Thursday, June 26, 2008

On the Use of the Term "Self-Interest" in Economics

I've been repeatedly embroiled in an argument for the last few weeks over the term "self-interest" as it is used in economic discussion, and I wanted to hammer out my position once and for all so that I don't have to keep trying to start from the beginning. Here's the deal. I am told that within the discipline of economics, what it means to say that a person "acted in her own self-interest" is that a person "acted according to her own interests." The idea here is that all action demonstrates preference, and that this necessarily means that the actor preferred the action that was taken to all other actions. So if I jump on a grenade in order to save my friends, what I have demonstrated is that I preferred to jump on the grenade over all other alternatives that I considered, and it's fair to say that I wanted to jump on the grenade; that out of all available alternatives, the one I consider the best is the one where I jump on the grenade so that my friends live. I'm down with that.

When I jump on the grenade because I want to save my friends, I take it to be uncontroversial that I do so according to my own interests. How could it be otherwise? And if what we mean by "self-interest" is simply that I act according to my own interests, then yes, my jumping on the grenade is self-interested.

But when presented with the claim that jumping on the grenade is a self-interested behavior, the average person tends to become perplexed. It's only after a thorough explanation of the "economic" meaning of the term that it becomes clear how this could be the case. Why does this happen? The reason, I contend, is that economists mean something completely different by the term "self-interested" than lay people do. This, I will argue, is a problem, and should be remedied in order to prevent completely unnecessary confusion and error.

Let me explain. In talking about any interest or preferred scenario, there must be a subject and an object. The subject, generally speaking, is the person who has the interest or the preference. So if we're talking about my preference for eating an apple, the subject is me. It is I who prefers the apple, and the preference for the apple is incoherent without the fact that the preference is my preference. The object of the preference, on the other hand, is the end which the subject is seeking to promote. In our example, I prefer the apple, but the object of my preference is not simply the apple: I don't value the apple for itself. I want to eat the apple. The object of my preference, then, is something along the lines of my having eaten the apple (perhaps we might say that I want "the experience" of eating the apple, or "the happiness" produced by my eating the apple; the exact way we phrase this is not critical).

The critical thing to note here is that the economists' definition of "self-interest" simply refers to the idea that interests are subjective: the subject of all interests is the interested individual. It is my understanding, however, that when lay people use the term "self-interest," what they have in mind is, minimally, that the object of the preference has something to do with the interested individual. So if my sister were sick, I might go get her some medicine. To say that my getting the medicine is "self-interested" would mean, to the lay person, that I get the medicine in order to promote some self-directed end. That is, I get the medicine because, perhaps, I am happier when my sister is not sick, or my sister is irritating when she's sick, or there's a cute pharmacist who will think I'm sweet for taking care of my sick sister. The lay-person, then, would call "non-self-interested" or "selfless" an interest with an object which does not directly involve the actor. So I act selflessly if the reason I go get the medicine is that I value my sister's health for its own sake, and am willing to take on the costs necessary to promote her health.

Note that this lay definition of self-interest is not incoherent or contradictory. And note also that the "selfless" act identified by the lay definition is labeled as "self-interested" by the economist definition. Indeed, the notion of "selflessness," as identified by the lay definition, is defined out of existence by the economist definition. Because the economist identifies as "self-interested" all actions where the subject is the actor, and because all actions demonstrate an interest on the part of the actor, it becomes clear that there can be no such thing as a "non-self-interested" or "selfless" action.

A number of problems immediately present themselves. The first problem is that the economist definition completely eliminates what I take to be an extremely useful distinction between "self-interested" and "selfless" actions, which is captured very well in the lay definition, without providing an adequate substitute. One might object that the term "selfish" captures the layman's "self-interested," but to most people, the term "selfish" is emotionally charged with negative connotations. Observe the struggles of the Objectivists to try to divorce this emotional
connotation from the term! By contrast, the layman's "self-interest" is relatively neutral and already conveys the sort of thing that the economist would be trying to bend "selfish" into meaning. Further, the economist would then need a new word for the layperson's "selfish"!

Another reason that the fundamental difference between the lay person's and the economist's definition is undesirable is that the economist's definition of "self-interested" means exactly the same thing as the lay person's "interested." Because all interests are subjective, and the "self" in "self-interested" refers only to this fact, the term becomes redundant. The only thing that could conceivably be added by using the term "self-interest" would be if the addition of the "self" served to remind people that preferences are subjective. But as we have discussed, the term "self-interested" already means something, and it has nothing to do with subjectivity. If anything, the use of the term crowds out more useful terminology like "subjectively-interested."

Yet another problem with the economists' definition is that now we have a situation where the technical definition of the term "self-interested" is fundamentally different from the normally accepted definition of the word. That means that in order to actually communicate their points to lay people, economists will need to first make clear what they mean by self-interested, and ensure that their audience keeps this definition firmly in mind so as to avoid drawing bad conclusions. This also creates a systematic likelihood that people will be misled by economists who fail to properly emphasize their use of the redefined term. Nowhere is this problem more apparent than in the field of Public Choice economics. We might imagine an economist going before a crowd of lay persons and announcing that "The problem with governments is that they are run by self-interested people." We might imagine that what the economist means here is that politicians act according to their own preferences, and do not magically take on "society's" preferences when they are elected to office. They are, after all, human! And this would be a good and important point. But upon hearing the economist say that politicians are self-interested, a number of lay people might interpret the economist as making the argument that politicians are "in it for themselves" and are simply involved in politics in order to accrue benefits for themselves, regardless of whether others are harmed in the process. If it's true that the economists' use of the term "self-interest" does not offer any new or important insight into anything, as I argued above, it's unclear why we wouldn't want to simply avoid this problem altogether.

The final problem with the economists' use of the term "self-interested" is that economists themselves may end up misusing the term and reverting to the normal definition without noticing. Remember, economists are lay persons before they are economists, and have generally grown up with a meaning of the term "self-interested" which is very different from the meaning they've been trained to adopt in their profession. As a result, you end up with phenomena like economists saying things along the lines of "Because all actions are self-interested, it's clear that the reason you jump on the grenade is because you would be miserable if you didn't, and you expect that the misery would be way worse than dying." And I assure you, having heard that point made today, the risk of this sort of thing occurring is very real.

So in conclusion, I say that economists should quit their ridiculousness and give us back "self-interest." Their definition takes away a useful distinction which is captured by the normal meaning of the word, doesn't explain anything new, and doesn't accomplish anything except confusing everyone, including the economists themselves.

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