There are competing interpretations of Smith on just about everything, including self interest and selfishness. Though mine may still be a minority view of the earthquake passage, I'd like to revisit it. First, here is an example of an interpretation that runs counter to mine. In The Blank State, Steven Pinker quotes the passage from TMS, ending with the famous sentence: "If he were to lose his little finger tomorrow, he would not sleep tonight; but provided he never saw them, he would snore with the most profound security over the ruin of a hundred million of his brethren." (Pinker, p. 288).
Pinker concludes that Smith's view is one in which our "moral sentiments" "overlie a deeper bedrock of selfishness." Nothing to do about it; we're hard-wired to be selfish and we keep our fingers.
If Smith had stopped there, this would all be fine. But he doesn't. In fact, Smith goes on to make the opposite case. While our first impulses are "sordid and selfish", we're compelled to overcome our initial sentiments, our high opinion of ourselves and disregard for others, and to sacrifice our interests to theirs. We're led, not by sentiment or benevolence but by "reason, principle, conscience", to give up the finger.
Here is the rest of the paragraph, following directly after the sentence above. It's long, but I'm including it all here because it's important:
Human nature startles with horror at the thought [of not giving up the finger], and the world, in its greatest depravity and corruption, never produced such a villain as could be capable of entertaining it. But what makes this difference? When our passive feelings are almost always so sordid and so selfish, how comes it that our active principles should often be so generous and so noble? When we are always so much more deeply affected by whatever concerns ourselves, than by whatever concerns other men; what is it which prompts the generous, upon all occasions, and the mean upon many, to sacrifice their own interests to the greater interests of others? It is not the soft power of humanity, it is not that feeble spark of benevolence which Nature has lighted up in the human heart, that is thus capable of counteracting the strongest impulses of self-love. It is a stronger power, a more forcible motive, which exerts itself upon such occasions. It is reason, principle, conscience, the inhabitant of the breast, the man within, the great judge and arbiter of our conduct. It is he who, whenever we are about to act so as to affect the happiness of others, calls to us, with a voice capable of astonishing the most presumptuous of our passions, that we are but one of the multitude, in no respect better than any other in it; and that when we prefer ourselves so shamefully and so blindly to others, we become the proper objects of resentment, abhorrence, and execration. It is from him only that we learn the real littleness of ourselves, and of whatever relates to ourselves, and the natural misrepresentations of self-love can be corrected only by the eye of this impartial spectator. It is he who shows us the propriety of generosity and the deformity of injustice; the propriety of resigning the greatest interests of our own, for the yet greater interests of others, and the deformity of doing the smallest injury to another, in order to obtain the greatest benefit to ourselves. It is not the love of our neighbour, it is not the love of mankind, which upon many occasions prompts us to the practice of those divine virtues. It is a stronger love, a more powerful affection, which generally takes place upon such occasions; the love of what is honourable and noble, of the grandeur, and dignity, and superiority of our own characters.
A considerable amount of misreading is the result of stopping midway through Smith's always-subtle and often-surprising story.