak (gravitational) forces, charitas holds together large units, in our case society—in a similar way to how gravity keeps together objects at large distances but is not as “strong” as nuclear or electric forces.

In the name of maximum growth, we have moved the morality of market transactions in our society -- in pursuit of maximum efficiency -- from the realm of near and strong to that of distant and weak. So that my meat is (theoretically) the highest quality at the lowest price, I now bypass the butcher -- he has long been put out of business -- and instead buy it from a national retailer. The clerk there does not know the shareholders who own the company, nor do they know the clerk. Or me. None of us know the actual people who cared for the animal, slaughtered the animal, processed the animal or transported the meat to the store. Nearly all moral dimension in this transaction have been removed leaving me, the clerk and the shareholder owners of the company free to treat each other with the least amount of social connection possible.

Yet, society still operates with an amazing degree of individual decency. It is still news when someone acts terribly because it is a rare occurrence. That should be a refreshing observation and should make us less fearful of a world where we sacrifice growth for stability, where we focus less on maximizing efficiency in our markets and more on building the resilience of our cities, towns and neighborhoods. Unfortunately, that is not the case, and so we've shown, in the face of all these distant and weak moral connections, an inclination to turn our power to do good over to others with the hopes that they will enforce a better world.

Again, from Sedlacek:

The question of whether man is good or evil is a key question for the social sciences. “Regulation” will develop from it. If man is evil by nature, then it is necessary to force him toward good (in the context and under the pretext of “social good”) and limit his freedom. If it is a dog-eat-dog world, as Hobbes believes, we need a strong state, a powerful Leviathan that forces men toward (men’s unnatural) good. But if on the other hand human nature (or something of the ontological core of man’s being, his very “I”) is good, then more laissez-faire is possible. Man can be left alone, because human nature will automatically have a tendency to steer him toward good.
State interventions, regulation, and limits to freedom need be applied only where man as part of a whole is not sufficiently (collectively) rational, where spontaneous social coordination works poorly or where forced coordination is capable of ensuring better results (in the case of externalities, for example). This is one of the key questions for economics: Can the free will of thousands of individuals be relied on, or does society need coordination from above?
Are we a society of villains or of neighbors?

I believe we are a society of people inclined to be neighbors who have adopted an economic structure predicated on our villainy. By shifting our markets from interactions that are predominantly distant and socially weak to those that are near and socially strong, we can start to move beyond our fragile dependence on growth and debt to a stronger America based on strong cities, towns and neighborhoods. Tomorrow I'll finalize this series by showing what that could look like.

Read the next article in this series.

(Top image from Arlington County via Creative Commons.)

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