Is Being Bad Good for the Economy?


Adam Smith did indeed say: “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.” Many free-marketeers would suggest that this is how a healthy economy should work, and that social issues will take care of themselves.

Ha-Joon Chang, however, suggests something different. He suggests that perhaps we are not completely driven out of self-interest (including the interest of our families). How does this all jive with what we have been learning about consumer choice theory and producer theory? What is taught in the textbooks seems to contradict what Chang is saying and supports the free-marketeers.

Question: As humans, are we completely driven by self-interest? If so, what does this say about the future of a sustainable world? If not, what else drives us and can you provide examples?

Please ensure that you are reading what your peers are saying and that you use contemporary examples to help your case. Be nice to each other and have fun. I have also included two videos from the “Nice Lady”; one on consumer choice theory and the other on producer theory. Good luck and please respond by Friday.

Advertisements

21 thoughts on “Is Being Bad Good for the Economy?

  1. In a way we are all driven to excel and make choices based on what we want and what we need. It is safe to say that we are "me driven" as a society. The things that we chose to do, say and act upon are usually for our benefit in some way or another. For example we often choose to do charity work. Not only are we doing this to help others but we are also doing this to benefit ourselves. We as humans love the feeling of helping others in their time of need. This is called maximizing utility. However, often we can not actually maximize our utility. If something is above our budget price and we really want it but can't afford it, then we can not be maximizing utility.This drive to always better ones self is a huge contributor to creating a sustainable world. If we are always looking for ways to better ourselves in our careers, economically, socially etc. then we will be able to sustain our world. This drive to better our situation will help us to always develop and produce for ourselves.

  2. Alli: I certainly see where you are coming from. Is it possible, based on what you have laid out, to maximize your own utility while, or in order, maximizing someone else's?I was thinking about this last night after our class discussion, and perhaps our understanding of self-interest needs to be broadened. I think I have to do more thinking and reading.Looking forward to more comments!

  3. I agree with what Alli says because anything we do will always be out out self-interest, even if you're doing something for someone else. Whether you're doing something to benefit you or someone else, you're still getting satisfaction out of both which means anything you do will be for self interest. Also to answer Mr. Henderson's question, I think you can maximize your own utility and someone else's at the same time, depending on the situation. For example, if you wanted to buy a car from someone that they really wanted to get rid of, you're maximizing your own utility by getting the car and at the same time you are maximizing the other person's utility too because they are getting rid of their car and getting money for it at the same time.

  4. I believe that human action is purely motivated by self-interest. Even when we help out strangers we do it to ‘feel good’ about helping others that are in need. We are constantly striving to think of new ways to achieve our ambitions and to maximize utility throughout our actions. This drive to help others not only leads to happy citizens, but also aids in the social and economic growth of the world. For example, buying a chocolate bar from the store will satisfy my sweet tooth and increase my utility, while the store that earns money from selling that chocolate bar also gains utility as a result – a win-win situation. However, many times we are faced with a problem where we have many preferences but have a limited budget. Prioritizing and choosing the desired preferences on a limited budget is essential in maximizing one’s utility.

  5. I was at a loss of examples for what I wanted to say, so I decided to search a few ideas, in doing so I came across an interesting article that talks about the difference between self-interests and group interests. The article argues that if we ultimately define both group interests (society as a whole) and self-interests, there is a conflict. If individuals focus on their self-interest, the group interests will not be sustainable. People tend to focus on maximizing their utility, not necessarily considering the effects in the long run (renewable/non-renewable resources). The article states, “Increased demand can be artificially created by economic forces which appeal to the population’s short-term interests (e.g. advertising)”. This means that the economic system today ultimately has a way to increase people’s self-interest and short-term utility via advertising; creating economic booms (often from what are arguably unnecessary products: ipads, luxury vehicles, etc). In today’s world we have the luxury of paying with “plastic”, which is being noted to play a significant role in the attitudes of today’s societies; the article clarifies by using the “buy now-pay later” motif. Overall, society needs to take a serious look at their interests and how they are going about, and have gone about, maximizing their utility. It is proving to be detrimental to today’s world and finite resources. As a result there have been multiple economic collapses, and climate change issues arising. Greed is definitely an issue that is leading to negative impacts on group interests.If our economic system can be manipulated for the short term, is there any way it can be manipulated for the long term?

