"Greed" vs. Economic Self-Interest?

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    I know it’s not something as germane to Austrian Economics as the business cycle, but I would think there’s still something relevant that the Austrian school would have to say to those who condemn capitalism as purely driven by “greed”.

    A friend of mine posted a link to this video of Milton Friedman addressing greed. Friedman correctly states that civilization has been built by those who acted in their own economic self-interest. (While I don’t agree with everything I’ve seen/read of Friedman, I do agree with his statements here).

    I’m trying to find a cogent and simple way to rebut, from an Austrian perspective, the statement that greed is simply a necessary evil within society.

    I stated that my friend was overgeneralizing greed, and asked the following question: Where do you draw the line between greed and self-interest? Is it greedy for minimum-wage Walmart workers to demand higher salaries from their employers, or is it merely in their economic self-interest? Is it greedy for people to buy food from restaurants with lower prices, or is it merely more cost-effective?

    In response, he stated that I was overcomplicating the issue – which I do tend to do. How can I simply clarify my position on this issue?

    Thanks in advance!


    I think your question is about as simple as it gets. One of the ways I frequently do well against statists (both on the left and on the right) in arguments is pointing out the arbitrariness of their positions. By asking the question “Where do you draw the line between greed and self-interest” you get right to the core of the issue, which is that any such attempted disctinction is completely arbitrary and subjective.

    Not sure how many people here are sports fans, but I am reminded of the NBA player Latrell Sprewell who once rejected a multi-million dollar contract because he “had a family to feed.” I’m sure that in his mind he was not being greedy. I’m also sure that he employed an agent who explained to him that it was in his economic self-interest to hold out for more money.


    What Adam Smith was trying to illustrate with his metaphor of the invisible hand was that it doesn’t matter if businessmen have no intention of helping other people. To succeed in the market and thereby help themselves, they must help others. He softened the view of Bernard Mandeville in his Fable of the Bees in which Mandeville argued that private vice is necessary for provision of the public good. “Greed is a necessary evil” as you put it.

    Greed is certainly not a necessary evil in society. The market economy operates fine whatever motives people have. They can be greedy, like Donald Trump, or altruistic, like Mother Teresa. All that is necessary for the market economy to function is that we are able to give each other monetary incentive. Consumers do this by buying or refusing to buy products. Entrepreneurs do this by offering or refusing to offer monetary compensation to acquire producer goods. Monetary incentives, as opposed to barter trade, are necessary for economic calculation, But the motive to pile up money, i.e., greed, is not.

    Consider historical examples. The fastest growth in the American economy was in the late 19th century. But Americans were certainly less greedy and materialistic back then than now. The fastest growing economy in the world over the last thirty years has been the Chinese. But nobody claims that what happened to spur this grow was massive greed overcoming the Chinese people. Instead, a better performing economy comes as a result of a more market oriented economy.


    I was having a facebook conversation along similar lines of this. I’ll just post one of my comments.

    “I have a couple thoughts on greed right now. First is that the desire to profit may not be the best definition of greed for a couple reasons. I may desire to profit for the purpose of using that income to freely help others (family, Church, those with more material needs, etc). In the Scriptures I see greed often tied to desire for unjustly acquiring property as opposed to justly acquiring property. But there is certainly also an aspect of greed in simply wanting to acquire property for your own sake whether at the expense or benefit of others.

    Second is that greed is not a distinguishing characteristic of neither capitalism nor socialism. In any form of socialism (corporatism, communism, even mixed economies) greed is exemplified by one group using government force to extract wealth from another group for the former’s benefit or government force is used to gain special privileges that inhibit or prohibit competition with the former. In capitalism an individual’s greediness will result in actions that try to build up his own treasures, but that build up of treasure can only occur voluntarily. A greedy CEO that chooses to use his profit to buy a yacht instead of give to the poor still employs an immigrant yacht builder… The virtue is missing but the wrong lies with the CEO alone and stealing for him to help a poor person does not fill him with virtue.

    If I sell my labor in the form of cooking a chicken for someone else to eat (or purchase money) so that I can receive wages that I can spend how I choose, and someone else purchases labor (or sells their money) so they don’t have to cook their own chicken, who is the greediest one – Labor or Capital? Or are both people equally greedy?”

    So it seems to me that capitalism is morally neutral to individual motives in general but is certainly morally superior in civil structure (no stealing allowed). Am I thinkin’ right? The conversation progressed into a Biblical discussion of the ownership of property by God and free stewardship granted towards mankind (so that really we don’t actually own ourselves/our labor, but are stewards of what God owns…. the end result being the same –> governments/other people don’t own us). It was a fun talk.

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