The Good Samaritan as Bad Economist
by Donald E. Frey

Donald E. Frey is professor of economics at Wake Forest University in Winston-Salem, N.C.

The moral legitimacy of economic systems has consistently received the attention of religious thinkers. [1] The moral content of economics as an intellectual discipline, however, may be as important. Beginning with Adam Smith, and continuing through modern American Nobel laureates of the influential neoclassical school, economists have insisted that self-interest is the key to human nature. Some claim that the self-interest axiom merely serves the scientific purpose of generating verifiable hypotheses. However, these economists' language and their nonscientific writings reveal that self-interest fills the much greater role of defining human nature, and so implying a moral system.

Following Smith's lead, neoclassical economics takes a benign view of self-interest, holding that self-interested decisions, made within the structure of the market, invariably produce an aggregate good --without anyone intending that end. To be fair to this tradition, we note that there is a literature on "market failures'' (such as externalities, monopoly, and public goods) that qualifies this claim somewhat; and, on close inspection, the nature of the aggregate good seems highly attenuated. However, the most orthodox of the neoclassical economists treat these as minor exceptions to the norm. Thus economic morality is understood as an expression of self-interest, rather than a necessary counter to self-interest. The first section of this essay delineates these claims.

Christian doctrine and, perhaps more broadly, the biblical tradition make self-interest a central feature of fallen human nature. Self-interest is understood to be at least potentially disruptive of human community; social morality is required as a counterweight to self-interest. This is true even for highly individualistic theologies that emphasize grace apprehended by personal faith. The second section of this essay relates how representative American theologians have reacted to the morality of economics.

The Tradition of the Economists

In his famous line Adam Smith proclaimed that "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. …'' [2] (Of course, an earlier book of his had argued that humans respond to more humane "moral sentiments.'') Smith was asserting here, however, that, in an economic world defined by the division of labor, economic agents inevitably would become morally isolated from each other. The social interrelatedness necessary to develop these moral sentiments simply would be lacking. Thus, in economic society characterized by division of labor and the social distance that it creates, only the appeal to self-interest would be effective.

Over the years an influential number of economists have minimized these nuances of Smith's thought and represented self-interest, almost pure and simple, as the key to human behavior. The axiom of self-interest is embodied in the neoclassical utility-maximization model that can be found as the core of virtually all microeconomics texts. An economic agent, who possesses a set of tastes for certain goods and services must spend a given income to buy goods and services in a mixture that maximizes personal "utility'' or satisfaction. The agent is constrained by limited income and the prices that are charged for the goods. Thus, if relative prices or income change, the agent recalibrates the mixture of goods purchased. All behavior is described as the search for maximum utility amid changing constraints. This model is almost infinitely expandable into other realms; for example, one of the "goods'' may be defined as leisure, and one's "income'' may be defined as time, while the "price'' of leisure becomes an hour's wage foregone. By clever extension this model is made to explain virtually all human decisions. The self-interest orientation is evident in that the economic agent's sole concern is maximizing its own "utility.''

Nobel laureate George Stigler insisted that the concept of self-interest provides a universal explanation of human activity. "Man is eternally a utility-maximizer,'' he wrote, and not just in economic activity but "… in his church, in his scientific work, in short, everywhere.'' [3] Another Nobel laureate, Gary Becker, has elaborated how self-interest could explain the most personal decisions, including marriage, child-bearing, and so on.

Standard textbooks in economics make the same point, and often carry it a step further. One text asserts, for example, that the "rational'' individual "always stands ready to further her own interest.'' [4]As in this text, economics often equates rationality with consistent utility maximization, thus reducing rationality to a calculus of personal gain. The equation of self-interest with rationality implies that self-interest is a basic human trait, and like reason, a positive human attribute.

Even economist-critics of the neoclassical orthodoxy confirm its nature. While the Harvard economist Amartya Sen exclaims that to limit rationality only to self-interested behavior "seems altogether extraordinary,'' [5] few of these critics claim that self-interest is irrelevant to human behavior, but only that human behavior cannot be dismissed as "not rational'' if it cannot be reduced to self-interest.

