Note: This is an expanded version of my entry for the “What is Capitalism?” essay contest on Ayn Rand Institute Campus. The essay prompt was: “Why does Ayn Rand argue that the moral justification of capitalism does not lie in the claim that it is the best way to achieve the ‘common good’?” The maximum length for the essay was a mere 800 words, so I had to heavily edit my original draft for submission, (already brief at just over 1,000 words.) Here, I’m able post the essay without that length constraint. For the 799-word version, click here.
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Adam Smith
Ever since the Enlightenment, there have been many attempts to justify capitalism–or a quasi-capitalist mixed economy—on the basis of its being the best way to achieve “the common good,” or “the public good.” For example, Adam Smith wrote that “By pursuing his own interest [a man] frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.” Thus he implied that the public good is a valid concept and consideration. (1) According to the Internet Encyclopedia of Philosophy, Jeremy Bentham thought that “[Rights] ought to be made because of their conduciveness to ‘the general mass of felicity,’ and correlatively, when their abolition would be to the advantage of society, rights ought to be abolished.”
More common among modern conservatives and the moderate left, is the statement that regulated quasi-capitalism is “practical.” This statement is generally made without answers to the question: Practical for whom and to what end? The implied answer seems to be: For everyone and to any end. So this claim of practicality can be taken as an implied appeal to “the common good” as justification.
Ayn Rand
But Ayn Rand justified pure, laissez-faire capitalism on different grounds. She rejected “the common good” as an invalid, collectivist notion, and instead held that capitalism rests upon the principle of individual rights. This principle, in turn, rests upon the morality of rational egoism, which rests on the nature of man. Thus, the justification for capitalism as the proper governmental system for man starts with the nature of man as a living organism.
Objectivism In Depth 