Harry Geels: Greed is good, revisited
This column was originally written in Dutch. This is an English translation.
By Harry Geels
‘Greed is good’. Gordon Gekko’s famous words from the cult film Wall Street (1987) are perhaps the most misused one-liner in economic debate. There are many misunderstandings about this film and its famous quote. And yes, we need more selfishness. At least, the good kind.
Wall Street is one of the most iconic films of the 1980s and paints a vivid picture of the rise of shareholder capitalism. What director Oliver Stone once intended as satire and a warning against the excesses of big money was glorified by many, precisely because of the spirit of the times. Gekko became an icon, not an antihero. Today, the film is regularly used to show how selfishness and greed can go off the rails. Unfortunately, this lacks the necessary nuance.
The two faces of selfishness
Selfishness is often portrayed as a vice, a moral black hole that swallows up everything and everyone. In reality, however, there are at least two distinct forms. We are familiar with “constructive selfishness”: self-interest that leads to personal development, innovation and social progress. Think of entrepreneurs who take risks, develop their talents and create jobs. This may temporarily be at the expense of time for others, such as family, but it often yields valuable knowledge, money or innovations.
Secondly, there is destructive egoism (in Ancient Greek pleonexia, or greed): self-interest that is at the expense of others, through tax evasion, rent-seeking, price gouging or outright fraud. Although this dichotomy has been known for centuries, it is hardly ever explicitly mentioned nowadays. When the term egoism is used, it seems to refer mainly to the destructive form. Egoism and greed have also become intertwined in the increasingly prevalent anti-market or collectivist thinking.
Misinterpretation
This has led to confusion about the concept of selfishness. Adam Smith, widely recognised as the founder of capitalism, pointed out in The Theory of Moral Sentiments (1759) that self-interest is fruitful provided it is framed by virtues such as justice and sympathy. In the aforementioned book, Smith wrote: “However selfish man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others.”
Ayn Rand, often mistakenly regarded as the philosophical founder of grab-capitalism, also made a clear distinction in her interpretation of the term selfishness. In The Virtue of Selfishness, she wrote: “The virtue of selfishness lies not in the pursuit of whims, but in the rational pursuit of one's own long-term values.” Rand did not advocate destructive selfishness. Selfishness is morally defensible when it is rational and purposeful, not when it serves impulsive gratification.
Scientific evidence
An important question is whether selfishness is part of our nature. The conclusion seems to be that humans are both herd animals and selfish creatures. Behavioural economics, for example, shows that humans are not purely selfish and often limit themselves through “bounded selfishness” (limited self-interest), or are willing to cooperate when others do so (“conditional cooperation”). Neuroscience shows that reward systems in the brain are positively activated by both altruistic acts and self-interest.
Recognising destructive selfishness
Admittedly, there is a fine line between constructive and destructive selfishness. Destructive selfishness can often be recognised by three patterns. Firstly, asymmetrical benefits: for example, profits are privatised, while losses are socialised, as in the case of excessive bonuses and bailouts. Secondly, there is often a lack of transparency, for example due to complex legal structures, vague reporting, or the avoidance of external scrutiny.
Thirdly, we often see a short-term focus: extracting value rather than building it up, often accompanied by aggressive lobbying or “regulatory capture”. Recognising these patterns in a timely manner is crucial. Regulators must modernise their tools, investors must tighten their due diligence, and citizens must vote with their feet when damage occurs. An interesting case is Elon Musk, who worked passionately and with his own money for years to create a viable electric car.
“Greed is good”, sometimes
The lesson of Wall Street was never that greed is a virtue. The lesson was that selfishness without a moral compass leads to destruction. At the same time, without any selfishness, there is no innovation, no entrepreneurship, no progress. Those who do not develop themselves have little to offer. The challenge, therefore, is not to banish selfishness, but to channel it in the right direction. Michael Douglas himself once said that the Greed is good speech was intended as a warning against greed, not as a eulogy.
It is up to us to encourage constructive selfishness – incentives for innovation, entrepreneurship and risk-taking – and to limit destructive selfishness through transparency, good supervision and a level playing field. As Ayn Rand put it: “Rational selfishness is not an enemy of society, but a prerequisite for mutual benefit.” The question is therefore not whether we are selfish, but what kind of selfishness we want to cultivate.
This article contains the personal opinion of Harry Geels