[Previous] Altruism Contradicts Liberalism | Home | [Next] Conflicts of Interest, Poverty and Rationality

Harmony, Capitalism and Altruism

I quit the Effective Altruism forum due to a new rule requiring posts and comments be basically put in the public domain without copyright. I had a bunch of draft posts, so I’m posting some of them here with light editing.

Are there conflicts of interest, or is mutual benefit always possible? This is one of the most important questions in political philosophy.

The belief in conflicts of interest leads to a further question. Who should win when there’s a conflict? One view is that individuals should get worse outcomes for the benefit of the group. Another view is that individuals should be prioritized over the group.

Why would one advocate worse outcomes for the group? That might sound odd initially. One reason is because it seems to be implied by individual freedom and individual rights. If each person has rights and freedom, then he’s free to maximize his interests within that framework. There’s nothing to do, besides asking nicely and trying to make persuasive arguments (which historically isn’t very effective), to try to get people to sacrifice their interests for the sake of others.

One consequence is the altruist-collectivist side of the debate has often considered rejecting individual freedom or some individual rights. What if most people won’t voluntarily act for the benefit of the group, to create a paradise society with the highest overall utility (the most good for the most people, or something along those lines)? Then some people will advocate violently forcing them.

Because there appears to be a conflict between the good of the group and the rights and freedoms of the individual, altruists have often advocated restricting the rights and freedoms of the individual. Sometimes they’ve used violence, in the name of the greater good, and killed millions. That kind of massive violence has never led to good results for the group, though it has led to somewhat good results for a few individuals who end up being wealthy rulers. There have always been questions about whether communist revolutionary leaders actually care about the welfare of everyone or are just seeking power so they can be corrupt and get personal luxuries. Historically, collectivist societies tend to be plagued by noticeably more corruption than the more individualist democracies have. Violence and corruption are linked together in some ways. It’s harder to profit from corruption if individuals have rights and society won’t let you get away with violating their rights to take their stuff.


A rather different viewpoint is that we’re all fallible, we each individually have limited knowledge, and we can only coordinate with others a limited amount. We shouldn’t try to design paradise by looking at society from the perspective of an omniscient god. We have to consider decision making and action from the point of view of an individual. Instead of trying to have some wise philosopher kings or central planners telling everyone what to do, we need a system where individuals can figure out what to do based on their own situation and the knowledge they have. The central planner approach doesn’t work well because the planners don’t have enough detailed knowledge of each individual’s life circumstances, and can’t do a good enough job of optimizing what’s good for them. To get a good outcome for society, we need to use the brainpower of all its members, not just a few leaders. We have no god with infinite brainpower to lead us.

So maybe the best thing we can do is have each individual pay attention to and try to optimize the good for himself, while following some rules that prevent him from harming or victimizing others.

In total, there is one brain per person. A society with a million members has a million brains. So how much brainpower can be allocated to getting a good outcome for each person? On average, at most, one brain worth of brainpower. What’s the best way to assign brainpower to be used to benefit people? Should everyone line up, then each person looks 6 people to his right, and uses his brainpower to optimize that person’s life? No. It makes much more sense for each brain to be assigned the duty of optimizing the life of the person who that brain is physically inside of.

You can get a rough approximation of a good society by having each person make decisions for themselves and run their own lives, while prohibiting violence, theft and fraud.

Perhaps you can get efficiency gains with organized, centralized planning done by specialists – maybe they can make some ideas that are useful to many people. Or maybe people can share ideas in a decentralized way. There are many extra details to consider.


Next let’s consider coordination between people. One model for how to do that is called trade. I make shoes, and you make pants. We’d each like to use a mix of shoes and pants, not just the thing we make. So I trade you some of my shoes for some of your pants. That trade makes us both better off. This is the model of voluntary trade for mutual benefit. It’s also the model of specialization and division of labor. And what if you make hats but I don’t want any hats, but you do want some of my shoes? That is the problem money solves. You can sell hats to someone else for money, then trade money for my shoes, and then I can trade that money to someone else for something I do want, e.g. shirts.

