Ethics of Economics – Self Interest vs. Greed: An Elliott School Speaker Series Panel

“Greed is good.” So says Gordon Gekko, the fictional corporate monster from the film Wall Street. Today, Dr. Steve Suranovic gave a talk at the Elliott School on the ethics of economics, discussing where we should draw the line between acceptable self-interest and unacceptable greed.

This discussion was based upon the more enlightened version of economics known as normative economics. Normative economics is a study of the markets and their associated elements on the basis of questioning how the economy should work, as opposed to positive economics, which focuses solely on how the economy works, regardless of any moral quandaries.

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Dr. Steven Suranivoc

This question of greed is one that existed since the beginning of human trading and bartering. Adam Smith, in his most enduring work Wealth of Nations, points out “it is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.” Thus in a capitalist society, calculated self-interest can create a society where everyone is better off than if nobody were motivated by that self-interest. The problem in this dynamics emerges when self-interest becomes exploitative and strays into that morally repugnant category of greed.

Suranovic lays out what he sees as a series of expectations that actors within the market should follow to govern their self-interest. Below, on the left are those actions that one should aim to abide by in order to achieve self-interest that is socially acceptable. On the right, the factors that, if violated, constitute an unacceptable self-interest, or greed.

Kindness

No violence

Respect for property

No theft

Honesty

No deception

Freedom

No monopoly

Sharing

No secrecy

Good neighborliness

No secondary harm

Dr. Suranovic argues that these social norms and expectations are required for the smooth functioning of a society. Economics has a normative core and efficiency within the market requires some acceptance of rules governing self-interest.

There are a few mechanisms that are used to govern greed. Some are societal, like feelings of shame, guilt, religious imperatives, or a desire to uphold one’s reputation and honor. Others are more concrete, like the government’s laws and punishments for violating them. The police, judiciary, and regulators act as enforcers of these norms, preventing the most egregious of violations of decency in the pursuit of self-interest.

In the end, Dr. Suranovic concludes that greed itself is not good. His definition of greed, self-interest ungoverned by ethical boundaries, is by definition a violation of his understanding of acceptable self-interest. Gordon Gekko or Travis Kalanick might disagree, but I imagine most of us would rather live in a market governed by the ethical imperatives of Dr. Suranovic than either of theirs.

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