The authors of a widely used labor economics text dismiss the objection that people are not really such personal-utility calculators. "[For] if people are not … then most predictions suggested by economic theory will not be supported by real-world evidence.'' [6] This text is devoted to showing how the "real-world evidence'' is indeed consistent with the self-interest axiom. Although these authors prefer the language of science --e.g., "assumptions,'' "predictions,'' "evidence'' --the broader message is that actual behavior can be explained consistently only by predicating a human nature that is exclusively focused upon maximizing its own utility.

Recently researchers have shown that the axiom of self-interest may become the basis of a working morality for those who most believe it --namely economists. According to the researchers, evidence shows that economists actually behave more self-interestedly than noneconomists. [7] In short, the axiom of self-interest serves as far more than the starting point for scientific hypothesizing --it becomes a moral principle by which those who believe the axiom actually relate to others.

Economists go out of their way to protect the hypothesis of self-interest from apparent anomalies, such as altruistic behavior. (Altruism is an anomaly, since one gives up something --seeming to leave the self worse off --in order that someone else be made better off.) The introductory text quoted earlier argues that the "rationality'' of altruism can be saved provided the altruist wants to serve others "just as he can want to own a new car'' (emphasis added). [8] According to this argument, the outer act may look like self-denial, but the inner intent remains entirely the satisfaction of the self. One is serving others, not due to moral obligation, nor because someone else displaces self in one's own regard, but only because such activity happens to please oneself. Nor is even the outer act true self-denial. What one gives up for the sake of others is no different from the money one gives up to obtain the car one wants to own: in either case one is merely engaged in a transaction to obtain what one wants.

Economics does not study the source of tastes or preferences --they are given. This means that one's taste for cars as opposed to one's taste for serving others is inexplicable, simply a datum. Since tastes are inexplicable they have no moral status; or, more accurately, all tastes have the same moral status. The intent to obtain a car is morally no better or worse than helping another human in need. Either way, one is simply satisfying the self, based on given tastes and preferences. A thorough moral relativism is implied.

The Moral Message of Economists

Adam Smith recognized that to consider self-interest the essence of human nature raised a moral problem: namely, whether a society populated exclusively by self-seekers was consistent with a general good. His answer was simply to deny that the problem existed. Smith invoked an "invisible hand'' to harmonize individual egos: "… the study of his own advantage naturally, or rather necessarily, leads [one] to prefer that employment which is most advantageous to the society.'' And, "[by] pursuing his own interest [one] frequently promotes that of society more effectually than when he really intends to promote it.'' [9] The extravagant nature of the claim made here is regularly overlooked: not only are self-centered intentions as good in their social consequences as public-spirited intentions, but better. There need be no moral constraints set upon the human ego because an invisible hand harmonizes the acts of all.

The modern British economist Joan Robinson pointed out that with this invisible-hand doctrine Smith "abolished the moral problem,'' that is, I take it, how humans are to produce a common good out of purely individualistic motives. [10] Given Smith's assurances, it is no wonder that the laissez-faire authors of the nineteenth century, such as Jane Marcet, typically rationalized indifference to the plight of the economically weak as serving the best interest of society.

The peculiar moral system embodied in nineteenth-century political economy was quite evident to Charles Dickens, who devoted Hard Times to attacking it. In the novel, the doctrines of classical political economy are taught in a proprietary school owned by one Thomas Gradgrind. Dickens sarcastically dismisses the writings of his character Gradgrind as "proving… that the Good Samaritan was a Bad Economist'' --or, as the modern economics-text writers might say, irrational. [11] Dickens thus warned that the moral precepts of the parable and of economics were poles apart.

The Nobel laureate Stigler recognized that his view of human nature also implied a value system. To Stigler ethics are largely rules to guarantee that self-interest take the long-run view and not ignore market externalities. Ethical rules "in general prohibit behavior which is only myopically self-serving…'' in order to advance long-term interests. Stigler quickly added, however, that "some people will gain by violating the rules.'' [12] This last observation, of course, would seem to undermine the possibility of any ethic based on self-interest. (What argument can be advanced against cheating on an ethic of self-interest if self-interest itself is the motive for cheating?)