The idea here is that each individual makes sure each trade he participates in benefits him. If a trade doesn’t benefit someone, it’s his job to veto the trade and opt out. Trades only happen if everyone involved opts in. In this way, every trade benefits everyone involved (according to their best judgment using their brainpower, which will sometimes be mistaken), or at least is neutral and harmless for them. So voluntary trade raises the overall good in society – each trade raises the total utility score for that society. (So if you want high total utility, maybe you should think about how to increase the amount of trading that happens. Maybe that would do more good than donating to charity. And that’s a “real” maybe – I mean it’s something worth considering and looking into, not that I already reached a conclusion about it. And if EA has not looked into or considered that much, then I think that’s bad and shows a problem with EA, independent of whether increasing trade is a good plan.)

High Total Utility

It’s fairly hard to score higher on total good by doing something else besides individual rights plus voluntary trade and persuasion (meaning sharing ideas on a voluntary basis).

Asking people to sacrifice their self-interest usually results in lower total good, not higher total good. Minor exceptions, like some small voluntary donations to charity, may help raise total good a bit, though they may not. To the extent people donate due to social signaling or social pressure (rather than actually thinking a charity can use it better than they can) donations are part of some harmful social dynamics that are making society worse.

Donations or Trade

But many people look at this and say “Sometimes Joe could give up a pair of old pants that he doesn’t really need that’s just sitting around taking up space, and give it to Bob, who would benefit from it and actually wear it. The pants only have a small value to Joe, and if he would sacrifice that small value, Bob would get a large value, thus raising overall utility.”

The standard pro-capitalist rebuttal is that there’s scope for a profitable trade here. Also, the scenario was phrased from the perspective of an omniscient god, central planner or philosopher king. Joe needs to actually know that Bob needs a pair of used pants, and Bob needs to know that Joe has an extra pair. And Joe needs to consider the risk that several of the pants he currently wears become damaged in the near future in which case he’d want to wear that old pair again. And Bob needs to consider the risk that he’s about to be gifted a bunch of pairs of new pants from other people so he wouldn’t want Joe’s pants anyway.

But let’s suppose they know about all this stuff and still decide that, on average, taking into account risk and looking at expectation values, it’s beneficial for Bob to have the pants, not Joe. We can put numbers on it. It’s a $2 negative for Joe, but a $10 gain for Bob. That makes a total profit (increase in total utility) of $8 if Joe hands over the pants.

If handing over the pants increases total good by $8, how should that good be divided up? Should $10 of it go to Bob, and -$2 of it go to Joe? That’s hardly fair. Why should Bob get more benefit than the increase in total good? Why should Joe sacrifice and come out behind? It would be better if Bob paid $2 for the pants so Bob benefits by $8 and Joe by $0. That’s fairer. But is it optimal? Why shouldn’t Joe get part of the benefit? As a first approximation, the fairest outcome is that they split the benefit evenly. This requires Bob to pay $6 for the pants. Then Joe and Bob each come out ahead by $4 of value compared to beforehand.

There are objections. How are Joe and Bob going to find out about each other and make this trade happen? Maybe they are friends. But there are a lot more non-friends in society than friends, so if you only trade with your friends then a lot of mutually beneficial trades won’t happen. So maybe a middleman like a used clothing store can help – Joe sells his pants to the used clothing store where Bob later finds and buys them. The benefit is split up between Joe, Bob and the store. As a first approximation, we might want to give a third of the benefit to each party. In practice, used clothing stores often don’t pay very much for clothing and don’t charge very high profit margins, so Bob might get the largest share of the benefit. Also the overall benefit is smaller now because there are new costs like store employees, store lighting, marketing, and the building the store is in. Those costs may be worth it because otherwise Joe and Bob never would have found each other and made a trade, so a smaller benefit is better than no benefit. Those costs are helping deal with the problem of limited knowledge and no omniscient coordinator – coordination and finding beneficial trades actually takes work and has a downside. Some trades that would be beneficial if they took zero effort actually won’t work because the cost of the trading partners finding each other (directly or indirectly through a middle man) costs more than the benefit of the trade.

Not Having Enough Money

What if Bob doesn’t have $6 to spare? One possibility is a loan. A loan would probably from a bank not from Joe – this is an example of specialization and division of labor – Joe isn’t good at loans and a bank that handles hundreds of loans can have more efficient, streamlined processes. (In practice today, our banks have a lot of flaws and it’s more typical to get small loans from credit cards, which also have flaws. I was making a theoretical point.)

