Economics helps you understand that money is not the only thing that matters in life. Economics teaches us that making a choice means giving up something. Money is nice, but knowing how to deal with it is nicer. Economics is the study of how to get the most out of life. That life is all about choices. Getting the most out of life means choosing wisely & well. If you want to make good choices, you have to understand yourself & those around you.

Each of us is self-interested. People are fundamentally self-interested which is not the same as selfish.

The idea that people care about themselves is generally a good thing to remember if you want them to do something for you in return.

How to know yourself

Adam Smith made the observation that we feel worse, much worse, about the prospect of losing our little finger than we do about the death of a multitude of strangers far away. Our ability to feel the pain of others is ever so much smaller than our ability to feel our own pain.

Smith says we are self-interested. Yet, why do we act selflessly, sacrificing our own well-being to help others? Our behaviour is driven by an imaginary interaction with what may be called an impartial spectator- a figure we imagine whom we converse with in some virtual sense, an impartial objective figure who sees the morality of our actions clearly. It is this figure we answer to when we consider what is moral or right.

We imagine being judged not by God, & not by our principles, but by a fellow human being who is looking over our shoulder.

We know we are small relative to the rest of the world. But we feel much of the time, maybe most of the time as if we are the centre of the universe. Call it the Iron Law of You.

I think more about myself than I do about you.

The impartial spectator reminds us that we are not the centre of the universe.

Self-love comes naturally to us. Love thy neighbour? Not so easy.

What spurs us to take care of our neighbour is the desire to act honorably & nobly in order to satisfy what we imagine is the standard that would be set by an impartial spectator.

The point is that you are always watching! Even if you are alone with no chance of being caught, even if no one knows you are stealing, you know. And as you contemplate committing the act, you imagine as an outsider, an impartial spectator of the crime, would react to your moral failure. You step outside & view your actions through the eyes of another.

The modern view of economics that looks at material costs & benefits alone is flawed. It’s perfectly rational to tip in a restaurant that you’ll never visit again, to donate anonymously to charity, give blood without expecting to use blood in the future. People who do these things, do so gladly.

You are up against the Iron Law of You. Your inevitable self-centerdness, which not only wants to put you first, wants you to pretend you are a good person even when you are not.

We want to be seen as having integrity, honesty, good principles. We want to earn respect, praise, attention & our good name- our good reputation- honestly. We want to be worthy of love. We do care about our reputation- how others view us- & that our reputation actually mirrors us.

Man desires not only praise but praiseworthiness. When we earn the admiration of others honestly by being respectable, honorable, blameless, generous & kind, the end result is true happiness.

Man naturally desires not only to be loved, but to be lovely.

What is loveliness? The minimum standard for loveliness is propriety.

Propriety is an old fashioned word. The modern version is proper or appropriate- acting appropriately. This means meeting the expectations of those around us. Propriety is about playing your part in the human symphony. It means to be prudent- do not act recklessly. Stay away from get-rich-quick schemes. Be inoffensive. Don’t be rude. The prudent man is genuine. He is modest about his skills & success. “Say little, do much.”

You want to be a good husband, not because that means your wife will treat you well. You want to be a good husband because that’s the right thing to do. Loveliness is not an investment looking for a return.

If you think of your actions as a husband as an investment or a cost-benefit analysis, you don’t have a marriage motivated by love. You have a mutually beneficial arrangement.

In a good marriage, you get pleasure from helping your spouse simply because that’s the kind of partner you want to be- a lovely one.

If you get love but are not lovely, you don’t feel good. It will appear undeserved.

If I get praise that I don’t deserve, it bothers me. The praise feels good. But knowing it is undeserved makes it impossible to enjoy. Undeserved praise is a reprimand.

To be loved without being lovely- to be praised without being praiseworthy- is a temptation for the weak & the foolish person, not a wise one.

Some flattery is just social pleasantry, such as paying someone a compliment. Another kind of flattery is insincere praise with an ulterior motive. Call it strategic flattery. Strategic flattery is fake love.

What leads to happiness is being loved & being lovely.

We want people to like us, respect us & care about us. We want to be appreciated, desired, praised & cherished. We want people to pay attention to us & take us seriously. We want them to want our presence, to enjoy our company.

The chief part of happiness arises from the consciousness of being loved.

“What so great happiness as to be beloved, & to know that we deserve to be beloved? What so great misery as to be hated & to know that we deserve to be hated?”