  6. I feel as though the majority of the population is driven by self-interest. Even though there are probably some people that may seem purely altruistic, they’re benefiting from their helpful deeds for a better world, too.In relation to the future, the idea of self-interest won’t make society at loss. Capitalism is associated with private ownerships of capital goods and a free market. Using this system would mean people would need to be competitive to sustain themselves therefore they’d need to demonstrate self-interest. When looking at this topic on a smaller scale, I don’t think it should be detrimental to society because that’s how businesses would thrive. Relating self-interest on a larger scale (like the whole world) could be a very different story that I’m really unable to predict. I even tried to research the matter and there’s even a field dedicated to it called econometrics- “a field dedicated to predicting how a national economy will perform”. Maybe this field puts self-interest into account but either way, I don’t think it limits the future of the sustainable world.

  7. I believe some people are motivated by group interest. Many people within our society volunteer their time helping others or supporting charities. These actions would be intended to benefit our community as a whole. Contrastingly, there are also various individuals driven by self-interest. These individuals strive to achieve goals and maximize personal utility through actions. I agree with Leanne as she explains how many individuals try to maximize their own utility, disregarding any long-term effects. Ultimately, I assume that finding the balance between self-interest and group interest would lead to the most beneficial society.

  8. I agree with most of these comments, especially with Ashley's point of view. There are differences between needs and wants; we need important things but we have unlimited wants for things that interest us (self-interest). However, there is one point I'd like to discuss. Although many people do like volunteering or charity work, and both sides could benefit from that, there are also many others who do not enjoy it. For example, people could be volunteering because they realize they may not have enough credits to graduate from high school, or people may have to volunteer for a certain amount of hours to make up for a crime that they have committed. Not all people will be volunteering for self-interest, because not everyone is maximizing their utility.I don't think the idea of self-interest will change much about the future, because it is inevitable as we all have different interests. An example would be that there are different shops, restaurants, jobs, etc. for everyone's own interest. Although self-interest could range among many things, it helps that there is a sense of diversity and different interests among business, companies, and so on. Although self-interest does not necesarrily relate to my last point on different businesses and what not, it is a way to explain that we are all driven by our own self-interest, and doing what drives us the most will help maximize our own individual utilities.

  9. As human beings I think we are driven by our own interests, and that it is only natural to feel self-concerned, particularly when we find a need to maximize our own utility and not somebody elses. It's instinctive to put yourself and your family first before you can raise utility of other people. Many companies nowadays are thriving with this idea in mind. Merging of separate businesses into one of a larger whole benefits both groups; it allows collaborative work and makes more money for the employees. In the long run, there is nothing wrong about this system.

  10. I agree with most of these comments, especially Juno's and Ashley's comments. I believe that human population is motivated by self-intrest. Self interest benefits not just yourself, but also society. We don't do things just for the sake of doing things, its because we want to. Like Juno said, "Even when we help out strangers we do it to ‘feel good’ about helping others that are in need." Everything we do in life is to satisfy our needs. This feeling in us, or drive is what helps our society move along. For looking into the future, we need to be careful with our self interest. Many people like to by everything they want, but they can't have everything. "Unlimited Wants, Limited Resources", This is where people need to prioritize. If we do this, society will do just fine.