If Bob is having a hard time, but it’s only temporary, then a bank can loan him some money and he can pay it back later with interest. That can be mutually beneficial. But not everyone pays their loans back, so the bank will have to use the limited information it has to assess risk.

Long Term Poverty

What if Bob is unlikely to have money to spare in the future either? What if his lack of funds isn’t temporary? That raises the question of why.

Is Bob lazy and unproductive? Does he refuse to work, refuse to contribute to society and create things of value to others, but he wants things that other people worked to create like pants? That anti-social attitude is problematic under both capitalist and altruistic approaches. Altruism says he should sacrifice, by accepting the disutility of working, in order to benefit others. Capitalism gives him options. He can trade the disutility of working to get stuff like pants, if he wants to. Or he can decide the disutility of continuing to wear old pants is preferable to the disutility of working. Capitalism offers an incentive to work then lets people make their own choices.

It’s better (in some ways) if Joe trades pants to someone who works to create wealth that can benefit society, rather than someone who sits around choosing not to work. Joe should reward and incentivize people who participate in productive labor. That benefits both Joe (because he can be paid for his pants instead of give them away) and also society (which is better off in aggregate if more people work).

What if Bob is disabled, elderly, or unlucky, rather than lazy? There are many possibilities including insurance, retirement savings, and limited amounts of charitable giving to help out as long as these kinds of problems aren’t too common and there isn’t too much fraud or bad faith (e.g. lying about being disabled or choosing not to save for retirement on purpose because you know people will take pity on you and help you out later, so you can buy more alcohol and lotto tickets now).

Since the central planner approach doesn’t work well, one way to approach altruism is as some modifications on top of a free market. We can have a free market as a primary mechanism, and then encourage significant amounts of charitable sacrifice too. Will that create additional benefit? That is unclear. Why should Joe give his pants to Bob for free instead of selling them for $6 so that Joe and Bob split the benefit evenly? In the general case, he shouldn’t. Splitting the benefit – trade – makes more sense than charity.

Liberalism’s Premise

But pretty much everything I’ve said so far has a hidden premise which is widely disputed. It’s all from a particular perspective. The perspective is sometimes called classical liberalism, individualism, the free market or capitalism.

The hidden premise is that there are no conflicts of interest between people. This is often stated with some qualifiers, like that the people have to be rational, care about the long term not just the short term and live in a free, peaceful society. Sometimes it’s said that there are no innate, inherent or necessary conflicts of interest. The positive way of stating it is the harmony of interests theory.

An inherent conflict would mean Joe has to lose for Bob to win. And the win for Bob might be bigger than the loss for Joe. In other words, for some reason, Bob can’t just pay Joe $6 to split the benefit. Either Joe can get $2 of benefit from keeping that pair of pants, or Bob can get $10 if Joe gives it to him (or perhaps if Bob takes it), and there are no other options, so there’s a conflict. In this viewpoint, there have to be winners and losers. Not everything can be done for mutual benefit using a win/win approach or model. Altruism says Joe probably won’t want to give up the pants for nothing, but he should do it anyway for the greater good.

The hidden premise of altruism is that there are conflicts of interest, while the hidden premise of classical liberalism is that there are no necessary, rational conflicts of interest.

I call these things hidden premises but they aren’t all that hidden. There are books talking about them explicitly and openly. They aren’t well known enough though. The Marxist class warfare theory is a conflicts of interests theory, which has been criticized by the classical liberals who advocated a harmony of interests theory that says social harmony can be created by pursuing mutual benefit with no losers or sacrificial victims (note: it’s later classical liberals who criticized Marxism; classical liberalism is older than Marxism). Altruists sometimes openly state their belief in a conflict of interests viewpoint, but many of them don’t state that or aren’t even aware of it.

Put another way, most people have tribalist viewpoints. The altruists and collectivists think there are conflicts between the individual and group, and they want the group to win the conflict.

People on the capitalist, individualist side of the debate are mostly tribalists too. They mostly agree there are conflicts between the individual and group, and they want the individual to win the conflict.

