Saturday, November 12, 2005

Greed is Not Good

ABC News, 12 November, carries a report on greed having, allegedly, a positive influence - you might remember Gordon Geko, aka Michael Douglas, saying ‘greed is good’ in Oliver Stone’s movie, Wall Street, in 1987.

John Stossel (quoted on Lost Legacy a couple of times) and Marc Doran develop this theme for ABC News. They give small scale, micro examples of reaching low achievers in a New York ‘sink’ School with motivating stories about making money, legally: “When Greed is Good: money motive can create better public services and revitalize classrooms”.

They quote:

“Economist Walter Williams says we usually benefit more from for-profit companies. "Normally in our country," he said, "those areas where people are motivated the most by greed are the areas that we're the most satisfied with — supermarkets, computers, FedEx. Those areas where people say we're motivated by caring are the areas of disaster in our country, such as education, the post office, city garbage collection, police services."
I'd add my own selection: the Department of Motor Vehicles. Again and again, these agencies that are supposed to help us, don't serve us as well as people driven by what Williams called greed.

I'd call it enlightened self-interest, and self interest does a lot of good things. In 1776, Adam Smith explained how pursuing profit helps others: "He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."

‘Greed’ is an emotive word that gets the listeners’ attention – something important when dealing with low-esteem people with short attention spans. But Adam Smith did not teach in favour of greed. ‘Self interest’ is not another word for ‘greed’ in Smithian markets.

His reference from “Wealth of Nations”, quoted above, was not about pursuing profit but about risk averse motives leading a trader to prefer to keep his capital-stock nearby in his neighbourhood, rather than send it abroad where he cannot watch over it so well. The effect of keeping capital-stock in a national economy, rather than in another country’s economy, was to raise the rate of growth (the physical goods produced annually in a country) in the home country to the betterment of the nation. This passage goes onto make the invisible hand reference.

Self-interest can do ‘good things’ and it can also, never forget, do ‘bad’ things too. Examples of the latter include self-interest driven motives to opt for monopoly pricing, to curtail supply and to eliminate competition, of which “Wealth of Nations” gives many other instances and examples. More modern day examples would include actions that add to pollution of the environment, unless detected and penalized by the law.

Left to themselves (the policy of laissez faire, which Smith never supported) self-interest alone can cause serious defects from selfish and greedy people thinking it is the same as greed.

Read the full story at Includes video clip from the tv programme.


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