The Benevolence of Market Exchange – Smith vs Daggett

In his book Living Together, David Schmidtz makes a simple but profound observation about one of the most quoted passages from Adam Smith‘s The Wealth of Nations. Smith says:

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. 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. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens.

A hasty reading of this passage might lead some to believe Smith is claiming that the only motivation we might have to help one another is by seeking personal gain. But Schmidtz helpfully clarifies what Smith is truly saying:

Second, it makes perfect sense for the author whose first book treated benevolence as primary to subsequently ask how to respond benevolently to trading partners. Why, as a benevolent person hoping to truck and bater with brewers and bakers, do you address their self-love? Answer: because you want them to be better off for having come to you. Notice that Smith does not say bakers are motivated solely by self-love. He says we address ourselves not to their benevolence but to their self-love (WN, Book I, chap. 2). This is a reflection on our psychology, not theirs. He is offering insight not into the self-love of bakers but into what it takes to be benevolent in our dealings with them.

In sum, the author of Moral Sentiments gives center stage to virtue and benevolence, but, in elaborating what benevolence means, the author of Wealth of Nations belabors the obvious: namely, a man of true benevolence wants his partners to be better off with him than without him. The point of addressing other people’s self-love is to give them their due. That’s what it’s like to succeed in one’s attempt to be sympathetic.

When we understand market exchange in this way, we can see how markets help foster and promote something that is profoundly virtuous and humanizing in us. At our worst, humanity can seek to make ourselves better off at the expense of others. But when we freely truck and barter with each other and agree on a mutually beneficial exchange, we improve our own situation by also improving the lives of those around us. We make people better off by dealing with us than they otherwise would have been.

A very different perspective was articulated by Harold Daggett, head of the International Longshoremen’s Association, a prominent labor union. As was highlighted recently by Jim Geraghty, Daggett made the following complaint about E-ZPass replacing tollbooths on the highway:

Take E-ZPass. The first time they come out with E-ZPass, one lane, and cars were going through and everybody sitting in their car and go, ‘What’s that all about? I’m going to get one of them.’ Today, all those union jobs are gone, and it’s all E-ZPass. People don’t realize it, everybody’s got three cars, everybody got an E-ZPass on the window, and they go through like it’s nothing, and they get billed in the mail. They didn’t care about that union worker working in the booth.

Daggett’s motives are a far cry from the benevolence promoted by Adam Smith. Daggett clearly recognizes that for the drivers, E-ZPass represented a significant improvement. It enabled people to get where they were going faster, with less congestion and less wasted time, and made the process of paying much simpler and less of a hassle. And the benefits of E-ZPass extend beyond that. By reducing congestion, they reduced pollution, which means the benefits spilled over to more people than the drivers who are no longer waiting to go through the toll booth. Research also revealed that this had a particularly striking health benefits for people who lived close to tollbooths. Implementing E-ZPass led to a significant reduction in both premature births and low birth weights for families living near the replaced toll plazas.

But to Daggett, none of these benefits seem to matter. He seems to be motivated not by a desire to for drivers or the public in general “to be better off with him than without him.” Instead, he is pointedly bitter than drivers and families couldn’t be kept in a worse off position in order to make union workers better off. The common idea that union leaders are motivated by benevolence and those who advocate for free market exchanges are lacking in sympathy could not be further from the truth. There is nothing benevolent about insisting other people be made worse off for your benefit, and there is great benevolence in wanting to make sure those you deal have been made better off because of you.