And then a few people say “Hey, wait, the individual and group, or the individual and other individuals, or the group and the other groups, are not actually in conflict. They can exist harmoniously and even benefit each other.” And then basically everyone dislikes and ignores them, and refuses to read their literature.

The harmony theory of classical liberalism has historical associations with the free market, and my own thinking tends to favor the free market. But you should be able to reason about it from either starting point – individual or group – and reach the same conclusions. Or reason about it in a different way that doesn’t start with a favored group. There are many lines of reasoning that should work fine.

Most pro-business or pro-rich-people type thinking today is just a bunch of tribalism based on thinking there is a conflict and taking sides in the conflict. I don’t like it. I just like capitalism as an abstract economic theory that addresses some problems about coordinating human action given individual actors with limited knowledge. Also I like peace and freedom, but I know most people on most sides do too (or at least they think they do), so that isn’t very differentiating.

I think the most effective way to achieve peace and social harmony is by rejecting the conflicts of interest mindset and explaining stuff about mutual benefit. There is no reason to fight others if one is never victimized or sacrificed. Altruism can encourage people to pick fights because it suggests there are and should be sacrificial victims who lose out for the benefit of others. Tribalist capitalist views also lead to fights because they e.g. legitimize the exploitation of the workers and downplay the reasonable complaints of labor, rather than saying “You’re right. That should not be happening. This must be fixed. We must investigate how that kind of mistreatment by your employers is happening. There are definitely going to be some capitalism-compatible fixes; let’s figure them out.”

You can start with group benefit and think about how to get it given fallible actors with limited knowledge and limited brainpower. We won’t be able to design a societal system that gets a perfect outcome. We need systems that let people do the best with the knowledge they have, and let them coordinate, share knowledge, etc. We’ll want them to be able to trade when one has something that someone else could make better use of and vice versa. We’ll want money to deal with the double coincidence of wants problem. We’ll want stores with used goods functioning as middle men, as well as online marketplaces where individuals can find each other. (By the way, Time Will Run Back by Henry Hazlitt is a great book about a socialist leader who tries to solve some problems his society has and reinvents capitalism. It’s set in a world with no capitalist countries and where knowledge of capitalism had been forgotten.)

More Analysis

Will we want people to give stuff to each other, for nothing in return, when someone else can benefit more from it? Maybe. Let’s consider.

First, it’s hard to tell how much each person can benefit from something. How do I know that Bob values this object more than I do? If we both rate it on a 1-10 scale, how do we know our scales are equivalent? There’s no way to measure value. A common measure we use is comparing something to dollars. How many dollars would I trade for it and be happy? I can figure out some number of dollars I value more than the object, and some number of dollars I value less than the object, and with additional effort I can narrow down the range.

So how can we avoid the problem of mistakenly giving something to someone who actually gets less utility from it than I do? He could pay dollars for it. If he values it more in dollars than I do, then there’s mutual benefit in selling it to him. He could also offer an object in trade for it. What matters then is that we each value what we get more than what we give up. I might actually value the thing I trade away more than the other guy does, and there could still be mutual benefit.


I have pants that I value at $10 and Bob values at $5. For the pants, Bob offers to trade me artwork which I value at $100 and he values at $1. I value both the pants and artwork more than Bob does, but trading the pants to him still provides mutual benefit.

But would there be more total benefit if Bob simply gave me the artwork and I kept the pants. Sure. And what if I gave Bob $50 for the art? That has the same total benefit. On the assumption that we each value a dollar equally, transfers of dollars never change total benefit. (That’s not a perfect assumption but it’s often a reasonable approximation.) But transfers of dollars are useful, even when they don’t affect total utility, because they make trades mutually beneficial instead of having a winner and a loser. Transferring dollars also helps prevent trades that reduce total utility: If Bob will only offer me like $3 for the pants, which I value at $10, then we’ve figured out that the pants benefit me more than him and I should keep them.

BTW, if you want to help someone who has no dollars, you should consider giving him dollars, not other goods. Then see if he’ll pay you enough to trade for the other goods. If he won’t, that’s because he thinks he can get even more value by using the dollars in some other way.

