The Speculator
7
pursuit-of-happiness all-stars
Independence Day isn't just about freedom from tyranny. It's about the freedom to enjoy a healthy, productive life -- and it's made possible by companies that exemplify the best in capitalism.
By Victor
Niederhoffer and Laurel Kenner
Posted July 3, 2003, on MSN Money
It is appropriate for investors and all others in celebrating the Declaration
of Independence this week to reflect on how the profit motive has been
responsible for so much of the happiness that we achieve.
A good way to start is to think about the many failed attempts to
establish settlements in the Americas by the Spanish, French and English. Not
until some entrepreneurs got the idea that the most effective way to establish
a colony was to appeal to the self-interest of those doing the colonizing did
incentives, infrastructure and institutions combine to make it work. The
Jamestown settlement established in 1607, now an open-air museum, testifies to
the many obstacles the stockholders of the Virginia Company had to overcome in
establishing their thriving farm export business.
It was not from the benevolence of the colonists or British government
planners that the colonies eventually became successful and rich, but from the
pursuit of self-interest. This pursuit is what Adam Smith had in mind when he
wrote: “It is not from the benevolence of the butcher, the brewer, or the
baker, that we expect our dinner, but from their regard to their
self-interest.”
The corresponding passage in the Declaration is “that all Men are created
equal, that they are endowed by their Creator with certain unalienable Rights,
that among these are Life, Liberty, and the Pursuit of Happiness.” Note that
the word is “pursuit.” The right isn’t just to pursue property, but for people
to use their property in diverse ways to be happy.
The signers believed that the proper role of the
individual is not to seek status or dispensations from a lord or a government;
existence per se gives him a right to his life, liberty and pursuits. As
Don Boudreaux, chairman of the Economics Department at George Mason University,
puts it, the capitalist ethic “encourages a division of labor driven not by
tradition or the dictates of secular or religious authorities but, instead, by
the countless opportunities for mutually advantageous gain that are
individually perceived and acted upon.”
The pursuit of happiness remains the single best way to get what we want,
and is responsible for many unintended benevolent consequences. This is clearly
shown every day in millions of ways, including the list of the 10 companies in
the Dow Jones Industrial Average that had the greatest increase in shareholder
wealth during the ups and downs of the last five years:
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If there’s one thing that almost all of these companies have in common,
it’s that they all purvey efficiently manufactured products that are affordable
and used by a great many people. Their customers pay a small part of their
income for the average products bought, and purchase them repetitively.
Therefore, there are golden circles of mutual benefit involved.
Unalienable right
It’s no accident that Adam Smith’s "The Wealth of Nations" was
published in the same year that the Declaration of Independence was signed.
Pursuing happiness had worked so well in the American colonies that, by the
time of the American Revolution, the economy was flourishing. This is that
inspired Smith to delve into the principles that were responsible for the
wealth of the colonies in North America.
Some will object that business, in addition to giving us what we want,
gives us something we don’t want: pollution. Our environment, however, is
vastly cleaner than it was 50, 100 or 1,000 years ago. Let’s start with
something that really matters: disease from pollution. As the late free market
economist Julian Simon observed: “When considering the state of the
environment, we should think first of the terrible pollutants that were
banished in the past century or so: the typhoid that polluted such rivers as
the Hudson, the smallpox that humanity finally pursued to the ends of the earth
and just about eradicated, the dysentery that distressed and killed people all
over the world.”
Boudreaux points out that people today live long enough to wring their
hands with concern over carbon dioxide testifies to the improvements that
industry and capitalism have brought to our lives. Consider, say, what life was
like before:
Outside, away from the droppings from the
inhabitants of the thatched roofs, one walked through the contents of chamber
pots emptied out of windows. The automobile, that 20th-century bete noir,
has eliminated the constant presence of horse dung on the streets, along with
the accompanying swarms of flies. Cities were choked by a haze of coal smoke.
What people want
People wrongly believe that the world is dirtier and less healthy today
than in the past, and many “blame the free market for all real and imaginary
environmental problems,” Boudreaux writes. “In fact, the free market is the
greatest cleanser and disinfectant of the environment, the most successful
pollution fighter that the world has ever known.”
To see the truth of this, one only has to think of the many great
industrial enterprises that are household words: Unilever (UN, news, msgs), Colgate (CL, news, msgs) and Procter & Gamble (PG, news, msgs) for soap; Crown Cork
& Seal and Sonoco (SON, news, msgs) and for packaging food to
prevent spoilage, Dow Chemical (DOW, news, msgs) for plastics, LaFarge
North America (LAF, news, msgs) for concrete, Pfizer (PFE, news, msgs) and Johnson & Johnson (JNJ, news, msgs) for cleanliness and freedom
from bacteria, DuPont (DD, news, msgs) for fungicides,
insecticides, fibers, seeds, cleaning materials and construction materials.
There are trade-offs in the manufacture and use of all of these goods, of
course. But pollution is much less where the business sector is vibrant.
Consumers are very capable of voting with their pocketbooks, and business is
amazingly good at providing products that keep people and their environment
clean.
Dinesh D’Souza, in ‘’What
Makes America Great?’’ notes that the cultures of antiquity regarded merchants
and traders as inferior to those who didn’t work for a living. Priests,
philosophers, nobles and military men were held to be the ideal. The idea of
America is different. Here, “the self-interest of entrepreneurs and workers
would be directed toward serving the wants and needs of others. In this view,
the ordinary life, devoted to production, serving the customer, and supporting
a family, is a noble and dignified endeavor.”
Halls of fame exist for almost everything under the sun. We believe there
ought to be an Invisible Hand Hall of Fame, for companies that, in the course
of increasing shareholder wealth, have improved our lives. We nominate seven of
them for the Hall of Fame:
We also nominate two
companies that have made remarkable contributions overseas:
Regardless of their mission statements, these
companies are motivated not by benevolence, but by the self-interest of their shareholders.
It’s fitting to honor the profit motive and the pursuit of happiness on this
Day of Independence.
Final note: The end of the first half of the year is a time of regrouping
and changing horses. On our Web site, Daily Speculations, we analyze and
show how to take advantage of that and explain why we're selling the five best
first-half performing in the Dow and buying the five worst. We welcome, read
and answer all communiques, critiques, and encomia at gbuch@bloomberg.net.