Commentary

Gain For Me is Gain For Thee

One of the most misunderstood elements within the school of capitalism is the concept of individual gain and its correlation to communal growth, development, and provision. As capitalism itself revolves around the incentive and profit of the individual, it is natural to perceive the economic system as singularly benefiting only individuals. An economic system that inherently gives the individual private gains would not appear to benefit those around him at first glance. However, as Alexis de Tocqueville would argue in his essay entitled Democracy in America, there is a component within the capitalist model that ends up providing great benefits to the community at large.  

The direct benefits of capitalism are often viewed as individual gain, but it is in the communal gain that Tocqueville finds the greatest benefits. Drawing upon the same ideas as Adam Smith in his Wealth of Nations, Tocqueville describes an individually motivated action that directly serves the community at large as falling under “self-interest rightly understood.” In doing what is right for oneself, he says, the individual becomes a necessary actor in a greater stage of interaction. This interaction further requires that the individual act in a way that others would want to interact with to make it mutually beneficial. Capitalism does serve the individual, but the open market requires that the individual act in a way that allows market interactions to occur. These interactions only occur when both actors in the system receive a perceived gain. For example, I would only buy something if it has value to me, and someone will only sell something to me if they receive enough money to cover its value. In this way the price will be low enough to cover my self-interest, yet high enough to be in the seller’s self-interest. This will especially be the case under the competitive conditions of capitalism. When there are many sellers, buyers will naturally pursue the best price for their best interest. This, as a whole, works to keep prices in general to reasonable levels. If, however, the market has restrictions in place that inhibit free competition, there is no incentive for prices to be low, for buyers have no sway over the market.  

It is a strange notion that self-interest can benefit the community at large. However, when rightly understood as a means for competition and reasonable market interactions, this “invisible hand” of self-interest clearly serves a communal purpose. However, this benefit is only available to those who are willing to show individual incentive and be an actor in the market. When someone chooses to passively let the system run its course, they become a slave to it. The market can only be truly healthy if individual actors take incentive and work in their best interest. Otherwise, the system will not be maintained in a functional way. Critics of capitalism decry this need for individual incentive, but the fact remains: life cannot be received passively, it must be gained through an active pursuit of “self-interest, rightly understood.” 

The opinions expressed in this publication are those of the authors. They do not proport to reflect the opinions or views of the Gordon Review, editorial staff, or its members.

Categories: Commentary

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