As noted, many economists equate self-interested behavior with rational behavior, using the terms interchangeably. A truly self-sacrificing act, knowingly done on behalf of a higher good, is thus irrational --as is any ethic based on duty or obligation to others. Conversely, the most extremely self-interested behavior is equated with rationality and thereby legitimated. This line of reasoning has even led some economists to affirm that crime is rational behavior. In this view the only thing that would make crime irrational is that the expected punishment outweighed the probable gains. According to such reasoning, honest people are really motivated the same way criminals are: it is just that "honest'' people don't calculate that the net payoff to crime is worth it. The intentions of both the honest and the criminal are identical. Everyone is a criminal at heart!

The morality implied by this line of reasoning has been understood, and protested, by some economists --these protests once again confirming the nature of the neoclassical orthodoxy. Arthur Okun observed that there is a duty to obey the law, and "anyone who would merely balance the cost of risking a prison sentence against the benefits obtainable from stealing a wallet is violating that duty.'' [13] Okun suggested that individuals have obligations to their community --a notion utterly foreign to the self-interest doctrine.

Finally, the doctrine of self-interest makes personal freedom a central value of economic morality. If one is to pursue one's interests, then one must be free so to do. It is no accident that the strongest proponents of libertarianism are economists. However, the personal freedom advocated is a freedom whose content is unspecified; the blanks are to be filled in by the tastes and preferences of the individual self. Said Milton Friedman, the ultimate social value, freedom, "has nothing to say about what an individual does with his freedom. …'' [14] Nothing beyond the individual self may legitimately define what is good and evil. The self is truly unbounded.

Self-Interest in Theological Thought

Although it is rare that theologians venture onto the turf of economics as such, American theology nevertheless has dealt with these very issues. Indeed, the American Puritans and their British mentors, who preceded Adam Smith by almost two centuries, dealt with the same questions. In contemporary times theologians have addressed these issues because economic values constitute much of the values of the broader American culture.

Governor John Winthrop of the Massachusetts Bay colony summed up the Puritan understanding of self-interest when he wrote that in the Fall, Adam not only alienated himself from God, but "rent all his posterity allsoe one from another, whence it comes that every man is borne with this principle in him, to love and seeke himselfe onely. …'' [15] Self-interest was, therefore, as universal for Winthrop as it was to be for Smith. But Winthrop traced the source to the Fall, and did not see it as a benign manifestation of rationality. Winthrop found the consequence of self-interest to be the destruction of human community, the rending of people "one from another,'' not the advancement of the public good as Smith did.

Much has been made by interpreters like Max Weber and R. H. Tawney of Puritan individualism, and of its tendency to promote self-interested economic behavior. Indeed, Puritan theologians like William Perkins asserted that one's calling by God is to a vocation that is best for oneself. And the secularized "Puritanism'' of figures like Benjamin Franklin seems to have had much kinship with the doctrines of Adam Smith.

Perhaps it was because Puritan individualism, rooted in the doctrine of God's election and calling of individuals, inescapably legitimated a certain degree of self-interest that a major task undertaken by Puritan theological ethics was to define the moral limits of self-interest. The Puritan ethic defined a legitimate individualism as one oriented outward toward the common good. The theologian Perkins, who had argued that a vocation was for the good of self, simultaneously argued without self-contradiction that "he abuseth his calling, whosoever… imployes it for himselfe, seeking wholly his owne, and not the common good.'' [16] The American John Cotton defined the "carnall man'' as he "that never served any man but himself.'' [17]

This heritage did not easily disappear. Daniel Raymond, America's first systematic economic thinker, rejected the extreme individualism of the classical political economy as it had developed by the 1820s. He warned that self-interest endangers the common good, baldly stating that the interests of a nation and of individuals "are often directly opposed.'' [18] Raymond rejected individualism entirely to suggest that the government should be the main agent of the common good, that it "should be like a good shepherd, who supports and nourishes the weak and feeble ones in his flock.'' [19]

Raymond also anticipated the branch of economics now called macroeconomics, which provides the major alternative within economics to the largely neoclassical microeconomics of self-interest. Raymond suggested that even the most rational decisions of individuals could not prevent the economy from developing systemic ills. His primitive analysis pointed beyond itself to a larger moral vision: that all humans share a common existence; and that the common good required an agent, like government, capable of transcending private interests. Raymond's suspicion --that individual self-interest could fail the common good --is consistent with the Puritan vision.

