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Is Self-Interest Enough?

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By Howard Nemon

Capitalism boasts of its ability to motivate people to produce more wealth which, in turn, benefits everyone. While the latter part of this equation seems doubtful given the persistent concentration of wealth over the last 200 years[1] [2], the motivational aspect of capitalism may be worth discussing. We cannot deny that there are strong incentives in capitalism which are embodied in the idea of self-interest. We all naturally act to benefit ourselves and so, as the argument goes, by giving people ample scope to pursue their self-interest, the economy is benefitted. But there are some problems with this idea.

First, self-interest is an extremely broad concept. It may include such diverse activities as satisfying our basic needs, watching a theatrical performance, walking in nature, sacrificing oneself for a cause, building a new relationship, or even committing a crime. Adam Smith, an 18th century Scottish philosopher and economist, emphasized the idea of “rational self-interest”, which refers to behavior that is economically beneficial and, in Smith’s understanding, “prudent”. Smith coupled self-interest with the virtue of prudence, a term that encompassed many moral and social nuances from his era. On its own, self-interest is open to multiple interpretations, and it is difficult to discern what exactly it refers to, whether it is rational or prudent, or merely selfish.

Second, self-interest without any type of moral bearing will inevitably default into anti-social and unsustainable economic behavior. Smith may have been a prudent fellow, and so may have his friends, but across the economic landscape today, prudence or any other ethical behavior is in short supply. Modern capitalism has basically stripped the economy of any moral moorings and set it adrift on a limitless ocean of profit maximization. Accumulating profit has become the end-all of economic motivation and purpose. According to Jeffrey Sachs[3], capitalism bereft of morality leads to the breakdown of competition, increasing wealth inequality, and environmental unsustainability, among other economic dysfunctions. And that’s the short list.

Third, when the main reward for self-interest is greater and greater wealth accumulation, then both the individual and the collective end up losing. Everyone should be able to accumulate a certain amount of wealth to sustain their living standard.  However, when wealth accumulation becomes an end in itself, individuals lose notions of adequacy and begin to accumulate far past their needs. Being unable to satisfy their endless thirst for “more”, they end up amassing excessive fortunes that not even their great, great grandchildren will know how to utilize. Without higher aspirations in life beyond material accumulation,, the human mind degenerates and loses its balance. 

On a collective level, the constant drumming of the message of materialism in society ultimately transforms our self-interest into a frenzy for material consumption. The subtler aspects of human life— creativity, broad-mindedness, rationality, empathy and compassion—are turned into fodder for profit maximization. And the excessive accumulation that results from this materialist drive ultimately deprives the vast majority of access to sufficient resources and wealth.

Capitalism has failed to create an economy that benefits society on both the individual and collective levels. Self-interest, as its guiding motivation, lacks the conceptual clarity, ethical base, and broader understanding of human needs and aspirations. Rather than creating the most efficient economic system, self-interest has resulted in economic inequities, environmental degradation, and continual market failures. It turns the economy into a selfish free-for-all, advantaging the few who have managed to amass enough capital power to dominate the market. A healthy economy needs to balance self-interest with collective interest. This will motivate the entire humanity to create sufficient wealth for each one of us.

[1]  “The World Inequality Report 2022 presents the most up-to-date & complete data on inequality worldwide:” World Inequality Report 2022 (blog), October 20, 2021. //wir2022.wid.world/chapter-2/.

[2] UBS. “Global Wealth Report 2023 – in-Depth Data on Wealth around the World | UBS Global.” Accessed May 19, 2024. https://www.ubs.com/global/en/family-office-uhnw/reports/global-wealth-report-2023/exploring.html.

[3] Sachs, Jeffrey D. “Self-Interest, without Morals, Leads to Capitalism’s Self-Destruction.” Financial Times, January 18, 2012. https://www.earth.columbia.edu/sitefiles/file/Sachs%20Writing/2012/FinancialTimes_2012_SelfInterestWithoutMorals_01_18_12.pdf.

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