Adam Smith's wisdom

Guido and Iain are boasting about their site stats. I prefer - and I'm not just making a virtue of necessity here - to remember Adam Smith's words:

To a real wise man the judicious and well-weighed approbation of a single wise man, gives more heartfelt satisfaction than all the noisy applauses of ten thousand ignorant though enthusiastic admirers.

In the same chapter of the Theory of Moral Sentiments (his best book), the great man also anticipated the Muslim Public Affairs Committee:

The idiot feels himself below every company into which you can introduce him. Ill-usage, to which he is extremely liable, is capable of throwing him into the most violent fits of rage and fury. But no good usage, no kindness or indulgence, can ever raise him to converse with you as your equal.

See here and here.

Comments

[Backword Dave]

Well, I read you, Chris. But I won't call myself an 'enthusiastic admirer' if you don't want me to.

[wjd123]

Adam Smith was a moral philosopher. I wonder if he ever thought of the harm economic myths could do when he was writing his Wealth of Nations.

If I were teaching Economics 101 the first day would be used to disabuse students of economic myths. Myths that are widely believed but are patently false.

One such myth is that the ultimate purpose of a corporation is to make profits for its shareholders. No, the ultimate purpose of a corporation is to serve the needs of society. Yes corporations need to make a profit but it's not their ultimate purpose.

Let a corporation make profits at the expense of society and governmental rules and regulations will deter their actions--at least they should if the government has its priorities straight.

Here are three examples of just one industry, the pharmaceutical industry, putting its interests ahead of social interests. That the government allowed it to do so attests to the hierarchy of values of our representatives and how they see their duties.

The CAFTA agreement allowed the pharmaceutical industry to reset the dates of their patents using as a marker the time the authorities in Central America approve a brand drug and not the time when it was approved by our FDA. The result is that the availability of generic drugs will be delayed to the people of Central America who need them and can't afford brand name drugs.

Generic drugs are also delayed to our citizens when the government allows brand name drug makers to enter into profit sharing agreements with companies that make generic drugs in order to delay generic drug production.

Government makes drugs more expensive for Medicare recipients when it caters to the pharmaceutical industry and bans Medicare from negotiating price with it.

Higher prices mean seniors and the disabled reach the $2250 donut sooner. Since both have to pay the full cost of medications after the total cost of their medications reach that level, many cut back on their medications or refuse new ones recommended by their doctors.

Instead of mitigating the cost of the new Part D program through the use of competition the government uses the donut hole. It's bad legislation brought about by the government catering to the pharmaceutical industries' bottom line and not the needs of society.

Will this defeat the ultimate purpose of Medicare Part D. It can't help.

The myth that the ultimate goal of corporations is to make profits instead of serving the needs of society is an onerous one that harms individuals and breaks down social solidarity

Corporations are considered people. However, they, to often, can act like sociopaths and escape the sanction of law..

The problem is that government isn't keeping them in tow because corporations pay our representatives to do their bidding. How do you prosecute government for racketeering? You can't. You can only vote your representatives out of office.

Corporations with the help of government do as much damage and kill as many people as any drug cartel. My three examples were of how government allows the pharmaceutical industry to prey on citizens.

Those three are also examples of CEOs acting like sociopaths. That label should apply to them but they escape it through the myth that profits are the ultimate purpose of corporations. Under that myth they are thought of as hard driving or ruthless business men or woman.

Take away the cover of this myth and much of their behavior will be seen for what it is: sociopathic.

[Bishop Hill]

"One such myth is that the ultimate purpose of a corporation is to make profits for its shareholders. No, the ultimate purpose of a corporation is to serve the needs of society. Yes corporations need to make a profit but it's not their ultimate purpose."

A couple of years ago I set up a company to operate a small business with my wife. And do you know I really thought that I did this for the profits?! What I fool I've been! Thank you for putting me right.

[1skeptic]

wid123,

are you coming up with this stuff just to make Chris look bad, after all his guff about quality visitors?

[wjd123]

Bishop Hill,

There were rules and regulations about what you were and were not allowed to do when you ran your business. Go outside those rules for the sake of your individual interest and you and your business could end up ruined. For recent examples see Enron and Arthur Anderson.

[wjd123]

1skeptic,

No, I'm not trying to make Chris look bad. That you would think that I was trying to do so only shows how deeply ecomomic myths are ingrained in us.

Alas, if a skeptic believes so deeply in myths what hope is there.

[james higham]

This little discussion is quite central to me. Quality visitors. Yes. It makes up for the instant clicker. I recently had a surge of hits when I ran a piece on underwear. Can you believe it? But the ones which appear to be enduring on Google are on the more serious topics.

