Knowledge is power.
—Francis Bacon, English philosopher, statesman, and scientist
THROUGHOUT HUMAN HISTORY, THE TWO MAIN FORMS OF economic interaction have been resource-grabbing and mutual cooperation. Resource-grabbing, which appeals to our selfish side, helps enlarge the slice of the societal pie that a person receives, but it often reduces the size of the pie itself. Mutual cooperation, which appeals to our empathetic and compassionate side, increases the size of the pie but not necessarily of the slice that each person receives.
Adam Smith had the brilliant insight that in competitive markets, mutually beneficial cooperation could be sustained by relying on the self-interested component of human nature. He didn’t think ...