Wall Street

Greed Is Good

The pursuit of self-interest benefits everyone.


On TV, my Fox colleague Bill O'Reilly says, "The recession was brought on largely by greedy Wall Street corporations."

Give me a break.

Bill's smart. If he believes such things, we who care about freedom have done a poor job communicating economics.

Blaming problems on "greed" is a mindless cliche.

Yes, Wall Street was greedy—but that's nothing new. Greed is a constant. Did you ever turn down a raise? We need a free market because it restrains greed. Laws against theft and fraud help, but competition does more. With this election approaching, and statist, eager-to-regulate candidates in ascent, we need more Americans to understand this.

The statist left says it's government's job to protect consumers and help poor people. But greed—more precisely, the pursuit of self-interest in the free market—would work better. The market (if not corrupted by corporate welfare and bailouts) harmonizes the interests of diverse people who don't even know each other and might not even like each other. It motivates them to work hard to serve customers.

When markets are free (alas, ours is not; in America today, too often people "partner" with politicians and get rich through government), those who charge too much, or skimp on quality or service, lose money to competitors who serve people better.

What could be more humane? Nothing has done more than markets to lift people out of the mud and misery of primitive life.

But progressive blogger Sally Kohn argues: "We all have a little greed in us. The question is, what values do we hold alongside greed as a society … so that we operate for the better good of everyone?"

What values? My vision of the "better good" may be different from hers. I don't want government to decide for me.

"Property rights constrain self-interest," libertarian economist Donald Boudreaux pointed out. "We're all self-interested. We care more about ourselves, our family and our loved ones than we care about strangers. … The problem with government is that it is the institution that best allows people to grab more than what they deserve."

That's what happened under communism—and increasingly, it's happening in America. As Joseph Sobran put it: "'Need' now means wanting someone else's money. 'Greed' means wanting to keep your own. 'Compassion' is when a politician arranges the transfer.'"

This is a threat to freedom and the route to stagnation.

Kohn rightly objects to "crony capitalism facilitated by government," but goes on to highlight government's "positive side … values of community."

Whoa! "Community" is a loaded word. Statists misuse it to criticize individualism, as though the two don't coexist, as if, without government, people don't work together. But this is nonsense. Real communities emerge organically from individuals who volunteer to come together for common purpose. Communities are not created by government edict, which amounts to a threat of violence against peaceful people. As classical liberals like Herbert Spencer and F.A. Hayek taught, there is no conflict between individualism and social cooperation. These are two sides of the same coin of freedom. Individualists form families, clubs, charities, churches and softball leagues, and participate in thousands of voluntary communities.

But what about the poor? Kohn said government is needed to assure equality, just as parents make sure a cake is not unfairly divided among family members.

"The reality is … we have fixed resources."

But we don't have fixed resources! Thanks to economic liberalization, 7 billion people on earth live better than ever. Poverty decreases. That should prove we don't have fixed resources. Rather than one cake or a fixed supply of cake, greedy entrepreneurs—like Bill Gates and Steve Jobs—make more and bigger cakes. Everyone gets richer. The producers, however greedy, are heroes.

Inequality is a product of freedom. When people are free, some will acquire much more than others. Forty years of reporting taught me that letting the wealthy indulge their greed protects consumers and helps poor people much more than government programs do. Just keep them away from government power.

The pursuit of self-interest—greed, if you will—benefits everyone. We should free the market and enjoy the prosperity.

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    1. Well, see, this way he can charge more from Reason due to pent-up Stossel demand. It’s entirely in line with the article.

  2. But we don’t have fixed resources! Thanks to economic liberalization, 7 billion people on earth live better than ever. Poverty decreases.

    We do have fixed resources. We just don’t have fixed productivity. There’s a certain amount of, say, Lithium available on earth. That doesn’t change no matter what we do. We can however come up with more productive ways of using lithium than we are now and thus improve our standards of living.

    1. There’s a certain amount of, say, Lithium available on earth.

      Prices are everything.

      There is a certain amount of Lithium available at it’s current price. The rest of it is not available because it is not economically viable. So it will not be mined.

      If, say, demand rises, then with supply being fixed, the price goes up.
      But now there is more Lithium available! How? Well, some that was not economically viable at the old price is now worth mining. So supply now increases.

      Couple this with advances in technology, and the amount of these resources is not fixed, it’s growing!

      1. Also, we import goods from outerspace in the form of protons which get converted into other forms and is also used to convert scarce resources into other resources. Also, our ability to harvest this natural resource is improving.

