Capitalism In A Nutshell From Its Founder, Adam Smith

I get the impression that many people think capitalism only serves nefarious ends. That somehow capitalists only get wealthy by somehow draining the wealth of someone else. But this is only so if you count the dollars in each’s hand at the end of the transaction. Often times we don’t consider the good or service received in exchange for the money.  Greed is not inherently evil.  We are all greedy to one degree or another and it’s what drives us to succeed.

Economics For Morons

Below I paraphrase Adam Smith’s words about the famous “Benevolent Butcher”.

We all need each other to survive. But it’s folly to think that people help others simply out of the goodness of their hearts. For this reason we all do much better if we can enlist our fellow man’s own self-interest in helping us; that is we must show our fellow man that his helping us is to his own advantage. We say to our fellow man “Give me what I want and in doing so you will get what you want”. This is the basis for every transaction we make from day to day. We eat food grown by a farmer we’ve never met. We live in houses, the builders of which we’ve never met. We have food and shelter, not because someone thinks we’re special, but rather because they got something they wanted out of the bargain…

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  1. I like your post, except that I don’t favor the word “greed”. I prefer the word “self-interest”. Greed can be very bad because it can be irrational or excessive. Self-interest in and of itself is not bad. Too much greed leads to bad things, even in a capitalist system. And let’s not forget that even Adam Smith supported regulated capitalism.

    More to the point, a society run on altruistic principles would be very bad, because it would favor those who appear to be good but who are actually bad. Basically, in a society run strictly on altruistic principles, the “jerks” would win out and run the show. (We all know who these people are).

    Your post fails to point out that the quantity of money is not limited. So, economically successful people are not taking a bigger share in a zero sum game. Unless you believe in the Gold Standard (which I think you might), which is a very bad idea indeed.

    Considering Marx as the denigrator of capitalism, what he noticed is that capitalism leads to exploitation of those who do not own much by those who own alot. Marx was basically correct, except there are ways to “fix” capitalism so that the exploitation is less and the benefits remain. That is basically what we have today (more or less).

    I have noticed something else about exploitation. Marx railed against economic exploitation, and many liberal intelligent people side with him. These same people completely ignore another type of exploitation: exploitation of the smart by those less smart. I have noticed many times that these same smart people who rail against capitalism engage in this other form of “intellectual” exploitation. They have no problem being rewarded for their brains or talent. Yet, somehow, they don’t see that in the same vein as capitalism. You can see more about this at my economics blog:, or

    -Anthony Mannucci

    • Anthony

      You’re right, an essential point is that there is no “pie” from which everyone gets a slice. So its not like that in order for my wealth to go up someone else’s has to go down.

  2. Agreed!

  3. You mentioned the exploitation of smart vs. not-so smart. I’ve seen the very thing you speak of with skyrocketing tuition, and highly paid professors and administrators going on about greed. There are lots of other ways people are exploited as well. One is rich politicians wringing their hands about the poor while doing nothing themselves to alleviate it. The quandary of any system is one of power, as I see it. Who is given the power to “fix” the system–whatever the system–for we know every system has too many flaws to count, and we also know that self-love disqualifies most as potential fixers. We can see this quandary in America’s founding, not only in the economic system, but also in its government with its separated powers. Madison rightly pointed out that “if men were angels no government would be necessary”. While I agree that in any system fixes are required, I get nervous when someone claims that there are people virtuous enough to actually do it. I get even more nervous yet when people claim that they themselves are the ones we ought to let at it.


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