A great insight of early economists was that an economy based on free-market transactions is
self-organizing.A market economy is self-organizing in the sense that when individual
consumers and producers act independently to pursue their own self-
interests, the collective outcome is coordinated—there is a “spontaneous
economic order.” In that order, millions of transactions and activities fit
together to produce the things that people want within the constraints set
by the resources that are available to the nation.
The great Scottish economist and political philosopher Adam Smith
(1723–1790), who was the first to develop this insight fully, put it this
way:
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 own interest. We address ourselves, not to their
humanity but to their self-love, and never talk to them of our own necessities but of their
advantages.Smith is not saying that benevolence is unimportant. Indeed, he praises it
in many other passages of his book. He is saying, however, that the
massive number of economic interactions that characterize a modern
economy are not all motivated by benevolence. Although benevolence
does motivate some of our actions, often the very dramatic ones, the vast
majority of our everyday actions are motivated by self-interest. Self-
interest is therefore the foundation of economic order.
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