Project 1

Topics: Capitalism, Free market, Market economy Pages: 7 (1279 words) Published: April 12, 2015


Greed and Incentives. Is there a difference?
Eric Simmons
Arkansas State University Beebe

Abstract
This paper explores greed and incentives in an economical perspective. Greed is a driving factor in a free market economy, and helps to further the process of innovation and free trade. Incentives are the driving factor behind greed. They are what motivate people to produce goods and services to other people in order to make a profit for their own self-interest. In order to help make clear the difference of greed and incentives, this paper will discuss a quote from Adam Smith’s book, Wealth of Nations, along with discussing innovation, the difference of acting in one’s self interest and being greedy, and fairness or greed in free market systems.

Greed and Incentives. Is there a difference?
Greed and incentives are two terms that each play a role in the other. Incentives are sometimes rewarding and sometimes unrewarding. Greed is taught to be a bad quality to children: but is greed really bad? By taking an economical perspective of greed and incentive, one can see how each play a vital role in the free market society. Define Greed and Incentives

Greed is a strong and selfish need for something, such as, power and wealth, with the intentions to keep it for their own self. Greed can cause people to stop at nothing to obtain what they desire most, without considering the consequences that may come along with their quest to obtain the thing they want most. Incentive is what motivates and encourages someone to do something. Incentives are used to persuade people in to doing something. For example, if you have ever purchased a kids meal just to get the toy, you purchased it with the incentive of receiving. Incentives can be negative or positive. Negative incentives punish someone financially for making certain choices and behaving a certain way. Positive incentives, however, reward someone financially for making certain choices or behaving in a certain way (Economic Incentives in Our Community). Greed and incentives have some similarities, such as, both are only concerned about with self-interest. They are also different, greed is the selfish desire, whereas, incentives are the motivations. Incentives are what cause people to be greedy. Adam Smith’s quote.

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages (Smith, 21).” This quote is a great example of how greed plays a role in our society. The butcher, the brewer, and the baker have a business to run and people to support. They do not operate just to provide goods to people, they have started their business with the intent to make money. One could say that they are greedy and only care for their wellbeing because they are selling what they make in order to gain money. Smith is claiming that free trade among the members of a society inevitably leads to an outcome that is good for the society as a whole, even though each individual pursues only his own selfish gain (Buchanan). If an individual can profit by manufacturing some product or supplying some service he or she will do so. The ability to make profit proves that other members of the society must want those goods or services. If you consider this, the society’s needs will be met through the pursuit of individual self-interest, or greed. The incentive to make a profit is what pushes someone to make the goods or services. Without the incentive of profits no one would provide goods or services. Discuss innovation: “Would humankind still be stuck in the stone age if we did not have the incentives provided by profits?”

Innovation is a driving factor in our economy. Without incentives of profit innovation would not matter. “Under capitalism,...

References: Baumol, W. (2002). Introduction: On the Engine of Free-Market Growth. In The free-market innovation machine: Analyzing the growth miracle of capitalism (p. 1). Princeton: Princeton University Press.
Buchanan, M. (2002, April 1). Wealth Happens. Retrieved February 23, 2015, from https://hbr.org/2002/04/wealth-happens
Economic Incentives in Our Community. (n.d.). