Benevolent Economics

Lesson Content

Inquire: Helping Others


Adam Smith believed that we are driven by our self-interest, and from an economics standpoint, that means individuals will focus on activities and actions that garner the most personal benefit. Though this sounds completely selfish, it is through these self-interests that we, as actors in the economy, create and offer goods and services that go on to benefit others. The market enables ongoing satisfaction of one’s interests through mutually voluntary associations with other people.

From Smith’s perspective, this means that markets generate both prosperity and peaceful association with others. In this way, despite our various imperfections, biases, prejudices, and selfish inclinations, the market provides opportunities for mutually respectful associations. Market economies are not perfect but any worthy political economy is susceptible to human nature’s imperfections. Despite these imperfections, markets can form the basis of a truly moral political economy.


Big Question

How does economic self-interest align with the idea of sacrifice for others?

Read: Self-Sacrifice


Are self-interested and selfish behaviors inherent in human beings or do they form because of the institutions under which people are raised? Adam Smith’s view, which aligned with public opinion in the 18th century, was that human nature is relatively fixed. Thus, he believed we came into this world with a certain package of natural instincts and motivations, one of them being self-interest. This opinion posits that self-interest is not a product of institutions; though institutions can channel self-interest in different ways, they are not the actual cause of it. Following Smith’s logic, changing the institutions wouldn’t get rid of self-interest, it would just channel it in different directions.

While Smith believed people are motivated by self-interest, he also thought they are capable of benevolence — the feeling of kindness and care towards others. Smith felt that people develop the genuine feelings of interest toward others which encourage behaviors we might call beneficence — actions that result in actually helping other people.

DecorativeYet, Smith believed beneficence is a limited resource. In simpler terms, we cannot help everyone, and as with any other scarce but precious resource, beneficence must be allocated carefully. Even if our personalities are entirely benevolent, there are still physical and financial limits to what we can do. Mother Teresa couldn’t minister to all the poor in Calcutta. Even the very wealthy have limits on how much they can donate their time or money. Consequently, we need to apply our benevolent motivations in the areas where it can actually make a difference.

We turn our benevolence into beneficence by translating our general good feelings on behalf of humankind into actions that can actually benefit others. We are best able to make this transition from benevolence to beneficence in situations where we have an intense personal knowledge of the particular circumstances. Since Smith believed all people have a localized knowledge about their own circumstances, those with limitations of knowledge will not be as effective in helping. Does this mean we can only help in situations where we are directly involved or help only people we directly know? No, we can exhibit beneficence as long as we listen to those with localized knowledge and heed their decisions, rather than impose what we think their needs are.

DecorativeRegarding political economies, Smith felt people would act out of self-interest and, thus, have limited benevolence. He wanted to develop a system with a wide scope that allowed individuals to act on their local knowledge and translate their natural, albeit limited, benevolent feelings into beneficent actions. This is effectively what Smith had in mind with a market based economy, which allows individuals to make decentralized decisions about how to use their resources to help others. While the market is decentralized, it also ensures at the societal level that people follow the rules of justice (defined by Smith as not harming the person or property of another and keeping your promises) so that we cooperate and grow relationships with one another.


Poll: From Benevolence to Beneficence

Which of the following acts of self-sacrifice sounds most compelling to you?

Expand: Good Intentions Aren’t Enough


The idea that self-interest motivates people is well-accepted in our society. We make decisions based on the belief that they will result in a situation, outcome, or world that is better. However, what individuals are interested in can vary.

What are you interested in? Lots of money? Pleasure? Ease? The well-being of your family? Helping inner city kids escape poverty? Caring for the sick? It is the content of our interests, not the presence of self, that has moral consequences. In fact, Adam Smith believed that one’s self-interests were tied to the moral perspectives of that person. Selfishness, in terms of self-interest, means that we believe and act in our own material or direct interest at the expense of others. In contrast, self-sacrifice, in terms of self-interest, involves identifying one’s interest with the well-being of others. If your interests are caring for/helping other people, then this is considered self-sacrifice.

Knowing How to Help

The knowledge that any individual person has is extremely limited. In particular, we often do not know others’ values, purposes, preferences, and opportunities. One consequence of this limited knowledge is that it is difficult to know what we can do to improve another person’s situation. Thus even when our self-interest is to help others or to self-sacrifice, it can still be difficult to accomplish. Some beneficent actions actually do not help at all or can even be counterproductive because we are acting without the relevant, detailed knowledge of others’ situations that would allow us to make informed decisions.

DecorativeFor example, we have all seen the outpouring of support after a major natural disaster, like a hurricane or flood. Often, we see images of donated clothing, personal items, and food waiting to be sent to those in need. But, there are also items collected that are not truly needed for particular disasters. For instance, people may naturally want to donate blankets and coats; pulling from their own experiences, they assume someone who experienced a natural disaster would need these items. Yet blankets and coats are not necessary relief items in tropical areas. Others perhaps offer food that can’t be prepared before it expires because of lack of water or power to cook. These items might actually be counterproductive; physical items are expensive for relief organizations to store and ship. This extreme illustration shows how best intentions are often difficult to translate into actual help when working on limited knowledge or using limited resources which are not beneficial to others.

Lesson Resources

Lesson Toolbox

Additional Resources and Readings

What Motivated Adam Smith?

A video suggesting that one of Adam Smith’s main interests in writing The Wealth of Nations in 1776 was his concern for those in poverty

The Wealth of Nations

The full text of Smith’s Wealth of Nations

The Theory of Moral Sentiments (First Edition)

The full text of The Theory of Moral Sentiments

Best intentions: When disaster relief brings anything but relief

A video and accompanying article describing how well-intentioned actions can potentially be unhelpful to those in need, due in part to do-gooders lacking localized knowledge

Poverty, Inc. Official Trailer

A documentary looking at the complex issue when good intentions, in this case helping people living in global poverty, may actually be more detrimental

Lesson Glossary


AJAX progress indicator
  • beneficence
    actions that result in actually helping other people
  • benevolence
    feeling of kindness and care towards others
  • justice (economic)
    a negative virtue which includes not harming the person or property of another and keeping your promises, as defined by Adam Smith
  • localized knowledge
    individuals know the most about themselves
  • self-interest
    (from Adam Smith’s perspective) allocating resources or behaving in ways that benefit oneself
  • self-sacrifice
    aligning one’s interests with the well-being of others
  • selfishness
    acting in one’s own material or direct interest at the expense of others

License and Citations

Content License

Lesson Content:

Authored and curated by James R. Otteson, Ph.D. for The TEL Library. CC BY NC SA 4.0

Media Sources

DecorativeAbundance Adults BoxQuintin GellarPexelsCC 0
DecorativeTornado DestructionSkeezePixabayCC 0
DecorativeAdult Blur BooksPixabayPexelsCC 0
DecorativeTogether Helping Each OtherMohamed_hassanPixabayCC 0

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