Three Contemporary Theological Perspectives

Without explicitly addressing economics, some theologians have done so implicitly while addressing the utilitarian morality of moderns. Abraham Heschel observed that the modern person behaves "as if the sole purpose of the universe were to satisfy his needs.'' [20] But although self-interest is a human reality, wrote Heschel, one ought not to cater to that reality but to transcend it, "to sacrifice [one's] own interests for the sake of the holy.'' [21] Heschel was not here directly addressing economic morality. However, he made clear that self-interest leads humanity fundamentally astray.

Heschel noted that the corollary of self-interest is personal freedom to fulfill one's desires. Yet he saw the emptiness of a freedom whose only content is that provided by the human ego. He asked, "Is liberty an empty concept --the ability to do what we please''? [22] And he suggested that liberty is meaningful only when given the content of righteousness.

Finally, Heschel, like the Puritan writers, recognized that one might legitimately serve oneself, provided one's primary orientation was outward toward a greater good, and not inward toward self. Evil arises by "arrogating to the self what is not its due,'' and making self the "ultimate goal.'' [23]

A contemporary Protestant thinker who has done much sustained writing on the morality of economics is Philip Wogaman. Wogaman examines the writings of modern free-market polemicists rather than formal economists, yet the essential points emerge. Although Wogaman gives credit to the individualist values of capitalism, he claims they conceal a "faulty understanding of human nature.'' [24] The major failing is the neglect of the "social nature'' of human beings. Economic individualism is a half-truth, inviting "a kind of principled selfishness.'' [25] Wogaman takes it as axiomatic that individualism by itself does not yield the common good. Like the Puritan thinkers, Wogaman warns of "the destructive possibilities of self-centered behavior.'' [26] He also suggests another dimension of a self-interest morality: moral callousness, wherein the successful attribute their success to "their own goodness'' while seeing "character deficiencies'' at the root of others' failures. [27]

Wogaman also hints at a fundamental paradox of self-interest values. Economic morality insists that the self have the freedom to pursue its interests, yet defines those interests relative to a framework of incentives, such as relative prices that are outside the individual's control. Thus, the self's freedom is simply the "freedom'' to move to an outcome dictated by external incentives impinging on one's preferences. Wogaman hints at this unfreedom when he suggests that there are always those in a position to set the incentives for others, who may "motivate people through their insecurities and vulnerabilities.'' [28]

Like both Heschel and Wogaman, the American Catholic bishops in their pastoral letter Economic Justice for All do not directly address the discipline of economics, but rather the structure of the economy and its moral manifestations. Again, however, the major issues are joined.

The bishops almost directly address Adam Smith's vision of the division of labor, and come to the same conclusion as Smith --namely, that private interest will emerge as dominant in such a world. But they view the prospect without Smith's complacency. The bishops note that people will come to view "their work ever more narrowly…'' and that the result will be "social fragmentation… and an increased emphasis on personal goals and private interests.'' [29] And the bishops understand that self-interest is dangerous not only to the common good, but also to the individual. The utilitarian morality of our age produces "destructive notions of responsibility and personal growth.'' [30]

The bishops also counter the invisible-hand notion that markets automatically produce the social good. They note the free-market enthusiasts' proposition that out of self-interested motives the market "provides the greatest possible liberty, material welfare, and equity.'' [31] Against this view, which has the effect of placing the economy beyond moral scrutiny, the bishops note that "the economy has been created by human beings and can be changed by them….'' [32]

