We watch the movie "Wall Street" as part of my M&A class. Recently, we came to the scene where Gordon Gekko proclaims that greed is good:
The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.
A recent paper by Wang & Murnighan (HT: Prof. Ribstein) suggests Gekko may have taken a few economics classes on the side while working his way up through the school of hard knocks:
Greed is a classic topic in human development (Balot, 2001; Robertson, 2001) and it inevitably affects many of our choices and decisions. Although greed is typically viewed as uniformly negative and reprehensible, we propose that people's attitudes and opinions about greed are actually subject to change. In particular, studying economics may help legitimize and even beautify greed. Previous research shows that economics education might make people more self-interested because self-interest maximization is central to most economic models (Marwell & Ames, 1981; Frank, et al, 1993). Because greed and maximizing self-interest are sometimes difficult to separate, conceptually or empirically, we propose that studying economics may make people view greed as potentially positive and beneficial. Two complementary studies support our proposition. Study 1 shows that students who are pursuing economics view greed more positively than students who are pursuing other majors and taking other courses. Study 2 indicates that positively priming greed can significantly increase people's positive attitudes and opinions about greed.
But if greed is by definition tied to excess, can it ever be good? I'm not sure where I come out on this, but one suggestion I do feel comfortable making is that we include classes on cognitive biases along with our econ classes. Greedy may be good, but greedy and dangerously overconfident is just a recipe for disaster.
{ 1 comment… read it below or add one }
I think the term greed is over used. Of course real greed is bad. The term greed has been turned into a class envy term.
We can point and complain about someone who is successful or what we consider rich.
I think the Madoff story is a good example of real greed. Imagine dragging your family into a criminal enterprise? This shows that money is more important than even your family.
The pursuit of profit can be good. Investors funded companies that are now making vaccines that will help tens of millions. Good happens and people are rewarded.
On a smaller scale I have a problem with so called day traders. Instead of expanding anything they are just siphoning off resources that could be used for good.