In his classic discussion on the essence of commercial transaction in the market economy, Adam Smith consciously advocated that the both sides of the transaction have only selfish motives but no altruistic motives. It is from this discussion that the two ideas of " selfish economic man” and " invisible hand” as well as the so-called " Smith paradox （or Smith problem）” have further derived. Through a close reading of this discussion, however, we would find that it actually reveals a fact that the economic man has both selfish and altruistic motives in transactional acts, which could deny or solute these famous ideas or paradoxes that have had a profound impact on the development of modern economics. The crux of the matter is that the former half of the sentence by which Smith described the essence of commercial transaction, " Give me that which I want”, indeed clearly means that the economic man has a selfish motive: I am willing to get the good thing that you have and I want. In this context, yet, we have to admit that the latter half of the sentence, " and you shall have this which you want”, clearly means that the economic man has also an altruistic motive at the same time: I am willing to give you what I have and you want. When Smith repeatedly said that " We address ourselves, not to their humanity but to their self- love, and never talk to them of our own necessities but of their advantages”, and " mutual good offices which we stand in need of”, what he actually suggested is still that the two sides have both the selfish and the altruistic motives in an intrinsically inseparable way, so that they can eventually complete the not unilaterally but mutually beneficial transaction. In this regard, moreover, the essence of commercial transaction implies such basic characteristics of normal trading acts as fairness, equality, honesty, and freedom: the two sides try to get the good things they want by fairly providing the good things their counterparts want through exchange, so that they take the other party as a trader with equal status, keep the promises of giving the good things that they have to each other, and finally let themselves freely achieve their aims respectively. By contrast, if they have only selfish motives and no altruistic motives, treating the other party in a selfish way that " you give me what I want, but I don’t give you what you want”, they could not take any normal trading acts, with the result that the market economy loses its inherent characteristics of " freedom”. According to this re-interpretation of Smith’s classic discussion, then, the basic presupposition of the selfish economic man would be denied first: if an economic man has no altruistic motives, he will be unable to engage in normal trading action and thus unqualified to be an economic man. Secondly, the hand that Smith defined as " invisible” would become visible: since the economic man has both selfish and altruistic motives, he will naturally promotes the interests of others and society when he tries to promote his interests through trading acts. Finally, " Smith paradox” would also be resolved: because of having both selfish and altruistic motives, and necessarily involving interpersonal relationships in trading acts, the economic man would inevitably become a moral person with a positive or negative attribute. Furthermore, the main reason for Smith’s self-defeating discussion is that due to the distorted influence of the dichotomy between the " selfish” and the " altruistic” in Western moral philosophy, he put these two motives in absolute opposition when discussing the essence of commercial transaction. Then, he did not realize that they are able to be compatible with each other in the " self-interested” will of the economic man to pursue good and avoid evil, and can urge them to engage in mutually beneficial trading action.
How Is the Moral Value of Market Economy Possible? A New Expanation of Smith Paradox
Journal of Shanghai University of Finance and Economics Vol. 21, Issue 02, pp. 124 - 139 (2019) DOI:10.16538/j.cnki.jsufe.2019.02.009
Cite this article
Liu Qingping. How Is the Moral Value of Market Economy Possible? A New Expanation of Smith Paradox[J]. Journal of Shanghai University of Finance and Economics, 2019, 21(2): 124-139.