  11. Building on what Alli initially said I agree that people often act with “self interest” in mind in some form. Whether it be through the satisfaction of doing something nice for someone else, or simply doing something for yourself. I think it is pessimistic attitude; however, to assume that everyone only acts purely with their own interest in mind. For example while engaging in a task that holds little interest to you, there is most likely other things you would rather be doing, that would more effectively “maximize your utility.” However, you are still engaging in the first less enjoyable task, so there must be some reasoning behind your actions. People are clearly able to gain some satisfaction from almost all activities; therefore they still participate in those that are less exciting or interesting. It is possible to maximize your own utility, while maximizing others, it is pretty much a win win. This idea can be summed up as “group interest” as Hayleigh mentioned earlier. If people are able to help themselves and others it doesn’t really matter if they are driven by personal satisfaction because they are still helping further society.

  12. As humans, we are completely driven by self-interest, history proves it. For an example, the Occupy Wall Street movement is a protest against the selfish profit driven corporations. Other examples can be about different countries developing weapons of mass destruction to destroy other cultures because of their self interest. After looking at, and thinking about all the different examples that show peoples self interests, we see that economically, the future of a sustainable world might not be so sustainable. As we see, when someone does something because of self interest, they might not look at the long term effects. If we do not actually look and see what some of the consequences could be, it could turn out to be very devastating causing this economic world to collapse. There is an underlining drive that humans have, and that is survival, this is the reason why we are driven to self interests. However, when the self-interest leads to the deterioration of the environment and the natural habitat we will certainly gravitate towards repairing the environment and doing what ever we can to insure our survival in a healthy environment. In other words our environment will win over selfish profit oriented actions.

  13. I think that people should try to do everything to maximize utility. Since the Warring State period of ancient China (2000 years ago), the idea "everyone is for themselves" had become well – known. This motto suggests people to do things that benefits themselves. It is important for us to realize what really benefits people. Money, fame and social status etc indeed favour people, but if a person fights for these in his entire life, what will he get in the end before he dies? He could not bring the money with him in the coffin, and his social status will disappear as he passes away. He will have nothing left but the feeling of vacuity. People might say that he makes his family, his children and his wife a better life; but their lives do not equal to his life; he MIGHT not be happy. For example, "King Lear" is wealthy; he provides his daughters fortune and fame, but his story ends up in regret and grieveness. This is just an extreme example, I am not saying that a man should not work hard for his family. I am just saying that physical substances might not bring people happiness and satisfaction. Anyways, it leads to the next idea. In contrast to material satisfaction, the sense of responsibility, achievement and fulfillment are more propitious to people because they represents the value of a person. They are ageless fortune. If someone really cares about himself, he will NOT do illegal things, such as cheating, hijacking etc for physical materials they want; because he knows that the consequences he will receive have no good for him. This is what I will call "benefit of self".

  14. This idea could be applied in the study of Economics. In economic study, we assume that all the consumers will choose the products that have the highest utility; some people say it is not true. The whole point is based on the understanding of what "utility" is. It is a measurement of satisfaction of consumers' desire and demand through their consumption of any type. The consumption includes time and money etc. Consumers have varies types of desire and demand. They vary based on the change of environment, politcs and many other factors (Economics is a socieology). Since the Renaissance, people's desire and demand has inclined from material to spiritual. Therefore, the conponents of utility also change. Now the utility of a product not only have a physical utility, but also an immaterial one. When consumers choose products, or be more general, apply actions, they sometimes don't choose the one that have the highest physical utility. For example, when Yao Ming was still playing for the Houston Rockets, the boss of Toyota Center invited Yao to be the spokesperson for Toyota Motor. However, considering that Toyota was a Japanese company, and Japan invaded China in the 1930s, Yao refused. He gave up a fortune, which was the physical utility, and chose the one has the highest spiritual utility. He showed people his patriotism and nationalism. His action was highly supported by Chinese, and Yao's reputation among China increased. Secondly, In many countries, governments encourage their people to buy home – made products. The people sometimes will give up foreign products that have high quality and utility. However, they cost on home – made products could help the home – companies' economic situation to be better, and benefit the people themselves sidways. (Boycott is similar to this idea.) For another example, there was a strike activity in Vancouver in 2007 because many employees' wages were lower than average level. In this case, the employees chose not to work for a few days to let their companies and the country know that they were unsatisfied. For the few days, they could get any payment because they did not work, which is saying that they did not maximize their utility. However, the strike could force the government and companies to change the welfare and salary system. It is a long term benefit for the employees. We can see that the employees chose to sacrify their short term benefit or utility to fight for their rights, and then gained the long term utility. The Minor sacrifices finally safeguarded major interests. From the examples I show above, these people all give up in sight utility but choose the long term utility. This is also what I will call "benefit of self". On the other hand, people must see that being selfish is different from considering about self – interest or self – benefit. In fact, they are opposite to each other. Selfish people, in my eyes, do not consider about their self – interest. Selfish people usually do not care about other people's interest. For their own "interest", they do not care about morality. In more serious cases, these people will try to gain public money in illegal ways or even harm the other people. However, in my point of view, these people are not being resonsible for themselves. People around them will get away from them, and as long as they are caught commiting crimes, their "interest" gained through illegal methods will be all gone. This does not benefit themselves at all. Thus, my point of view is, as long as people understand what really benefit themselves, the sustainable development of the world will not be a problem because everything people do costs time and energy, but more important is that they should actually put in to feelings on what they do.

