It is a common assumption that greed and selfishness are vices. The majority of people possess moral compasses which lead them to navigate away from such characteristics and traits. They believe selfishness is socially harmful. 

Four-time British Prime Minister William E. Gladstone said, “Selfishness is the greatest curse of the human race.” Statements like that are one reason why people believe selfishness is degenerative. 

Economics tells us something different. Gordon Gekko, Michael Douglas’s infamous character from the 1987 movie “Wall Street” said, “Greed, for lack of a better word, is good. Greed is right. Greed works.” 

Gekko is not the model of human decency, but he was correct in his assertion.  Economists have a better word for greed. We call it rational self-interest. This is a commonality among Gandhi, Mother Teresa and a man like Gekko. 

A basic tenet of economics is that people are rational. They make decisions in which the marginal benefits outweigh the marginal costs. A man like Gandhi was rationally self-interested. He made decisions in which the benefits outweighed the costs. I am sure you are thinking, “Gandhi? Selfish!? NO!” 

In Gandhi’s opposition to the British rule in India, he performed many deeds that were detrimental to his physical health. While that is true, he also performed them in his own self-interest, and the benefits to him were greater than the costs. One may argue, “Gandhi was an intelligent man. He could have done otherwise and been better off.” 

The reality is that Gandhi’s satisfaction would only come from achieving his goal of ousting the British.  

Gandhi would have found discontent in all alternative pursuits. He would not have been happy so long as the British continued to oppress his beloved nation. Gandhi possessed a set of preferred outcomes and he sought to see them realized. Self-interest manifests itself in many ways, but as you can see, it is not always as obvious. More often than not, self-interest benefits society.

How does the selfishness of individuals make everyone better off?

The great Adam Smith, an 18th century Scottish philosopher and pioneer of economics, famously stated, “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self-interest.” 

Smith is best known for explaining how rational self-interest leads to increased economic well-being. The butcher, the baker and the brewer all produce their relevant products to further their own ends, yet society benefits as a whole. Furthermore, in order to maximize wealth earned, it is beneficial to individuals to produce the goods or provide services society values most. Selfishness, or rational self-interest, is the mechanism by which society may receive its set of preferred outcomes. You could say, one man’s greed is another man’s prosperity, and society’s prosperity for that matter. 

Gordon Gekko did not say it eloquently or convey it in an effective manner, but he was correct — greed works. Greed is an important aspect of capitalism. It is a reason why capitalism is so successful and a reason why the alternative, socialism, fails so miserably, but that is another article for another day. 

So, the next time you get accused of being greedy or selfish respond gleefully, “Thank you! You’re very welcome!”