If the goal of public policy is to maximize society’s wealth, in the broadest meaning of wealth (economic and cultural), what should that policy be? The invention and production of goods and services that enrich our lives (by providing food, shelter, safety, and entertainment) require a mix of cooperation and competition. How that mix is determined is the critical factor providing varied results in different societies. The Soviet Union represented one extreme of central determination and enforcement of the mix. The United States represents the other extreme encouraging individual determination of when and how to cooperate and when and how to compete based on each person’s self-interest.
What form of cooperation and competition maximizes society’s wealth and how should that optimal mix be determined? The exploitation of our self-interest to maximize wealth that has such extensive scope in the U.S. is guided by each person’s understanding of how their interests are best served. Our moral code for how best to treat others and thus to be treated ourselves is a critical part of that understanding.
Alexis de Tocqueville, in his Democracy in America (1835), marveled at the extensive degree of voluntary cooperation in America. Americans joined together in church groups, civic clubs, charitable organizations, and sports clubs as part of their pursuit of their self-interests to a greater extent than in any other country in the world.
The tightest cooperative unit is the family, were trust between members is very high in dividing responsibilities while sharing its fruits, as they compete with other families for jobs and markets. Firms divide up tasks and cooperate in producing the best possible products and services with which to compete with other firms for market share (see Ronald Coase’s The Nature of the Firm – Wikipedia). The Brooklyn Dodgers (now the Los Angeles Dodgers) cooperated within the club in order to better compete against other baseball clubs.
The wealth and success of America compared with the poverty and eventual failure of the Soviet Union reflects its better choices of the when and where and how much to cooperate vs compete. History has confirmed that those choices are best made by individuals pursuing their self-interest as they see and understand it. In Adam Smith’s foundational book: An Inquiry into the Nature and Causes of the Wealth of Nations (1776) Smith argues that when individuals pursue their own self-interest in a free market, they are led by an “invisible hand” to promote the general welfare of society. However, these invisible hands operate within and through a society’s legal, institutional, and moral environment. Well defined and secure property rights are particularly important.
The dramatic increase in material wealth for the average family and decline in poverty in relatively free market, capitalist economies over the past 250 years followed thousands of years of unchanging incomes and general poverty. https://humanprogress.org/trends/
I hope that our next generation of innovators and workers understand this.
Warren's space 