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Discussion of Why Greed is Good for The Economy

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In The Wealth of Nations, Adam Smith outlines the principle that self-interested market participants unknowingly maximize the welfare of society as a whole. This “Invisible hand” idea originated in 1776 and has been the basis for how our economy functions today. When a firm provides goods and services for a customer, it is never out of the kindness of their heart, but out of greed for money. Greed is what motivates companies to provide better services and products. Without greed, the creation of companies like Apple, Amazon, and Microsoft would not have been possible. Instead, the world would have been left with non-profit organizations, who wouldn’t bother to elevate their products and services because of a lack of competition and drive to be the best. This ultimately details why greed is good for the economy and why people nowadays cannot live without it.

Greed is everywhere and for the most part, greed is good. For example, Monta Vista students are inadvertently greedy, seeking more knowledge and trying to achieve the best grades possible. Does this greed make them a bad person? Of course not, in fact, those with the best grades and hunger for knowledge, contribute to society the most. It is only the textbook definition that gives greed a negative connotation, defining it as having an “intense selfish desire” when in reality it’s wanting more than what is necessary. This ties with rational self-interest, one of the three overarching Principles of Economics. People want to reduce costs and maximize benefits, getting more than what’s needed for a sustainable life. If greed was truly a bad thing, people wouldn’t need incentives or benefits, they would give out of the kindness of their hearts. However, the world only works with money and other incentives in mind.

Money, the largest incentive, is what motivates these firms to produce products that can compete with other companies and gain the most revenue. A simple example includes a non-profit organization and a for-profit company. Both entities offer the same service, which is lifeguard training. The non-profit organization will give its mediocre services for free out of the kindness of its heart, but the for-profit company will be competing against other firms and as a result, will improve upon its services to have the highest chance to win over the customer’s wallet. The company doesn’t necessarily care about the customer, they only care about their money. This connects to Smith’s “invisible hand” principle because the company’s self-interest unknowingly makes the quality of lifeguard training much better because companies will always attempt to compete and surpass each other’s service quality.

This is why the quality of goods and services has become better year after year. Firms compete in a particular area of interest and build upon their ideas to make them as successful as possible. Many entrepreneurs apply this philosophy to maximize their chance of creating a profitable business. Without greed, humans would regress and many of the things we would have today would be gone. It’s hard to imagine what life would be like without human greed, but the world would certainly lack progression, and technology wouldn’t nearly be as advanced as it is today. During the time Adam Smith spoke about the “Invisible hand” principle there was no electricity or radio. Not until someone was greedy enough to see the marketing potential of the radio or electricity, there was no need for it, people lived their lives happily. However, now the radio and electricity have evolved to a point where our lives revolve around them. In short, greed is nothing but the motivation for innovation.

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Discussion of Why Greed is Good for the Economy. (2020, September 01). GradesFixer. Retrieved August 9, 2022, from https://gradesfixer.com/free-essay-examples/discussion-of-why-greed-is-good-for-the-economy/
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