Ronald Coase

Essays on Economics and Economists

For that extensive division of labour required to maintain a civilized standard of living, we need to have the co-operation of great multitudes, scattered all over the world. There is no way in which this co-operation could be secured through the exercise of benevolence. Benevolence, or love, may be the dominant or, at any rate, an important factor within the family or in our relations with colleagues or friends, but as Smith indicates, it operates weakly or not at all when we deal with strangers. Benevolence is highly personal and most of those who benefit from the economic activities in which we engage are unknown to us. Even if they were, they would not necessarily in our eyes be lovable. For strangers to have to rely on our benevolence for what they received from us would mean, in most cases, that they would not be supplied: 'Man has almost constant occasion for the help of his brethren, and it is in vain to expect it from their benevolence only.'

Looked at in this way, Adam Smith's argument for the use of the market for the organisation of economic activity is much stronger than it is usually thought to be. The market is not simply an ingenious mechanism, fueled by self-interest, for securing the co-operation of individuals in the production of goods and services. In most circumstances it is the only way in which this could be done. Nor does government regulation or operation represent a satisfactory way out. A politician, when motivated by benevolence, will tend to favour his family, his friends, members of his party, inhabitants of his region or country (and this whether or not he is democratically elected). Such benevolence will not necessarily redound to the general good. And when politicians are motivated by self-interest unalloyed by benevolence, it is easy to see that the results may be even less satisfactory.

The great advantage of the market is that it is able to use the strength of self-interest to offset the weakness and partiality of benevolence, so that those who are unknown, unattractive, or unimportant will have their wants served.