The invisible hand needs a conscience

On September 30th, Citadel founder Ken Griffin donated over $3 billion to Carnegie Mellon University, setting a new record for the largest individual gift in higher education. The funds will be used to build a new campus in Miami's Wynwood neighborhood, with the first students expected to enroll in 2028, pending regulatory approval.

Griffin's donation aims to "reignite both the belief and the realization of the possibility of the American dream." While his act of philanthropy is impressive, it raises a question: should stewardship only begin after wealth has been created, or should conscience also play a role in how the fortune is made?

The invisible hand, an economic mechanism, is often expected to perform a moral function it was never designed for - to supply a conscience. This misconception stems from the belief that individuals pursuing their own interests in a free market can advance the interests of society as a whole. However, Adam Smith, an economist and moral philosopher, recognized that markets require elements such as trust, restraint, and people who measure themselves by more than what the market allows.

Smith believed that markets function effectively only when guided by conscience, which is essential in determining when enough is enough and what one owes to others who helped make their success possible. Although capitalism rewards ingenuity, hard work, risk, and ambition, it raises concerns about whether the current state of economic inequality and lack of trust in big business strains the aforementioned bargain.

Philanthropy typically arrives near the end of a person's wealth-making journey, after the fortune has been made. However, conscience should ideally be part of the process from the beginning, influencing how an individual treats employees, shares opportunities, and contributes to society through investments and business practices. Some companies, such as Costco and Publix, have successfully incorporated this notion into their business models, demonstrating that shared prosperity can coexist with creating wealth.

While government and the market cannot supply conscience, it is crucial for individuals who accumulate significant wealth to ask questions such as: who will benefit from my success? How can I contribute to the society that made my achievements possible? By doing so, they can ensure that their actions align with the values they hold dear and contribute positively to society.