In sum, theologians perceive that the economists' understanding of human nature, and its corresponding value system, have many adherents in contemporary American culture. More important, theologians representing several traditions find the central premises of the economic morality to be lacking. This consensus, furthermore, extends back in time to the very first American theologians, whose writings anticipated the central problem of self-interest. The soundness of the theological critique is attested to by the findings of social scientists themselves. The sociologist Robert Bellah and his colleagues have documented the prevalence of the utilitarian ethic in all aspects of American life, and commented on its negative results for the greater community; they have explicitly juxtaposed this with the moral strengths of the biblical tradition. In addition, as we have noted, the economic morality is not without critics among economists themselves.

In closing, we reiterate other inherent weaknesses of the self-interest morality. It necessitates an "invisible hand'' to avoid the problem of conflicting selves; one needs to be rooted in Enlightenment optimism to make this the foundation of one's ethic. An ethic of self-interest is incapable of formulating a case against violating its own rules if the violation is motivated by self-interest. The ethic's notion of freedom is essentially without content, leaving each person "free'' to be a slave of the desires of self. Finally, the economic ethic poses the paradox that freedom emerges as the highest value in a system that is essentially a deterministic web of material incentives.


[1] For example, Gary Dorrien, "Beyond State and Market: Christianity and the Future of Economic Democracy.'' In Cross Currents (Summer 1995): 184--204.

[2] Adam Smith, The Wealth of Nations (1776). Book I, chap. 2.

[3] George J. Stigler, The Economist as Preacher and Other Essays (Chicago: University of Chicago Press, 1982), 35.

[4] Richard McKenzie, Economics (Boston: Houghton Mifflin, 1986), 375.

[5] Amartya Sen, On Ethics and Economics (London: Basil Blackwell, 1987), 15--16.

[6] Ronald G. Ehrenberg and Robert S. Smith, Modern Labor Economics 2d. ed. (Glenview, Ill.: Scott, Foresman, 1985), 4.

[7] Robert H. Frank, Thomas Gilovich and Dennis T. Regan, "Does Studying Economics Inhibit Cooperation''? Journal of Economic Perspectives 7, no. 2 (Spring 1993): 170.

[8] Richard McKenzie, Economics, 385.

[9] Adam Smith, The Wealth of Nations, Book IV, chap. 2.

[10] Joan Robinson, Economic Philosophy (Garden City, N.Y.: Doubleday, 1962), 54.

[11] Charles Dickens, Hard Times (1854), Book II, chap. 12.

[12] George Stigler, The Economist as Preacher, 35--36.

[13] Arthur Okun, Equality and Efficiency: The Big Tradeoff (Washington, D.C.: Brookings Institution, 1975), 6.

[14] Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962), 12.

[15] John Winthrop, "Christian Charitie: a Modell Hereof'' (1630), in E. Morgan, ed. Puritan Political Ideas 1558--1794 (Indianapolis: Bobbs-Merrill, 1965), 86.

[16] William Perkins, "Of the Vocations or Callings of Man,'' in ibid., 39.

[17] John Cotton, The Way of Life (1641), 447.

[18] Daniel Raymond, The Elements of Political Economy (1823), vol. I, 35.

[19] Ibid., vol. II, 13.

[20] Abraham J. Heschel, God in Search of Man: A Philosophy of Judaism (orig. 1955) (New York: Harper and Row, 1966) 34--35.

[21] Ibid., 117.

[22] Ibid., 170.

[23] Ibid., 400.

[24] J. Philip Wogaman, Economics and Ethics: A Christian Inquiry (Philadelphia: Fortress Press, 1986), 20.

[25] Ibid., 21.

[26] Ibid., 37--38.

[27] Ibid., 38.

[28] Ibid., 41.

[29] National Conference of Catholic Bishops, \em Economic Justice for All\/ (Washington, D.C.: United States Catholic Conference, 1986), par. 22.

[30] Ibid., par. 345.

[31] Ibid., par. 128.

[32] Ibid., par. 129

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Source: Cross Currents, Fall 1996, Vol. 46 Issue 3.