Christopher Snowdon Selfishness, Greed and Capitalism Debunking Myths about the Free Market Selfishness, Greed and Capitalism Selfishness, Greed and Capitalism Debunking Myths about the Free Market CHRISTOPHER SNOWDON The Institute of Economic Affairs First published in Great Britain in 2015 by The Institute of Economic Affairs 2 Lord North Street Westminster London SW1P 3LB in association with London Publishing Partnership Ltd www.londonpublishingpartnership.co.uk The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. Copyright © The Institute of Economic Affairs 2015 The moral right of the author has been asserted. All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored or introduced into a retrieval system, or transmitted, in any form or by any means (elec- tronic, mechanical, photocopying, recording or otherwise), without the prior written permission of both the copyright owner and the publisher of this book. A CIP catalogue record for this book is available from the British Library. ISBN 978-0-255-36679-3 (interactive PDF) Many IEA publications are translated into languages other than English or are reprinted. Permission to translate or to reprint should be sought from the Director General at the address above. Typeset in Kepler by T&T Productions Ltd www.tandtproductions.com Printed and bound in Great Britain by Page Bros ‘I think there is a truth, and I think that economists have found a significant amount of the truth in economic behaviour. There are a lot of things we do not know, but there are also a lot of things we do know, which non- economists get completely wrong.’ Gary Becker (Herfeld 2012: 85) CONTENTS The author x Foreword xi Preface xv Summary xvii List of figures and tables xxi Part 1 The Straw Men 1 1 Capitalism relies on greed and selfishness 3 Incentives and the invisible hand 4 The parable of the steel company 11 Is greed good? 15 Conclusion 18 2 Economists believe people are perfectly rational 22 Some models are useful 23 Rational choice and behavioural economics 25 Have we found angels to govern us? 28 Rational consumers and irrational voters 34 Conclusion 35 vii CONTENTS 3 Economists think GDP is all that matters 37 A blind obsession? 40 No design for life 45 Conclusion 47 4 Economists think we live in a free market 49 A free market is not anarchy 49 Capitalists don’t like free markets 53 Planning, private and public 58 Conclusion 60 PART 2 The Myths 63 5 The rich get richer and the poor get poorer 65 Higher wages for all 66 The progress of the poor relative to the rich 71 Conclusion 76 6 We are working ever longer hours 78 Conclusion 84 7 Rich countries will not benefit from more economic growth 87 Growth scepticism 90 In defence of growth 92 Conclusion 96 8 There is a paradox of prosperity 99 Other people’s consumerism 104 Ferraris, Porsches and other preferences 110 Conclusion 118 viii