        1. *photons, not protons

    2. But it’s not Lithium we want so much as what we can do with it. Rarely are there no substitutes.

      1. Until something better comes along and lithium serves little purpose. Then we suddenly have too much of it.

      2. I like to start my day with a mocha frappuccino and a heavy dose of Lithium. Sweet, sweet Lithium.

  3. Stossel kinda points out one of the problems I have with the current political narrative. The left says that corporations are all evil and greedy and need to be punished. They are, as Stossel points out, wrong about this. The problem is that the offsetting narrative from the right is frequently that corporations are all good and should never be question regardless of what they do. That position is just as wrong.

    The problems during the financial crisis is that a number of the major banks were defrauding their customers. The solution to this is not Franks-Dodd style regulation, but prosecution. Unfortunately the Republicans have been against any attempt to hold anybody to account.

  4. Stormy, I get your point, broadly. But was the faulty advice to count on rising real estate prices really actionable fraud? Or is it something else you’re referring to?

    1. Well, the most obvious example would be Goldman Sachs wanting to short real estate, and so creating securities they thought were going to lose value, and then passing them off as AAA securities without disclosing that fact to any of the buyers.

      Goldman Sachs had a rate to make the securities, but they had an obligation to their clients to make clear exactly what they were buying.

  5. “‘Need’ now means wanting someone else’s money. ‘Greed’ means wanting to keep your own. ‘Compassion’ is when a politician arranges the transfer.'”

    Roger that, when a statist uses comparative words like fair, equal, and free, he means forced fairness, forced equality, and freedom to claim wealth transfer from someone with more wealth.

    When a statist uses emotional words like greed and compassion, he means that humans need to have limits to freedom because “bad” emotions can overwhelm “good” emotions, and the collective good will be reduced.

    When a statist uses economic gain words like revenue, wealth, and profit, they use them as if they meant plunder, rape, and murder, because they believe in zero sum economics…one’s gain is another’s loss.

    1. The statists are the ones who are greedy, for wanting what isn’t theirs.

  6. Statists have an infantile philosphy. Their arrested development includes a kindergarten morality that can’t really understand what “earning” means, and they feel better if everyone has work time and play time and nappy time and candy time all together. Statists want an all-powerful “teacher” to arbitrate all disputes and redistribute everything equally and compliment everyone’s art so everyone can feel good.

    The Statists’ zero-sum culture welcomes tyranny and predatory patronage, and results in a nanny state and docile mediocrity at best, a totalitarian regime and slavery at worst. This horrifically stupid thinking disqualifies them for adult leadership. They must be democratically marginalized and put out of power. The good news is, thanks to Obama’s unapologetic marxism, people are waking up to the absurdity of statist morality, and it’s unfitness for underpinning modern governance.

    1. This is what I categorize as “the truth, the whole truth, and nothing but the truth” syndrome. When we are sworn to do so in front a tribunal with guns, we should know we are held to that higher standard. But everyday intercourse between people should at least involve truth (outside of the little white lies we need so we don’t kill each other on sight). We are not bound to tell the whole truth or nothing but the truth. So in business, an individual – or the individuals who make up a corpus – should endeavor to tell the truth. But they are not bound to tell the whole truth. Someone asks if it is raining out, you look out, it isn’t, but there are rain clouds on the horizon – you just answer truthfully that it is not raining and are under no obligation to clue them into 15 minutes from now. Also, you can provide other information about your affinity toward fudge. You don’t have to tell them the whole truth, and you can obfuscate all you want. But you at least have to tell the truth. If they want better information, they can get off their ass and look out the window themselves.

      Puritans want every interaction between people to be as if one is swearing before God or his representatives in the form of government. And that simply cannot be. To the degree people work this angle can measure how much respect you have for them personally, but as long as they are truthful, there is nothing actionable.

    2. Not really. 94 percent still plan to vote for Obama or Romney.

  7. The best counter argument to the notion that capitalism and trade is a zero sum game is the story of Kyle McDonald. He’s the one who started with a paper clip and eventually traded it up to a house. If enriching one’s self is an act of greed in a zero sum game then McDonald took advantage of every person with whom he traded. Sadly, there are fools who probably would see it that way and demand that McDonald give back something to those he “victimized.”

    1. There was an Econtalk a while back where they discuss an account from a WW2 German prison camp. Everyone received the same Red Cross package, and one prisoner (a priest no less) went around trading with everyone. Some preferred the carrots to the cigarettes, some didn’t want the dried beef and so on. Each trade left both participants subjectively better off.

      After the trading was finished the priest sometimes ended up with 2 full packages (100% profit!). The other prisoners naturally resented him for this.

      1. Stalag 17.
        Bill Holden.
        The nitwits in his bunk assume he’s gained his material wealth by being a rat.
        When, in fact, he has just pursued trades between himself and willing partners, and routinely ends up with excess goods in his “store.”
        He tries to explain it, but they try to kill him anyway.

