Guest blog: Serving complete strangers

People that are against profits are against incentivising businesses from serving complete strangers all over the world. It is unfortunately, all too normal to hear political rhetoric demonising “excessive profits” rather than rightfully demonising fraud and theft when it occurs under any economic system. But what sort of system would they suggest to replace one that rewards taking care of the needs and desires of complete strangers? FA Hayek might have said it best:

“[When] we are all working for people whom we do not know and are being supported by the work of people we do not know, [the economy] is made possible because we produce for profit. Profit is the signal which tells us what we must do in order to serve people whom we do not know.”

Milton Friedman’s 1980 PBS series Free to Choose began with a scene of him (borrowing from Leonard Read’s essay I, Pencil) articulating how no single person can make a pencil. Each pencil is put together with raw materials and know-how of thousands of people scattered around the world, and only through the “impersonal operation of prices” they are able to coordinate their plans to make something as seemingly-simple as a pencil even possible.

Steven Pinker’s book, The Better Angels of Our Nature: Why Violence Has Declined, looks at the decline of violence over time and provides explanations for it. It might not seem like it, but we are living in the most peaceful time in history. We don’t tend to think of the present as particularly peaceful, but it is. We only don’t think of it as such because of a so-called availability heuristic. That is, we are able to quickly draw examples from memory of news stories reporting on what is going on in Syria and Iraq. These are important data points, but they don’t accurately represent the overall downward trend worldwide. Among the explanations that Pinker provides for the decline of violence, “gentle trade” is one of them.

To explain it through a game theory lens: when it is more profitable to trade with others than to conquer and steal from them, people will tend to trade instead. Pinker quotes Robert Wright:

“Among the many reasons I think we shouldn’t bomb the Japanese is that they made my minivan.”

Blog content written by guest contributor, Emile Phaneuf,  31 August 2018.

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