How Confusing Greed with Self-Interest Nearly Destroyed the World Economy

Hershey H. Friedman, Sarah Hertz

Abstract


Adam Smith demonstrated how self-interest and the “invisible hand” of the marketplace allocated scarce resources efficiently and promoted social welfare. Unfortunately, the invisible hand argument led to the belief that regulation is unnecessary and that “greed is good.” Greed should not be confused with self-interest. In the long run, greed is selfish and can destroy an organization or country. Self-interest, on the other hand, may include benevolence and could therefore be used to justify moral capitalism.

Keywords: Adam Smith, capitalism, greed, Karl Marx, rational man, maximizing shareholder value, pay it forward, Peter Singer, Pope Francis, self-interest, tone at the top, world poverty


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References


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