Objectivism and Its Failures

"Ayn Rand is my hero," the student says during office hours. "Her writings freed me. They taught me to rely on no one but myself." Thirty years after Rand's death, her book sales still number in the hundreds of thousands annually — tripling since the 2008 economic meltdown. Brad Pitt, Paul Ryan, Ted Cruz: the devotees span celebrity and politics.¹

The core of Rand's philosophy is that unfettered self-interest is good and altruism is a disease. She resolved the obvious problem — that humans are deeply cooperative animals, as any anthropologist studying hunter-gatherers will tell you — by asserting that prosocial tendencies are lies imposed by society. In her 1934 journal: "Supposing men were born social — does it mean that they have to remain so? If man started as a social animal — isn't all progress and civilization directed toward making him an individual?" The hero of Atlas Shrugged, John Galt, is a captain of industry who shuts down his factory to prove that the world needs him more than he needs it.

The experimental evidence runs the other way. People are far more cooperative and trusting than rational choice theory predicts, and they retaliate viciously when others behave selfishly — even paying penalties for the opportunity to punish perceived freeloaders. Cooperation isn't a cultural overlay on a selfish substrate. It's baked in.

The Sears Experiment

In 2008, Sears CEO Eddie Lampert decided to test Rand's philosophy on a real company. He broke Sears into over 30 units, each measured separately for profit and loss, expecting that internal competition would boost performance. As a fan of Rand and an advocate of free-market economics, he assumed the invisible hand would drive better results if leaders were told to act selfishly.¹

Instead, the divisions turned against each other. Kenmore started selling competitors' products and placing them more prominently than Sears' own. Units competed for ad space. Executives undermined other units because bonuses were tied to individual unit performance. Nobody was incentivized to make sacrifices — like offering discounts — to get shoppers into the store.

Sears became, by all accounts, miserable to work at. Share prices fell. The company lurched toward bankruptcy. The moral, as Lynn Stuart Parramore put it: "Humans actually have a natural inclination to work for the mutual benefit of an organization. They like to cooperate and collaborate, and they often work more productively when they have shared goals. Take all of that away and you create a company that will destroy itself."

This is market failure at the organizational level. The same coordination dynamics that make externalities and free-riding problems intractable in economies operate inside firms too. Lampert assumed that self-interest within a firm would sum to the firm's interest, the same way Adam Smith assumed self-interest within a market would sum to the public interest. Both assumptions are wrong for the same reason: when the gains from cooperation are large and the mechanisms for capturing them individually are absent, rational self-interest produces collectively insane outcomes.

Honduras: The Libertarian Field Test

If Sears was the corporate experiment, Honduras was the national one. After a 2009 coup, the new government passed a law in 2013 creating autonomous free-trade zones governed by corporations instead of the state. The result, as one American libertarian discovered on vacation: "The greatest examples of libertarianism in action are the hundreds of men, women and children standing alongside the roads all over Honduras. The government won't fix the roads, so these desperate entrepreneurs fill in potholes with shovels of dirt or debris. They then stand next to the filled-in pothole soliciting tips from grateful motorists."¹

"That is the wet dream of libertarian private sector innovation," he wrote, having been converted from Rand supporter to Rand debunker by the experience.

The Leveraged Philanthropy Problem

The Gates Foundation offers a different lens on the tension between self-interest and public good. With $26 billion in leverage, the Foundation operates as a public-private partnership — using targeted grants and tax-free lobbying to influence government policy in directions that "explicitly support profitability for corporate investors, whose enterprises are seen by the Gates Foundation as advancing human good."²

The conflicts are structural. Monsanto partners with the Foundation on agricultural development while the Foundation reportedly works to suppress local seed exchanges. GlaxoSmithKline partners on vaccination while UNICEF disclosed that it was forced to pay artificially elevated prices for vaccines under a Gates-brokered arrangement. The Foundation owns stock in many of these same partners.

In education, the Foundation increasingly shifted funding to promote Pearson Education's products in US schools. In agriculture, African farmers were bound to international corporate partners for future seed and pesticide access. Gates told Forbes: "Pharma doing well is important for the world."

The criticism isn't that the Gates Foundation does no good — vaccines save lives, full stop. It's that the model of leveraged philanthropy warps program design toward corporate profitability rather than local capacity-building. Vertical integration means the Foundation controls every aspect of a project, which disappears when funding is exhausted. Horizontal development of medical infrastructure gets frozen out. The Foundation's opposition to comprehensive national health programs means physicians watch patients die from conditions that would be treatable if basic infrastructure existed.

The pattern — self-interest rationalized as public benefit, with the rationalization becoming more strained the closer you look — echoes through Rand, through Sears, through Honduras. The lesson isn't that self-interest is always destructive. It's that the claim "my self-interest is your public good" deserves the most aggressive scrutiny precisely when it's made by the most powerful people in the room.