Academic journal article Advances in Management

Self-Interest, Egoism and Business

Academic journal article Advances in Management

Self-Interest, Egoism and Business

Article excerpt

Abstract

Among the various troublesome features of business is the fact that economists, many of whom study it as a social science, believe its functions based on self- interest.

Keywords: Business, egoism and self interest.

Introduction

Even apart from that technical language, many believe that crass egoism is at the heart of free market capitalism. Consider the following, by Michael Lewis, as an example. "The beauty of free market capitalism is that it does not require anything more than ruthless self-interest from its most ruthless self-interested citizens. When the system works properly, they enrich us all by enriching themselves without giving the matter a great deal of thought. If that is no longer true, it is a sign not that they are less moral but that the invisible link between private gain and the public good has been severed."1

This observation uses the concept of "self-interest" in a way that does not do justice to what economists mean by that term.

Some economists who champion the free market embrace some version of the idea Lewis1 relates. For example, the late Milton Friedman2 held that "The private interest is whatever it is that drives an individual." This use of "self' or "private interest" is not the same as Lewis'. For Lewis, economists believe that the free market system rests on the assumption that when people act, they want to benefit only themselves, in contrast to benefiting others. But this is not so, as the quote from Friedman suggests. In Friedman the idea is simply that everyone does what he or she wants, not others, want to do.

The sort of freedom enjoyed in free markets makes this possible because others do not have the authority to order one to behave as they wish them to. All (legal, peaceful) conduct must be voluntary, arising from the choices of market agents. It is misleading to call such conduct "self- interested" or the "private interest," because in nontechnical language these suggest that we all do indeed act only to benefit ourselves and not anyone else. For the economists, however, that is not the point, not, at least, as most use the idea.3

What is Self-Interest, Really?

From the time of Plato there has been a serious debate as to whether self-interest means "doing what one wants" or "doing what one actually benefits from (by some objective standard of what benefits a person)" or again "doing whatever one is doing of one's own initiative." Now, there is nothing remotely "ruthless" about doing any of these. The first sense is in effect tautological or redundant: People who are free act as they do because, well, they want to act as they do.

To invoke "self-interest" as ordinarily understood, namely, acting to benefit only oneself, does not do the economist justice. Of course, economists sometimes do use the term as if they meant what Lewis has in mind. But at that point they are inadvertently suggesting that they have in mind some (objective) standard of what counts as being of benefit to oneself. Yet most economists do not believe there exists such a standard and so to benefit oneself means to them no more than doing what one wants to do, something valued subjectively (whether this be getting wealthy or helping the poor or furthering the fine arts).

It is the last way of understanding self-interest that most technical economists mean: when people do things uncoerced, they are pursuing their self-interest or what they prefer. By this account, both Michael Milken and Mother Teresa - and indeed we all and always - act from self- interest. But this leaves unresolved the issue of what differentiates those who work to satisfy others' welfare more than their own, from those who focus on their own before anyone else's or indeed those who have some other goal in mind entirely - say, saving wildlife or preserving historical relics.

The Economist's Idea of Self-Interest

The economist's concept of self-interest may be captured by the ordinary claim that we all have our own motives from which we act when no one is coercing us. …

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