Should I do services for Bob whenever the value to him is higher than the disutility to me? What if I I have very wonderful services that many people want – like I’m a great programmer or chef – and I end up working all day every day for nothing in return? That would create a disincentive to develop skills. From the perspective of designing a social system or society, it works better to set up good incentives instead of demanding people act contrary to incentives. We don’t want to have a conflict or misalignment between incentives and desired behaviors or we’ll end up with people doing undesirable but incentivized behavior. We’ll consider doing that if it’s unavoidable, but we should at least minimize it.

Social Credit

There’s a general problem when you don’t do dollar-based trading: what if some people keep giving and giving (to people who get higher utility for goods or services) but don’t get a similar amount of utility or more in return? If people just give stuff away whenever it will benefit others a bunch, wealth and benefit might end up distributed very unequally. How can we make things fairer? (I know many pro-capitalist people defend wealth inequality as part of the current tribalist political battle lines. And I don’t think trying to make sure everyone always has exactly equal amounts of wealth is a good idea. But someone giving a lot and getting little, or just significant inequality in general, is a concern worthy of some analysis.)

We might want to develop a social credit system (but I actually mean this in a positive way, despite various downsides of the Chinese Communist Party’s social credit system). We might want to keep score in some way to see who is contributing the most to society and make sure they get some rewards. That’ll keep incentives aligned well and prevent people from having bad luck and not getting much of the total utility.

So we have this points system where every time you benefit someone you get points based on the total utility created. And people with higher points should be given more stuff and services. Except, first of all, how? Should they be given stuff even if it lowers total utility? If the rule is always do whatever raises total utility, how can anyone deviate to help out the people with high scores (or high scores relative to personal utility).

Second, aren’t these points basically just dollars? Dollars are a social credit system which tracks who contributed the most. In the real world, many things go wrong with this and people’s scores sometimes end up wildly inaccurate, just like in China where their social credit system sometimes assigns people inaccurate scores. But if you imagine an ideal free market, then dollars basically track how much people contribute to total utility. And then you spend the dollars – lower your score – to get benefits for yourself. If someone helps you, you give him some of your dollars. He gave a benefit, and you got a benefit, so social credit points should be transferred from you to him. Then if everyone has the same number of dollars, that basically also means everyone got the same amount of personal utility or benefit.

What does it mean if someone has extra dollars? What can we say about rich people? They are the most altruistic. They have all these social credit points but they didn’t ask for enough goods and services in return to use up their credit. They contributed more utility to others than they got for themselves. And that’s why pro-capitalist reasoning sometimes says good things about the rich.

But in the real world today, people get rich in all kinds of horrible ways because no country has a system very similar to the ideal free market. And a ton of pro-capitalist people seem to ignore that. They like and praise the rich people anyway, instead of being suspicious of how they got rich. They do that because they’re pro-rich, pro-greed tribalists or something. Some of them aspire to one day be rich, and want to have a world that benefits the rich so they can keep that dream alive and imagine one day getting all kinds of unfair benefits for themselves. And then the pro-altruism and pro-labor tribalists yell at them, and they yell back, and nothing gets fixed. As long as both sides believe in conflicts of interest, and are fighting over which interest groups should be favored and disfavored in what ways, then I don’t expect political harmony to be achieved.

Free Markets

Anyway, you can see how a free market benefits the individual, benefits the group, solves various real problems about coordination and separate, fallible actors with limited knowledge, and focuses on people interacting only for mutual benefit. Interacting for mutual benefit – in ways with no conflict of interest – safeguards both against disutility for individuals (people being sacrificed for the alleged greater good) and also against disutility for the group (people sacrificing for the group in ineffective, counter-productive ways).

Are there benefits that can’t be achieved via harmony and interaction only for mutual benefit? Are there inherent conflicts where there must be losers in order to create utopia? I don’t think so, and I don’t know of any refutations of the classical liberal harmony view. And if there are such conflicts, what are they? Name one in addition to making some theoretical arguments. Also, if we’re going to create utopia with our altruism … won’t that benefit every individual? Who wouldn’t want to live in utopia? So that sounds compatible with the harmony theory and individual mutual benefit.

More Thoughts

People can disagree about what gives how much utility to Bob.

People can lie about how much utility they get from stuff.

People can have preferences about things other than their own direct benefit. I can say it’s high utility to have a walkable downtown even if I avoid walking. Someone else can disagree about city design. I can say it’s high utility for me if none of my neighbors are Christian (disclaimer: not my actual opinion). Others can disagree about what the right preferences and values are.

