ABSTRACT
The rational person maximises utility. What should the rational society do? Neoclassical economics seizes on Adam Smith’s most famous claim: that the merchant ‘by pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it’ (see the box on ‘Trade and virtue’ on p. 17). Since, according to neoclassical economics, everyone is a merchant (even manual workers or comedians), if Adam Smith is right then utility maximisation by each may lead not only to maximum personal utility but also to maximum benefits for society as a whole. Intriguingly Smith adds that this is most likely to happen when merchants do not really care about the common good. To put it slightly differently, no one needs to care or even know what is in the public interest. All they need do is pursue their own and, hey presto, the public interest may be served.
