Greed is a Sunk Cost

You don’t need Ayn Rand to defend capitalism. You need not extol greed nor declare rational self-interest as the highest moral value. You can believe man to be a social animal. You can extol altruism and even declare it to be the pinnacle of moral behavior and still favor capitalism. You need only concede one thing about greed: it exists.

Greed exists without capitalism, without money, without markets. Greed exists in communal economies, within organizations, within families. Greed exists within toddlers, even those not exposed to television. Watch a toddler cram her mouth full, to the point of needing to spit out the food. It’s natural selection in action. In times of famine the greedy child survives. Greed is in our genes.

Jean-Jacques Rousseau might have observed this phenomenon had he taken care of his children instead of dumping them off to die in foundling hospitals. Instead he pushed the crackpot notion that greed is a learned response taught by society. Karl Marx (a less bad father, who merely let his family go hungry in order to pay for piano lessons) picked up the idea, declaring that without capitalists, we’d have a new Socialist Man, free from such distasteful impulses. And they still teach nonsense like this in college. So much for the value of a liberal arts education...

Greed is with us to stay, unless some mad scientist develops an aerosol drug to turn off parts of our brain, or government scientists figure out how to reprogram the next generation’s instincts through gene manipulation, and then make said manipulations mandatory for all parents. I consider these scenarios unlikely for a few years yet, so I figure we had better deal with the fact that humans are often greedy.

Greedy capitalists can be messy, annoying and even destructive at times. But look back at what greed does without markets!

Capitalism Tames Greed

The market pays you to serve others. Produce a product people want, and they give you money. It’s a win-win situation. If you want people to serve other people, then you want markets. Greed gets directed to good behavior. This is the beauty of capitalism.

Markets are not perfect. Businesses try to serve even when they are not wanted. And you can get paid sometimes for pretending to serve when actually you don’t.

But consider the effects of greed under alternative systems. Greed under feudalism leads to war, fratricide and oppressing peasants. Greed under slavery leads to unspeakable torture. Greed within government leads to bribery, corruption, favoritism, and bureaucratic bloat. Greed within organizations -- profit or nonprofit -- leads to backstabbing, rancor and activities at odds with the official goals of the organization.

The argument for capitalism is not that greed is inherently good. The argument for capitalism is that markets make greed good—much of the time.

Capitalism vs. Spirituality

Because markets often make greed good, greed becomes more socially acceptable. And sometimes this is bad. Many moral philosophies, including Christianity, call for love, charity, acting on behalf of others without earthly reward. A more communal economy can inspire more altruism because it requires more altruism. The earliest Christian churches practiced communism as did many monasteries later. Anyone who joins a voluntary society such as a college fraternity or even a local Libertarian Party chapter(!) experiences a taste of communism. I recommend doing so. A bit of communism is excellent spiritual exercise.

But too much communism makes other people a drag. Communism makes you care not only about other people’s needs, but also other people’s faults. Communism inspires hatred for slackers or others with even minor differences in values. Just as overtraining can make muscles weaker, too much communism can be spiritually draining.

Moreover, we all have a limited capacity to truly love. We have insufficient space in our brains to truly know but just so many people, and insufficient bandwidth in our senses to communicate but just so many wants and needs. News organizations understand this. A story about a single missing child evokes far more emotion than a story about a million people going hungry in a war torn country.

Markets encourage us to serve those we do not know. Even enemies can serve each other through trade. And since our capacity for love is limited, love is not all we need. We need markets.

Capitalism does lessen the need for spirituality vs. communism, but ironically the modern welfare state is less spiritual yet. Witness the decline in religion in Western Europe. A purely capitalist system still requires substantial voluntary charity to take care of the unproductive needy. A modern welfare state reduces the need for voluntary charity. It robs givers of the spiritual uplift that comes from giving from the heart. On the other hand, it forces the heartless to give via taxes.

Now I leave it to you to decide the optimal balance between the general welfare and opportunities for spiritual growth. (Whether the modern welfare state actually provides better services to the poor than pure capitalism plus private charity is difficult to determine, as our last experience with pure capitalism plus charity was at a time of less technology, less wealth. I cover the problems and challenges of designing an efficient welfare system elsewhere on this site.)

Read the Book

Do you want to start a new political party? Or are you simply interested in what that would entail? Check out my new book: Business Plan for a New Political Party.

People wanted an ebook version of the Plan here on this site. So I started cleaning up, reformatting, and adding a huge amount of content. The book is about three times the length of the free online version -- and easier to read.