When preferences involve other people or public stuff instead of just your own personal stuff, then people will disagree about what’s good.

What can be done about all this? A lot can be solved by: whatever you think is high utility, pay for it. As a first approximation, whoever is willing to pay more is the person who would get the most utility from getting the thing or getting their way on the issue.

Paying social credit points, aka money, for things you value shows you actually value them that much. It prevents fraud and it enables comparison between people’s preferences. If I say “I strongly care” and you say “I care a lot”, then who knows who cares more. Instead, we can bid money/social credit to see who will bid higher.

People often have to estimate how much utility they would get from a good or service, before they have it. These estimates are often inaccurate. Sometimes they’re wildly inaccurate. Often, they’re systematically biased. How can we make the social system resilient to mistakes?

One way is to disincentivize mistakes instead of incentivizing them. Consider a simple, naive system, where people tend to be given more of whatever they value. The higher they value it, the more of it they get. Whoever likes sushi the most will be allocated the most sushi. Whoever likes gold bars the most will be allocated the most gold bars. Whoever is the best at really liking stuff, and getting pleasure, wellbeing or whatever other kind of utility from it, gets the most stuff. There is an incentive here to highly value lots of stuff, even by mistake. When in doubt, just decide that you value it a lot – maybe you’ll like it and there’s no downside to you of making a high bid in terms of how much utility you say it gives you. Your utility estimates are like a bank account with unlimited funds, so you can spend lavishly.

To fix this, we need to disincentivize mistakes. If you overbid for something – if you say it has higher utility for you than it actually does – that should have some kind of downside for you, such as a reduced ability to place high bids in the future.

How can we accomplish this? A simple model is everyone is assigned 1,000,000 utility points at birth. When you want a good or service, you bid utility points (fractions are fine). You can’t bid more than you have. If your bid is accepted, you transfer those utility points to the previous owner or the service provider, and you get the good or service. Now you have fewer utility points to bid in the future. If you are biased and systematically overbid, you’ll run out of points and you’ll get less stuff for your points than you could have.

If you’re low on utility points, you can provide goods or services to others to get more. There is an incentive to provide whatever good or services would provide the most utility to others, especially ones that you can provide efficiently or cheaply. Cost/benefit and specialization matter.

There are many ways we could make a more complex system. Do you have to plan way ahead? Maybe people should get 1,000 more utility points every month so they always have a guaranteed minimum income. Maybe inheritance or gifting should be allowed – those have upsides and downsides. If inheritance and gifting are both banned, then there’s an incentive to spend all your utility points before you die – even for little benefit – or else they’re wasted. And there’s less incentive to earn more utility points if you have enough, but would like to get more to help your children or favorite charity, but you can’t do gifting or inheritance. There’d also be people who pay 10,000 points for a marble to circumvent the no gifting rule. Or I might try to hire a tutor to teach my son, and pay him with my utility points rather than my son having to spend his own points.

Anyway, to a reasonable approximation, this is the system we already have, and utility points are called dollars. Dollars, in concept, are a system of social credit that track how much utility you’ve provided to others minus how much you’ve received from others. They keep score so that some people don’t hog a ton of utility.

There are many ways that, in real life, our current social system differs from this ideal. In general, those differences are not aspects of capitalist economic theory nor of dollars. They are deviations from the free market which let people grow rich by government subsidies, fraud, biased lawmaking, violence, and various other problems.

Note: I don’t think a perfect free market would automatically bring with it utopia. I just think it’s a system with some positive features and which is compatible with rationality. It doesn’t actively prevent or suppress people from having good, rational lives and doing problem solving and making progress. Allowing problem solving and helping with some problems (like coordination between people, keeping track of social credit, and allocating goods and services) is a great contribution from an economic system. Many other specific solutions are still needed. I don’t like the people who view capitalism as a panacea instead of a minimal framework and enabler. I also don’t think any of the alternative proposals, besides a free market, are any good.

Elliot Temple on December 7, 2022


Want to discuss this? Join my forum.

(Due to multi-year, sustained harassment from David Deutsch and his fans, commenting here requires an account. Accounts are not publicly available. Discussion info.)