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The Pros And Cons Of Greed

1225 words - 5 pages

When the word “greed” is used it is most often in a negative connotation describing some sort of socially unacceptable behavior. Individuals who are described as “greedy” are often considered thieves or usurpers. Yet, is greed really that bad? Is it not greed that, ultimately, motivates one to excel? In a commencement speech at the University of California-Berkeley’s School of Business Administration stock speculator Ivan Boesky declared, “Greed is all right, by the way…. I think greed is healthy” (James), could a man who seemed so successful be so very wrong? The short answer to this question is yes, greed really is that bad and although it can be the greatest of motivators towards success, ultimately when it takes the form identified below it only leads to failure as exemplified by Mr. Boesky’s conviction on insider trading charges. To more fully answer this question it is necessary to discuss what greed truly is, how it manifests itself in the business world in an economic sense and what effects it has on the market.

The Oxford English Dictionary defines greed as “Inordinate or insatiate longing, especially for wealth; avaricious or covetous desire”, in other words, constantly wanting more than what you have. This definition, however, does not offer a reason as to why greed is a bad thing. Wanting more, especially in the context of economics, is usually considered to be a desired manner of conducting oneself. Participants in a market are assumed to be “rational maximizers” in that they always choose the basket of goods or method of production that provides them with the highest levels of utility or highest profits. If it were possible for an individual to obtain a higher level of satisfaction economics expects that person to do so. The problem with trying to examine greed in an economic context is that it is too closely related to ideas of straight profit maximization. For example, if a consumer who loves apples has a choice between a basket containing three apples or a basket containing four apples for the same price she would obviously choose the basket containing four apples. The consumer in our example cannot be considered greedy for trying to satisfy her insatiable desire for apples by choosing the basket with the extra apple, she is simply maximizing the return to her investment (the price paid for the basket). This principle is of course applicable to business as well. If a producer has a choice between a piece of equipment that reduces marginal cost by $100 and a piece of equipment that reduces marginal cost by $150, that producer will of course choose the second piece of equipment. This “good” behavior turns into “bad” behavior and deserves to be identified as greed when it is pursued at the expense of others, leading to a reduction in social benefit.

In his paper "Good Faith and Profit Maximization", James Gordley discusses the theories of Adam Smith, specifically that of the “Invisible Hand”. Smith’s idea...

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