Economics 101

Tough Questions about Greed, Selfishness, and Self-Interest

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How do you legislate good behavior? Is it possible to legislate in such a way that people are incentivized to serve others instead of themselves?

These are just a couple of the tough questions I’ve been asked in response to my previous writings on the difference between selfishness and self-interest in our lives, especially in business. This past Friday I had the opportunity to speak about C.S. Lewis, selfishness, and self-interest to a group of Capitol Hill staffers as part of the Faith & Law lecture series.

The main points of my talk were that:

  • There is a tension between legitimate self-interest and selfishness.
  • Business need not be always primarily driven by greed. It is possible for businesses to be motivated by a desire to serve their customers.

These points prompted many thoughtful questions from the audience. You may have some of the same ones. I’ve listed some of the more challenging questions below, along with the answers I gave.

How do you legislate in such a way that incentivizes good behavior so that people serve others and not themselves?

There is reason to consider where certain great abuses in business that come as a result of greed should be legislated against. Additionally, in order to run businesses, we certainly need the rule of law, preservation of private property, and certain regulations that have to be there in order for business to run smoothly.

Whether or not this works in a particular society depends on the motives of the people involved. If people are not honest or respectful or trustworthy – not everyone is, we certainly know that – then the whole business sector breaks down. If you have to legislate every contract, or bring it before judges, then the whole system stops functioning. That’s why in a lot of countries there is a black market and lots of corruption.

What about “crony capitalism?” Isn’t that business acting in its self-interest?

Different companies lobby for the wrong kind of advantage in business propositions, and that messes up the whole idea of the free market because they structure everything in their own interest. It’s unfair and unjust to other people to have the government regulating for a particular corporation or business against other businesses.

This is legal, unfortunately, but it seems to be unjust or unfair in most cases.

How can we think about the double-standard society holds where multimillionaire businessmen are disdained while celebrities are not?

It is a fascinating double-standard, and I’ve noticed it a number of different times.

It’s based on a caricature of capitalism. Caricatures have a basis in reality, but they’re an overstatement of things.

There is certainly enough greed to go around. There is enough selfishness to go around. There are a lot of biblical warnings about riches.

On the other hand, being wealthy is not necessarily wrong, as we see in the “righteous rich” from the Old and New Testaments. Riches do have corrupting power, but it’s not an absolute necessity that it corrupts.

Money is a good thing. Profit is a good thing. Should we maximize profit at all costs? No. But there are many people who pursue what you might call “capitalism with a conscience.” Listen to what Bono said last year about aid to Africa. He said the solution is not aid, but capitalism with a conscience. There has been acknowledgement of that even from the World Bank.

These are just a few of the questions people raise about greed, selfishness, and self-interest. You may have others – feel free to share them in the comments below.

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  • Roger McKinney

    Good answers to tough questions. May I add my two bits?

    “How do you legislate in such a way that incentivizes good behavior so that people serve others and not themselves?”

    Looking to legislation and the government to solve all problems is itself the major problem. Adam Smith warned against this over 200 years ago. Bureaucrats and politicians (the only people who write legislation) are just as corrupt as business people. Becoming a politician in no way improves one’s character. As the Public Choice (Buchanan) school of political economy has taught us, politicians take campaign money in exchange for passing legislation favorable to major contributors. Smith’s answer was to allow the market to work to punish greed. Greedy businessmen will lose customers to businessmen who treat customers
    better.

    “What about “crony capitalism?” Isn’t that business acting in its self-interest?

    Crony capitalism is just a socialist term intended to disparage capitalism.
    It’s really nothing more than old fashioned corruption, which exists in socialist countries as well. Such corruption can happen only with corrupt politicians. Give the state more power over the marketplace and politicians will sell that power to the highest bidder, usually a large business. If it’s legal, then why expect businessmen not to engage in it? The only answer is to take power away from politicians
    so they have less to sell.

    “How can we think about the double-standard society holds where multimillionaire businessmen are disdained while celebrities are not?”

    The hatred of business is ancient and runs deep in human psyche. Aristotle
    hated commerce and manufacturing, seeing only farming and politics as worthy occupations. In ancient Athens, citizens could not hold political office unless they
    had been out of commerce at least ten years. University of Chicago economist Deirdre McCloskey has written excellent books on the subject, Bourgeois Virtues and Bourgeois Values. She writes that economic development in the West that lifted hundreds of millions out of starvation poverty happened only after the West, beginning with the Dutch Republic and then England, embraced bourgeois values, the essence of which is the respect for business. The West has lost those virtues and values and that is part of the reason for our economic and financial difficulties. We can expect non-Christians to continue the hatred of business because it’s a
    result of the natural envy that is part of the fallen nature. But Christians should embrace the ancient Jewish (that is, Biblical) attitude toward business and see it as a calling. Profits are the measure of how well business people are serving their fellow man.

    So why don’t people envy athletes, actors and rock stars the way they envy
    business people? Because the see that becoming an athlete, actor or rock star is
    as much a matter of luck (talent one is born with) than hard work. Helmut Schoeck, a German sociologist, wrote a book on envy, Envy: A Theory of Social Behavior, that explains well how envy works. If people see sudden wealth coming from luck, such as winning a lottery, they tend not to envy the person who won. Acting, athletics and musical talent are all seen as lucky winning in the genetic lottery. Schoeck makes an important point several times in his book: economic development in the West could happen only because Christianity found a way to suppress envy enough to allow it to happen. Envy is the greatest obstacle to economic development. Schoeck’s thesis fits well with that of McCloskey.

    Finally, people are ignorant of the important role of business people. They
    think managing is easy; anyone can do it. Mangers don’t work; they just live off
    the sweat of the people under them. But even the most ignorant among us can see actors, athletes and musicians at work. That distinction, however ignorant, justifies in their minds the high pay of the star entertainers and not that of CEO’s.

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