Wednesday, February 8, 2012

Tax policy, greed, self-interest

Just to even the score a bit, I thought I'd start posting weekly reactions to our reading/viewing materials as well, to give you a sense of different ways you can approach your blogging. 

After class today I had a few more thoughts about some of the precise difficulties in pinning down this notion of greed. 

It may be a bit odd to describe someone as "greedy for knowledge" (we usually speak of a "hunger" or "thirst" for knowledge) but it certainly sounds less strange to talk of someone being greedy for money. In the video for today, Bill Gates and Warren Buffet were offered as examples of people who created things of use and value out of selfish greed. However, over time both have given more money to charity. So if they were motivated all along by a desire to give away money to charity eventually, were their actions still then instances of greed? Furthermore, charity itself is now more like business. The Gates foundation has been remarkable for applying a sort of cold, calculating logic to charity, which in turn has made it all the more effective in helping people. The line between business and charity has begun to blur; it may one day disappear, which would possibly be a good thing. Some have even spoken of charity as a type of venture capital. (Maybe the Gates Foundation could invest in helping out the workers in their supposedly cooler, nicer rival's factories). Does applying ideas that Stossel associates with greed--efficiency, maximizing returns, etc.--to charity make it greedy too? 

My main reservation about describing all economic self-interest as "greedy" is that this opens the door to bad policy. It is no doubt good for the economy to have businesses seeking to maximize their profits. As long as they are operating within the bounds of legal and ethical strictures, such activity will help to make for a more efficient and prosperous country as they seek to find ways to cut costs while making better products. However, it seems to me that part of the goal behind extolling "greed" rather than self-interest is to lump together helpful practices with potentially harmful practices. Perhaps greed motivates some business people to pursue profits. But if we then conclude from this that greed is good, what is wrong with lobbying the government to pass regulations that favor one business over its competitor? Stossel may argue that this is a use of the government to increase wealth. OK, that's fair enough, but let's consider a similar example that works through the opposite mechanism. If a company lobbies the government to relax regulations that prevent them from dumping harmful waste or polluting the environment while simultaneously limiting the ability of those harmed by the pollution to sue for damages, then the company is eliminating government control. It can then reduce its environmental compliance costs without breaking any laws. Why does this violate Stossel's claim that any greed that does not employ the power of the state is somehow good? The response would probably be that it seeks to make money by causing harm to others. But then we are reduced to taking things on a case by case basis. Why not just reserve the word "greed" for such instances of harmful selfishness rather than trying to distinguish a good greed from a bad greed?

On some level I think that the purpose of Stossel's argument is precisely to make it impossible to come to any reasonable standard of what constitutes economic fair play. That way it becomes possible to argue that the particular type of greed under consideration is good when it benefits you but to argue that it is bad when it does not benefit you. As an example: aarguably Stossel was harassing that wrestler and impugning the reputation of his employer, so it was with a type of good greed that he reacted when hit him--violence was necessary to disprove the point that Stossel was making, and thus was not intended to hurt him, just to look out for his interests. Why do I get the feeling that Stossel would not agree with this (he sued the WWF; they settled out of court for a six figure sum)? If there is no reasonable standard for separating greed from enlightened self-interest, then people start to develop a negative opinion of markets and will be more skeptical of any policy that engages them, even if they seek to generate outcomes that benefit society as a whole. Right now the distrust of markets is leading people to advocate soak-the-rich taxation policy because people see such wealth as having stemmed from greed. The problem with this is that some policies that might actually allow rich people to lower their tax burden by investing or donating to charity would discourage them from spending their wealth on luxury items for personal consumption. Lowering taxes on the wealthy might actually encourage more charity and more investment. If all economic activity is just greed, then no one will consider such policies because they won't expect the rich to serve any useful function in the first place.  


  1. I think it is ridiculous that Stossel sued the WWF over the confrontation with that wrestler. Stossel went into another company's venue and purposefully called an employee out. That would be the equivalent of walking up to a high school teacher during school and saying, "An education is useless". Although the high school teacher probably would've have body slammed or elbow dropped Stossel, a confrontation would still be almost inevitable. People take pride in their work, especially if their life revolves around it. Reading that last paragraph makes me question if Stossel posted that documentary simply to stir up conflict. People will always have a negative view of the market because the market is in itself associated with greed, whether it be good or bad. It is natural to assume that somebody that has a substantial amount of money is greedy, especially if you don't see them doing something for the outside world with it. To me, it comes down to a matter of perspective. People can view self interest as good greed, but I think that viewing self interest as this is simply trying to justify when you want to exhibit the bad greed.

  2. Just to be clear, I'm certainly not advocating a pro-slapping policy here. My point is rather that defending reputation and property through violence seems a perfect instance of "good greed" as Stossel defines it. He might argue that he was in his rights to sue because the state should protect us against violence, but if the state is also just as likely to steal from us as it is to protect us--and arguably the wrestler was himself protecting his interests--then arguably it is Stossel using the state to steal from others by suing after having threatened someone's property rights.

    I don't favor violence. But I do think that Mandeville's/Stossel's principles much more easily justify the wrestler's behavior than do the principles of Hutcheson/Smith, who would argue that all defense of self-interest that is unnecessarily violent or harmful to others is destructive and not necessary for economic prosperity. Maybe there is some case in which greed alone, rather than enlightened self-interest, serves a useful function, but it seems that anything that greed can do enlightened self-interest can do more prudently and carefully and thus, in the long run, more beneficially for al.

  3. I think that this is a good example of how a business such as the wwf, markets itself. If you think about what happened i'm sure you can agree with me that "good greed" is some what of a advertising scheme. I think that wwf is fake, but now because of what this wrestler accomplished, i want to watch and laugh about it. It definitely puts wwf out in the public. Im not saying that its ok to just hit people, but in this type of work place i wouldnt want to mess with guys 10 times bigger than me.