Front Page Titles (by Subject) Self-Interest: An Invisible Hand for Social Good - Literature of Liberty, April/June 1979, vol. 2, No. 2
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Self-Interest: An Invisible Hand for Social Good - Leonard P. Liggio, Literature of Liberty, April/June 1979, vol. 2, No. 2 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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Self-Interest: An Invisible Hand for Social Good
“Adam Smith's ‘Natural Law’ and Contractual Society.” Journal of the History of Ideas 39 (October/December 1978): 665–674.
Can Adam Smith's argument that a free and pleasant society is feasible meet Thomas Hobbes's contention that a society of free individuals must be a conflict-ridden state of war? We can sustain Smith's argument (illuminated by Hobbes opponents, Bernard Mandeville and David Hume) when we realize how Smith stipulated that free, self-interested choice should be informed by ethical judgment.
In his Leviathan, Hobbes contended that in a free “state of nature” unrestrained by fear of retaliation, each man's self-interest would unleash his “natural passions” in violence. Freedom and self-interest seemed to condemn man's life to being “solitary, poore, nasty, brutish and short.” In game theory language, Hobbes attacked a society of individual freedom with the “prisoner's paradox: that state of affairs in which an individual's maximizing of his own utility does not seem to lead to maximizing results for the group.” In effect, we need the fear of Big Brother, the Leviathan State, to serve as a “civil theology” to restrain our anti-social self-interest.
Smith rejected Hobbes's malevolent view of man's nature as tied to debased anti-social passions. Men, for Smith, would adopt a rule of law because it in fact reflects humanity's commonly chosen morality. Through social evolution, as Mandeville pointed out in The Fable of the Bees, men would recognize their frail but good human nature and freely choose those institutions that would confer social order and benefits. Ethics would evolve a code that would not suppress our passions but channel any “anti-social passions into harmonious social conduct.” Hume believed that moral codes evolving for socially beneficial purposes would, for reasons of utility, devise such rules of justice as respect for property. Individuals could learn that justice was in each's self-interest.
Smith argued that the moral sentiment (and justice) went beyond simple considerations of general utility. Men would indeed agree with the utilitarian benefits to social stability in adhering to laws of justice. But men approved of justice even before recognizing the social utility of justice. As men we restrain our “passions” and form a general rule of our duty to be just “as an inductive process resulting from our sympathetic judgment of resentment of injustice in individual cases.” Thus our natural sense of duty will constrain our choices and prohibit ignoble action. Rational religion in evolutionary fashion, if free and competitive in its “market” will diffuse a noble sense of duty through society. Thus humane religion will inculcate duty as part of other market processes and will allow “selfish” individuals to respect their fellows and form a stable and free society.