In addition to referencing the work of the ever-insightful Dan Klein, John Tierney’s column from Saturday’s NYT (reg. req.) discusses one of my favorite subjects in great detail: Adam Smith’s analysis of the importance of social distance.
He says he could never betray the Jedi because they’re his family, but then the chancellor puts the family question in perspective: “Learn to know the dark side of the Force, Anakin, and you will be able to save your wife from certain death.” Anakin promptly recognizes the limits of altruism, just as Adam Smith did in the 18th century.
Smith knew that some people professed love for all humanity, but he realized that a man’s love for “the members of his own family” is “more precise and determinate, than it can be with the greater part of other people.” Hence his famous warning not to rely on the kindness of strangers outside your family: if you want bread, it’s better to count on the baker’s self-interest rather than his generosity.
Hayek had a related concept, one of the extended order (his use of different “orders” comes in a straight intellectual lineage from Carl Menger’s higher-order and lower-order goods). In the extended order, we use different institutions to govern our interactions than we do in a more personal order, such as the family, and when we follow the delusion that Dan calls “the people’s romance” and try to use the institutions of personal order in the extended order, we don’t get what we wanted or anticipated.