[Backword Dave]

OK, wjd123. Can I can you wj? or do you prefer 3?

"If I were teaching Economics 101 the first day would be used to disabuse students of economic myths. "

Do I understand from this that you're not preparing an Economics 101 (as you put it) course for the Fall? Is it likely that anyone would ask you to do this? By 'disabuse' you see to mean 'I would rattle on for my appointed hour and the fresh-faced naive little darlings would transcribe by words with the reverence Moses devoted to the Decalogue, and push out of their minds everything else they'd read, thought, or observed.' Because that's how universities work, isn't it?

'Myths that are widely believed but are patently false.'

Well, I do like to separate false myths from the true ones.

"One such myth is that the ultimate purpose of a corporation is to make profits for its shareholders. "

So not to produce stuff then?

"...at least they should if the government has its priorities straight."

Do you mean, if the government agrees with you? Which you seem to think governments don't.
Blimey, you are a windy little bleeder aren't you? Have you thought of getting a blog and posting your quasi-random bletherings there rather than cutting and pasting? Have you heard of linking?

[1skeptic]

wjd123, sorry i really wasn't sure if you were being serious earlier.

could you explain how the price of a life-saving drug should be set in your opinion, including by whom and when i.e. at what stage of development, and how this would lead to further development and innovation of more and better life saving drugs.

are you sure you are isolating the impacts of patent law, government intervention and industry lobbying for protective regulation, and the profit motive of corporations? it seems to me that the last one is the best of the lot.

[wjd123]

I can't find one argument against my assertion that the ultimate responsibility of corporations is to serve the needs of society. Nor can I find one counter example.

What I find is presumption. And, so far, it looks very much like presumption based of faith. Faith in a myth.

[Shuggy]

"I can't find one argument against my assertion that the ultimate responsibility of corporations is to serve the needs of society."

That's probably because you weren't very clear about this. What are you on about? An individual corporation cannot be said to serve or not serve the interests of 'society' - only those who's interests are directly affected by it. Yours seems to be a complaint about the attitude of governments to corportations in *general* and/or the existence of 'corporations', by which I presume you mean privately-owned enterprises.

Haven't you rather missed the point of the post, anyway?

[wjd123]

One last example to try and break through your religious beliefs. I'll use the pharmaceutical industry again.

One third of all new breakthroughs in medicine come from the National Health Organization funding universities research. In other words from the American taxpayer. (I'm talking about real innovation. I don't consider innovation the practice of the pharmaceutical industry of tinkering with old brands as a way of extending a patent.)

What the National Health Organization does with promising new research is to sell it to a pharmaceutical company for a token fee. That exchange of money allows the company the exclusive rights to use the research to develop a product.

Drug companies for any number of self serving reasons often do nothing with the research. This practice allows them to keep the rights of development away from other companies until they see fit to work on it.

Does the drug company know that this practice isn't serving the needs of society? Yes. Does the government know that the practice it allows isn't serving the needs of society? Yes.

Why doesn't the government change the rules? Why don't drug companies ask that the rules be changed? They have their priorities wrong. What is one of the things that skews priorities and allows such practices as the one above to go on? Myths like the ultimate purpose of corporations is to make a profit.

Should corporations be allowed to make a profit at all costs? No, not at the cost of not serving society. How do corporations get away so easily with harming society? Ignorance of their practices abetted by the faith of those who believe in myths.

[wjd123]

I noticed something in my writings and want to make clear what I'm saying before someone accuses me of anthropomorphism or of spreading a myth of my own.

When I say "the needs of society" I'm not talking about society as if it were a living being. Society isn't, so it can't have needs. Its members do. Future members who make up a society can have projected needs, such as a cure for a disease that exists today.

We can even speak of sinning against future members of society. The savings and loan debt brought about by unscrupulous practices of the banking industry and the failure of our government to regulate left debt for the next generation to pay. Our national debt which now has a yearly service charges as large as our yearly spending on defense means a lower quality of life for future generations.

What segment of society I am referring to can be inferred to from my examples: those who need a drug but can't afford non generic ones, those who are suffering from an illness and would like to see promising research continue. I use "the needs of society" as a normal way of speaking of all such groups.

The pharmaceutical industry (by which one understands the people making up the industry and their activities) is the normal way of referring to a specific industry. When one talks about the greed of the pharmaceutical industry that understanding is implicit since an industry can't have greed anymore that a society can have needs.

However a company can have a purpose other than making a profit. Proof of this would be their mission statements. And since companies don't exist in a vacuum it is perfectly legitimate to ask, "What is their ultimate purpose?"