Why is western economics based on self-interest?

. . . as answered on Quora. . . .

It isn’t.

Self-interest is a moral concept, and economists are supposed to be Wertfrei (value-free) social scientists — if on track of value.

You might say, “but economics is all about the results of people choosing according to their own values, thus all about choices dependent upon a kind of perceived or self-constructed interest.” And I reply, “well, OK, if you must — but it is just as much a science exploring other-interest, for these selves doing their choosing also value others, and their interests in others figure into their demand and supply curves just as much as does their self regard.”

The truth is this: the logic of choice at the heart of subjective value and marginal utility and marginal rates of substitution and satisficing and all that is not egoistic . . . according to economists. When they say it is — as they sometimes do, in large part because they are not always good philosophers — they err.

The brilliant Jevonsian economist P. H. Wicksteed tried to make this clear when he argued that economists are not pushing a rationale of egoism when they develop their notion of a demand schedule, nor negating altruism, either. What they apply, he argued, is a concept of non-tuism, a coinage he offered to help explain that when a person economizes in his purchases and asks for the highest prices possible in his sales, he may do so for egoistic or altruistic reasons, but still works to maximize the interest of the transaction, either egoistic or altruistic, when he makes those trades. (Or when she makes her trades, for one of Wicksteed’s better examples was of a housewife deciding the basic economy of the household under her charge.) Non-tuistic interest is a worthwhile concept to try to understand: see Israel M. Kirzner’s The Economic Point of View: An Essay in the History of Economic Thought (1960), for a good treatment.

But even Wicksteed did not get it exactly right, for nearly all our choices involve demand schedules made up of both egoistic and altruistic ends.

It helps to focus not on “interest” — which, as I assert above, has too moral a component — and not on “utility” — which is unduly abstract, and gets students confused. Concentrate, instead, on the specific uses to which a good may be put. Under the theory of Grenznutzen (border use) of the Austrian School economists (from which English-language economists got their term of art marginal utility), the various uses to which a fungible good may be put, and against which value is to be understood (as dependent upon the importance of the specific use the last unit of a good decided upon has to the economic actor), can be almost any mix of self-regarding and other-regarding purposes.

In my personal economy, my first gallon of clear water goes to drink, the second and third to food preparation, the fourth to cleaning myself, the fifth to my neighbor, the sixth to my dog, the seventh to washing the dog, the eighth to washing the house, the ninth to letting the neighbor’s cow to drink, and so forth.* All of these uses satisfy me, but several also satisfy others. Do you see how useless quibbling about whose interests are being served?

The economist does not usually inquire deeply about the egoism and altruism of the goals, or uses, that are the foci of the border use (Grenznutzen) that goes into explaining the formation of prices and the rates of exchange. Because such concerns are irrelevant to what economists are usually trying to explain.

Similarly, economists rarely fret about how a person forms the value scales which place the various uses to which goods are put into order. Not because they cannot be analyzed, but because they are mostly irrelevant to what economists do.

Who is concerned? Moralists, whose traditional and self-appointed job it is to get people to change their values.

But when moralists get worked up over whether choices on the market are “too egoistic” or “not altruistic enough,” they go too far if they also castigate all economic choice as selfish. And usually they descend into a very deep error.

The error was identified clearly by Austrian philosopher Alexius Meinong in his Ethische Bausteine (see Marie-Luise Schubert Kalsi, Alexius Meinong’s Elements of Ethics, 1996), where he explores the difference between subject and object, egoand alter. Of egoism and altruism, Meinong argued that, before any deep inquiry, one might think that “a value is egoistic if the subject is egoistic, altruistic if the alter is the subject. However, that this is not so can be seen in the fact that I myself have altruistic desires and valuations besides egoistic desires and valuations. Thus, no objection should be raised that there are altruistic and egoistic values for me. Then, the ego is subject of even altruistic values. But the altruistic nature of these values must be grounded on something other than the valu[ing] subject.”

The notion that economics is “based on self-interest” is actually a misguided philosophical complaint, and though I recommend Wicksteed and Kirzner and other economists to clear this up, it really is a philosophical error, and should be dealt with philosophically.

N.B. In addition to the texts explicitly cited, above, one should consult

And the reader may note that I deliberately ignored another possible meaning of “western economics” that the questioner may in fact have intended: the system of private property “capitalism.” I simply won’t get caught up in the habit of calling a practiced economic order “economics.”