How Good is Greed?
BROCKWAY, GEORGE P.
The Dismal Science HOW GOOD IS GREED? BY GEORGE P. BROCKWAY The other day, in talking about profit maximization and utility maximization, we refrained from referring to their common,...
...Consequently, a motive— including, of course, the economic motive—must be defined in the light of a value judgment that cannot be merely personal but has to be social as well...
...The effects of the increase can similarly be traced throughout the economy...
...It was not until two millennia after Euclid that the implications of the parallel-line postulate began to be understood...
...Today, we'll look at a few more...
...Partial analysis can do nothing with the big questions...
...It is all very well to say that, cet...
...One of the most famous of these is ceteris paribus—other things being equal...
...This is the way it is with what we say finally matters...
...Both can show what people do on certain assumptions...
...yet one based on greed is in principle no better...
...We let it go at that and examined some of the logical implications of those propositions ("Serving Two Maximizers," NL, March 7...
...Cet...
...Unfortunately, we've proved too much...
...I cannot become rich without enlisting your support or at least your forbearance...
...Whether full employment, for example, is a proper objective of public policy is an ethical question...
...benefiting one's fellow-men is better, a winning second serve is better...
...We see that the procurement of battle tanks is not, fundamentally, a question of short-term profit maximization...
...This is the way ordinary people and ordinary economists handle hard questions...
...It should be a matter for specialists—like dentistry...
...par., people want more money because, cet...
...I think that is manifestly untrue...
...Thus Mother Teresa, who may be perfectly altruistic and scornful of anything for herself, may, other things being equal, be eager for more money to support her charitable causes...
...BY GEORGE P. BROCKWAY The other day, in talking about profit maximization and utility maximization, we refrained from referring to their common, everyday name, which is "greed...
...The second is to claim that, whether or not people really are greedy, they act as if they were...
...par.—that is, putting those beliefs aside—she'll go for it...
...There are three possible resolutions of the issue...
...you may judge otherwise...
...On the greed question partial analysis merely tells us that, other things being equal, people want more of whatever it is they want...
...It is used all the time in business, as a means of assigning costs to different parts of an operation, deciding which advertising pitch pulls best, and so on...
...The phrase is invoked so frequently by economists that they often drop in its abbreviation ritualistically, as a Tibetan monk spins a prayer wheel...
...Nor can I benefit my fellow-men if they are unwilling (there are even people who don't read this column...
...I'd alsoliketobean internationally respected philosopher and a better bird watcher, have a better second serve, and (in my less wary moments) be Vice President of the United States...
...Most people shrink from such bravado, especially now that Boesky's stock market activities have forced him to take early retirement...
...And my second serve is meaningless unless you are across the net lunging desperately as it slices abruptly away...
...All of these motives are true under the partial analysis rule, and they are no less true than the fact that I am greedy...
...a motive is diffuse and impotent without a value judgment...
...Economics is concerned with more than the price of oil...
...The partial analysis rule seems to leave us in a world without form, a world where anything goes...
...But who knows...
...We will not contract with China to supply us with Silkworm missiles made to our design and specifications, although we could thereby save half or more of the cost...
...What they are doing is holding unchanged all except one of the factors of a situation or equation, and then varying that one to see how it affects the outcome or solution...
...par., money is the means of getting whatever people want (even if the best things in life are free...
...The big questions are ethical and historical...
...It would make dispiriting reading...
...What full employment is— should children be counted, should women, should blacks, should braceros, should strikers—is a historical question, and one whose answer has changed mightily since World War II and is still changing...
...but a fat anthology could be made of similar statements, both earlier and later...
...the assumptions are valid, cet...
...It would be a weak and erratic economics that would be based on my second serve...
...How long before we see that the so-called social issues are not such questions, either...
...It is further true that there are some questions we will not submit to the market for answers...
...Ivan Boesky was not so picky...
...The value judgment is certainly personal...
...par., everybody is greedy...