  15. I believe that people are often stimulated by self interest. It is evident that most actions directly,or indirectly benefit ourselves. In many cases people maximize their own utility, while also maximizes others utility. For example, if you make dinner for you and your famil. Your performing a helpfull deed, that benefits you and your family. This being said there are clear cases where a person does not maximize their utility, just to help others. For example, take a person helping homeless people. Their only goal is too help someone maximize their utility. Many will argue that the person helping, will get a sense of happiness(from helping someone). The fact is that it all depends on what the individuals wants and needs are. Because of this, every person maximizes their own utility, in their own special way. Whether it helps other people or themselves, people are always trying to satisfy their own self-interests.

  16. It is human nature for people to act on self interest. On a day to day basis almost everything we do is out of self interest but on the occasion that we do something such as volunteer work, it would be very pessimistic to say that there is no such thing as a selfless act. When looking at service trips or other humanitarian work, it is fair to say that a major part of doing those things is the intrinsic reward that we experience from helping others. However, in very simple situations such as holding a door open for someone and waiting for them to reach it and pass through, are we really doing this for ourselves?, How significant is the reward someone gets for holding a door open?, and how is this maximizing our utility?I personally don’t think that everything a person does is driven by self interest. The word “selfless” wasn’t just created for no reason. In many situations people give to others because they don’t want something to go to waste or because they are returning a favor. There are tons of different reasons why we are driven to do things for each other and self interest is only one of them. In terms of maximizing utility, many people choose to do certain deeds because they would like to get the absolute most they can out of a given situation. Around the holidays for example, many people will choose to volunteer at a soup kitchen because of the “win-win” results. People look for experiences that will be humbling and make them feel as though they have made a difference. Those cases are the ones that are recognized as “good deeds” but the small day to day events like picking up someones pen are not recognized. The little things are the ones that are selfless because we don’t do them for ourselves, we do them purely for others. There is always a drive or a reason for someone to do something and there always will be. That drive or reason always being self interest is debatable. If we were all completely selfish, the future of a sustainable world would not be very positive.

  17. After reading through the comments posted above, I agree with much that is being said. Similar to what Alli first blogged about, I would agree with the notion that as humans, we generally perform actions that benefit us in some way. However, sometimes, humans choose to take part in things that do not prioritze their own self intrest. Similar to what Alex said, examples of this would be volunteer trips and community service pursuits. Although these acts may seem selfless, there is, for most people a reward and self-satisfaction that comes from taking part in such things that are not necessarily driven by self-interest. Another interesting thing to look at how we as humans are constantly striving to maximize our own utility. Robert Shiller looks at this concept in his article “brains vs. Keynes”, “Much of modern economic and financial theory is based on the assumption that people are rational, and thus that they systematically maximize their own happiness, or as economists call it, their ‘utility.’”. While talking part in charity work may not necessarily be seen as something done out of self interest at first glance, upon closer inspection you can see that some people would see this act as maximizing their own utility. The definition of maximizing your own utility depends on many factors: your moral values, your interests, and what brings you happiness. The ideal situation exists when people are able to maximize their own utility while at the same time helping other to maximize theirs. In an ideal world, selflessness would outweigh greed.

