ESSA

ESSA

Greed, for lack of a better word, is good


Robert Greco

By

May 23rd, 2014


Adam Smith on steroids—is there still a case to be argued for greed?


‘The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through and captures the essence of evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA.’—Gordon Gekko, Wall Street (1987)

If you haven’t seen Wall Street, I’d recommend it above any other film of its kind. This isn’t necessarily because of Gordon Gekko’s visually pleasing lifestyle that is on display, but mainly because of director Oliver Stone’s ability to leave viewers to question the morality of capitalism and the people who benefit from it the most.

To contextualise the monologue above, Gekko, in his capacity as the biggest shareholder of Teldar Paper, has just explained to the shareholders at the company’s AGM the agency costs of Teldar. Gekko argues that because the over-sized management team have a very little stake in the company, they have engaged in reckless spending on unnecessary perks, running the company into the ground. The point made here is uncontentious: a company’s performance will improve when there are strong incentives to run it efficiently.

While it would be easy to dismiss Gekko’s controversial speech as a trite, pro-free market sentiment driven by the insatiable greed of the rich, such an approach throws out the baby with the bathwater. At a point in time when many believe that greed has ruined the US and created the controversial ‘1%’, is there still any merit to the claim that greed is good?

In answering this question, a helpful starting point is to define greed as an excessive desire for something, especially wealth or money. Additionally, an interesting feature of greed is its negative connotation—people do not want to be viewed as greedy, nor do they like greedy people. Indeed, it’s commonly advanced that capitalism has created a society based on greed—a claim used to deprecate the utility of capitalism and its vocal proponents.

Greed is excessive self-interest—it compels people to pursue their own interests above the interests of others. In this way, greed ties in with Adam Smith’s theory of the invisible hand, except on steroids. Smith’s work theorises that as people pursue their separate self-interests, resources will be allocated in the most efficient way, without the need for government intervention. In other words, as individuals seek to maximise profit, society can also expect to benefit. If you believe in Smith’s work, even to a small extent, then surely greed can be a useful tool in the sense that it could at least allocate resources efficiently. After all, isn’t how we allocate our resources the most fundamental economic question?

Another reason why greed isn’t entirely bad is that greed is a lot more common than most would like to believe. This had led to the ‘I’m not greedy, it’s only the other person who’s greedy’ type of attitude that pervades society. While there are some people who undeniably devote their lives to the service of others, the majority of people are utility and profit maximisers. For example, take a university student. The reason why students tirelessly dedicate themselves to their studies could be to obtain that top mark or that desirable job or simply to absorb as much knowledge as possible. More generally, the over-working nature of Australia’s workforce is owing to affluenza (or keeping up with the Joneses). The fact that the average Australian is excessively leveraged, well beyond their means, further points to our infinite desire to consume. What I take from this is not necessarily that people have neglected life’s fundamentals, but rather that greed is widespread because the underlying motives of greedy behaviour, when isolated, are not as corrosive as society would have us believe. In other words, our pursuits to maximise our individual interests can be justified.

Furthermore, there’s a strong case that people in society today are the beneficiaries of greed. There can be no doubt that the people throughout time whose life efforts made our lives more convenient today were in a sense driven by greed. People like Steve Jobs, Henry Ford and Albert Einstein could not have succeeded without their excessive desire for self-satisfaction, improvement or perfection. Surely in this sense the view that greed motivated their pursuit for personal success, which ultimately made the lives of many better off, is plausible.

So if there is some merit to greed, then why do so many people caution against it? This is because, although greed can work, to claim that the best way to run society is on greed and greed alone could be disastrous. A society fuelled by greed encourages people to leverage positions of power to rort taxpayer money, lobby governments for incredibly selfish ends and undermine democratic process (the corruption associated with governments around the world bears testament to this). In addition, the excessive nature of greed may lead people to aimlessly pursue a cause, thereby ruining families and relationships that would otherwise be maintained. And, then there’s the fact that the very nature of greed tends to blind people from the circumstances of others, leading people to exploit the more vulnerable for selfish ends.

So is greed good? Although I would not take the view that greed, in all its forms, is good, Gekko’s words have some credence. There are certainly some positive spillover effects from greed that we tend to take for granted, and although greed allows our behaviour to deviate from more noble standards, neglecting our inherent senses of self-interest altogether could be equally as harmful.

Image: ‘Greed’ by liz west, https://flic.kr/p/4n42Ey. Licence at https://creativecommons.org/licenses/by/2.0/. by

The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

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