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The so-called “economic man” is a classical role model of human behaviour. It is part of the capitalist economic theory, and one way to explain how Europe and North America became economically dominant in the world. The basic assumption is that people always act in ways that benefit themselves.

Adam Smith, who lived during the 18th century, was a Scottish philosopher and liberalist. He believed that society would benefit if people were allowed to pursue their own interests. According to him the market would work more efficiently due to an automatic competition and little Government interference. This lack of influence by the Government he called the “invisible hand”. Today the Adam Smith Institute in the UK promotes Smith’s ideas in a modern context to reduce Government influence and achieve a free market.

“Every individual…generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.” – Adam Smith

I have created an overview of the advantages and disadvantages of the theory of economic man and put it below:

Should companies and countries be free to follow Smith’s ideas?

Considering the positive and negative aspects of the theory I have listed above it is not as easy to answer this question. In my opinion you cannot just answer it with “yes” or “no”. On the one hand I believe that freedom of the market is a very desirable aim, and as we have learned it makes a country’s economy work more efficiently. On the other hand the results of everyone just pursuing their own interests can be dramatic. The wealthier part of the population gains more and more money and power on the market, while lower social classes can be “pushed down” by them. Even if a country’s economy and  also society benefit from this economic system, other countries which have less economic power and international influence (less economically developed countries, e.g. in Africa, the Middle East and South America) do not have a chance of catching up with more economically developed countries. Hence those countries get even poorer and the development gap becomes even bigger.

In conclusion I suggest to make a compromise: Apparently the best solution is that companies and countries should be free to have a generally free market, but the government should still interfere as far as it is necessary. That means that there should be government help (e.g. through publicly founded health and education) and programmes to aid poor and disadvantaged countries. This way the government is still given the required freedom to help bridging the global development gap as well as social gaps within its country, but at the same time there is a natural economic competition due to a fundamentally free market.