  18. Human nature is not a simple, concrete matter, and aspects of human nature cannot be explained in black and white. In the context of this discussion, it is fair and necessary to separate "human nature" into economic human nature, and general human nature. In an economic environment, individuals act almost purely for their individual interests. They work hard for the company in which they are employed because they want to make money, or to keep their job. Some argue that employees work because they want the company to succeed. However, the desire for that company to succeed is usually, at the very best, boiled down to a matter or personal pride. The entire point of an economy is to make money. The best way for an economy to work, and the way in which our motives in the economy in fact do work, is for everybody to be doing whatever they can to make the most economic profit that they can. Even when a company gets involved in humanitarian efforts, it is very commonly in order to get good PR. However, it is in terms of "general" human nature (everyday decisions), where a lot of pessimists have emerged in this blog. There are certainly actions that individuals take that do not maximize their own satisfaction in order to help others. Of course, every action can be twisted to have some sort of associated personal gain. But, to properly asses those actions, they must be looked at by opportunity cost. Someone who volunteers over their weekends is surely being personally satisfied. However, that time could be used to gain more satisfaction by, for example, making money, or even relaxing at home. By not acting in what is the most personally satisfying way, an individual is giving up satisfaction purely for the sake of others. In an economic environment, it is fair to say we act in self interest. It is unfairly cynical, however, to say that all human actions are purely self interested.

  19. As defined by the videos posted in the question, consumers thrive to maximize their utility, or simply their “happiness”. Producers seek to maximize their revenue. Adam Smith clarifies that this motivation ensures a stable economic system. In other words, self-motivation will consistently maintain stability. The question asks “as humans, are we driven by self-interest?”. I cant speak on behalf of “humans” per say, but as an individual self-interest is definitely the motivating factor in my life. Our entire lives are centered upon monetary values. We are educated, in order to have the availability of highly paid jobs. From youth, to adolescence, to adulthood, our development is centered about an end result of success. Of course there are individuals who do not necessarily have primarily self-interest in mind, but I would say a majority of humans thrive to propel them selves. In my short seventeen years, I can honestly say I have never heard someone wish to be unsuccessful in their field. This sentiment does not apply to every human on earth, simply a majority, but: Humans base their lives upon increase their quality of live, through increases monetary wealth. In the end, Adams Smiths thinking that “"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" proves to be true in a majority of situations.

  20. As human, it is almost instinct that people tend to fulfill the desire of things that are driven by their self-interests. Since we are best-known as the emotional species, when we face something uncomfortable and unfamiliar in any circumstance, we become annoyed and tend to avoid from the circumstance where we belong. However, on the other hand, when we face the situation where makes us comfortable or helps our instant or later satisfaction to be fulfilled, also commonly called as "utility" by economists, we are certainly willing to stay in that situation. Self-interests drive us into the place where we want to be belonged in, and I would like to say that following our self-interests would be beneficial to our society because humans are likely good at the area in which they like and prefer. For instance, if I had to work at the restaurant as a cooker, since I am not interested in cooking, it would be awkward to have a job at the restaurant and also would not result the productive outcomes out of. In contrast, if I was hired at the place where I need to count numbers, such as a bank, I would be more passionate about my job, and ultimately would result the productive outcomes out of. Additionally, in terms of consumer choice theory, I prefer to spend money on buying a jets' ticket in order to maximize my utility. However, on the other hand, my consumer choice not only fulfills my utility but also helps the seller's income to increase. Therefore, although self-interest can be shown as a greedy or selfish human desire, people should bare it in mind that self-interest is our powerful motivation which can make us excel in the area we are good at or like.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s