        1. Great movie.
          The incident I was referring to was from a 1945 article by R. A. Radford, “Economic Organization of a POW Camp.”

  8. I have found that there is a semantic issue involved with the word greed. Proponents use it to mean “enlightened self interest” while opponents use it when the interested party uses tactics such as theft or fraud. It keeps the two from reconciling.

  9. OT: Let’s play a game, count the number of economic fallacies by our best and brightest.

    1. Good example. And note the number of times that the worry warts use the pronoun “we”.
      It all stems from that nonsense.

  10. Amen, Mr. Stossel!

  11. To me, it’s frightening that John Stossel, with Reason’s blessing and imprimatur, would have to pen such obvious thoughts and philosophies — to an audience that ostensibly knows these things already. Is this site populated by 18-year-olds?

    1. The regular commentariot aren’t the only people who frequent this site, and not all of the other people who frequent this site necessarily understand this stuff already. The fairly regular Stossel pieces are a good addition, I think, since too many libertarians assume everyone else who’s interested already understands libertarianism. That, sadly, just isn’t true. I’d rather have Stossel state the obvious than have nothing like it when interested parties take a look.

    2. The zinger aimed at O’Reilly was worth it alone.

    3. There are, sadly, plenty of 19-99 year old for whom Stossel’s columns run counter to everything they’ve ever learned, been told or hold dear.
      If they can be converted one at a time, it’s a win.

  12. Blaming a recession on greed is like blaming an airplane crash on gravity.

    1. Well played.
      The pithy force is strong in this one.

      Conversely, promising a recovery on the basis of having more compassion and fairness than one’s opponent is equally dipshittinous.

  13. Stossel’s use of the image of Gordon Gekko is aleays amusing when he talks about the virtues of greed on his show. Next time he should do a shout out to us free market advocates down here in Texas by using a picture of JR Ewing.

  14. I don’t think greed is good. I just disagree with the notion that corporations have a monopoly on greed. A poor college student with unfortunate circumstances who is protesting the fact that richer people aren’t giving him money for nothing is just as greedy as the rich people he hates.

  15. “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 interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

  16. I wish i make up bullshit and get rich like Stossel.

    1. Well, learning to communicate with out sounding like an illiterate would be a good start.

  17. Greed is everywhere, Even the top companies of the world stand on Greed.

  18. If you believe that Obama would use the extra $80 billion in revenue extracted from the rich to reduce the deficit, I have an 11-page glossy jobs pamphlet for you. And Obama’s tax on the rich would hit Johnson is certainly the clear favorite in our 2012 “Who’s Getting Your Vote” survey. Few of the contributors below have kind words for either President Obama or Gov. Romney, but many are stoked by state-level intiatives seeking to legalize the production, sale, and use of marijuana; to recognize gay marriage; and to otherwise limit the power of the state. Contributors were also generally optimistic that Reason’s vision of “Free Minds and Free Markets” was either still gaining ground or at least holding its own against constant attempts to limit both coach outlet, Still, according to a Bloomberg survey of selected economists, under Obama’s plan, “13,000 jobs would be created in 2013, bringing the total to 288,000 over two years.” That’s hundreds of billion in spending?deficit spending?aimed at creating a few unsustainable jobs without the benefit of any real private-sector growth.coach outlet

  19. This whole greed/envy debate is so frustrating. I think there is a deliberate attempt to obfuscate the issues involved so there can never be any mutual understanding. The issue is not self interest versus altruism. Those things are not remotely contrary to each other. This issue is a system that has been rigged in such a way that those with influence – whether political or otherwise can manipulate things so that they can benefit at the expense of others. Real free markets exploit no one nor do they require that our rulers redistribute wealth for every capable person to flourish in a basic sense. What we have, as you all well know, is a weird amalgam of corporatism and rent seeking – neither of which has any resemblance to free market capitalism. The debate never, never make any progress as long as it is a debate over greed and envy.

  20. Help poor people?

    We’ve been trying to help them since long before I was born. Hasn’t worked yet. Never will work cause you can’t help those who aren’t already working to help themselves. You can’t lift someone out of poverty because poverty is not an economic condition. It is a moral and intellectual condition that has economic consequences. People who make consistently poor choices in life and/or were cursed with below average abilities tend to be poor. You can’t help them any more than you can make a cripple walk. Just doesn’t work. The most you can do is discourage them from breeding so that future generations might be spared their shortcomings.

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  22. Bill’s smart. If he believes such things, we who care about freedom have done a poor job communicating economics.

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