Greed is NOT good

Milton Friedman, famous economist and free market advocate, once wrote an essay stating that “the social responsibility of business is to increase its profits”. Friedman argued that the modern concept of corporate social responsibility was idiotic and inefficient: if businesses operated according to the law and focused purely on profit, they would be acting morally enough.

He added that by spending the business’s money on social initiatives, businesses are using up a substantial chunk of their employees’ and shareholders’ paycheques. Thus, Friedman argued that by pursuing profit and at the same time, playing by “the rules of the game”, society is pursuing a better future.

Unfortunately, the theoretical free market works very differently from the real world. In practice, profits have a tendency to lead people astray and encourage them to commit unethical, illegal and economically inefficient acts.

In the perfect world, everyone would follow greed to the limits of the law. However, our legal system is infamous for being slow and critically flawed in dealing with white-collar crime.

As shown in the recent financial crisis, regulations on financial markets that should have existed were simply not there. As we amend our regulatory policies, we realize that innovation in the financial services sector evolves more quickly than the law, and that something else is needed in order to prevent such a crisis from happening again.

The famous philosopher, Immanuel Kant, had a utopian solution for such moral dilemmas. He believed that morality could only be achieved if we pursue an action as a “means in itself.”

This means that to be moral, we must do things because we believe in what we do and not because we are pursuing ulterior motives.

What does this mean for profit?

It means that people should work and contribute to the society simply for the purpose of improving our collective quality of life—not for making a profit. Farmers in China should farm purely for the sake of providing food to the nation. Otherwise, they may be able to find other ways of making profit without being truly productive.

Of course, Kant’s philosophy is neither practical nor possible. A world that tries to live by those rules would be too inefficient and could never exist. However, it is obvious that we each need our own sense of morality and social justice.

To be practical, we can and should seek profit. Nevertheless, when unrestrained by a strong code of ethics, greed is definitely not good.

By Kevin Kang, Editor in Chief

In association with:

The ARB Team
Arbitrage Magazine
Business News with BITE

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