...but partial analysis is a perfectly legitimate procedure, and in the majority of economic problems the only procedure...
...None of this is to say that Mother Teresa is greedy, or that I am or that you are...
...To laymen it often looks as though economists were simply shadowboxing, because other things generally are not equal...
...Scientists properly insist that knowledge is good in itself, regardless of its apparent usefulness...
...She won't compromise her beliefs to get that money, but cet...
...Since everyone is some kind of economic agent—a producer or a consumer or both—they are saying that everyone is greedy...
...Economic questions cannot be posed except in ethical terms...
...I can't even improve my golf game unless someone maintains the course...
...We may sometimes act out of self-interest, just as the most depraved miser may sometimes act altruistically...
...It can be said (other things being equal) that a reduction in the supply of oil will cause an increase in its price...
...We are clear-headed enough on that level, but badly confused elsewhere, more confused now than we were a few years ago...
...Many years ago when I took Latin (it would be an exaggeration to say that I studied it), I was charmed by the grammatical construction with the silly-sounding name of "-ablative absolute...
...He once told the graduating class of a California college that it's good to be greedy...
...The third way is what is known in mathematics and in economics as partial analysis...
...The first thing to notice about any motive is that it implies a value judgment...
...and on the basis of these studies policies can be proposed and analyzed—taxation, subsidization, nationalization, conservation, or perhaps laissez faire...
...par., and so are the showings...
...par., to maximize their gains in the short run...
...I opt for being rich...
...The most popular is to forget all about it...
...par.," they will say, and go about their business...
...And I, holier than thou though I may be, am the same...
...Conventional economics says that producers are profit maximizers and consumers are utility maximizers...
...But economists are made of sterner stuff and will, if pressed, admit and even insist that economic agents are greedy...
...Professor Frank Hahn of Cambridge replied by referring to the title of Keynes' book and noting "the singular lack of dentists who have written 'general theories.'" Every dentist I've known face to face has been full of general theories and has told me about them, but Harm's point is well taken, as Keynes surely would have agreed...
...Happily, a larger anthology could be made of inspired documents that we all, including Coolidge and his admirers, recognize as the symbols of our democracy...
...We may import golf carts from Poland, but we will not buy howitzers from Czechoslovakia, even though the Skoda works has solid experience and an unexcelled reputation...
...Greed can be established as a universal motive under the partial analysis rule, and only thus, but every sort of motive—including contrary motives —can likewise be established...
...Rich is better...
...In this connection John Maynard Keynes wrote, "But, chiefly, do not let us overestimate the importance of the economic problem, or sacrifice to its supposed necessities other matters of greater and more permanent significance...
...Aside from things I will not or cannot do, I'd rather be rich than poor (I hear that rich is better...
...But it does not stop there...
...If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid...
...Moreover, cet...
...It may even be assumed that the economic agents involved will act, cet...
...It may be contended that some of the assumptions—the second-serve postulate, for example—have trivial consequences...
...Perhaps the frankest statement of that confusion was Calvin Coolidge's "The business of America is business...
...But the choice among policies will not turn on the relative extent of these gains, either individually or in the aggregate...
...The same sort of reasoning applies to every honorable or dishonorable activity you can name...
...We Americans have a tendency—often a dominant tendency—to confuse national purpose with short-term profit maximization...
...We will not buy our battle tanks from the Soviet Union, no matter how cost effective they are...
...A motive is not like a physical force, which acts willy-nilly...
...Other things being equal—all contrary considerations aside—the miser would be happy to be a benefactor of his fellow-men, or some of them...
...Even though this is the type of approach favored by Milton Friedman, it gets us nowhere because it raises the same questions of fact: Does Sister Teresa really act as if she were greedy...
...So we come to ethics and public policy...
...But it is very bad to conclude that the encouragement of greed is the proper objective of public policy...
...The choice will turn on the national purpose, which is an ethical question and a historical question...
Vol. 71 • May 1988 • No. 8
