By Jonathan B. Wight

David Brooks in today’s New York Times reports on the shift in the American Enterprise Institute’s take on capitalism.  The AEI’s president, Arthur Brooks (no relation), is touting the human transformational aspects of capitalism.   That is, how people acquire meaning from discovering and pursuing their dreams and aims in life. 

This is long overdue. 

Wealth maximization is not to be sneezed at—!—because, as Paul Heyne was fond of pointing out, money is the tool by which we carry out our aims, including our ones for benevolence and justice as well as the self.  We cannot say why someone buys or sells, since we do not know their motives, many of which could be noble.

But life is also more than shopping: “To found a great empire for the sole purpose of raising up a people of customers, may at first sight, appear a project fit only for a nation of shopkeepers” (Adam Smith, Wealth of Nations).

The motivation for entrepreneurship is complex.  To portray it simply as profit-maximizing diminishes and degrades the noble pursuits that often go with it—creating beauty, being the first, being the best, and serving others.  An organic grocer in my hometown started on this path thirty years ago, long before this movement was captured by corporate bigwigs and long before this could be seen as a “profit-maximizing” career move.  The founders were moved by their commitments and ideals. 

Profit is necessary for sustainability, but it is not always the most important motivation for entrepreneurship.  In teaching about capitalism we should abandon the caricatures of Adam Smith (that greed is good) and the caricatures of standard micro theory (that profit is the only motivation) to present a more complete and enriching view of the possibilities of competitive markets.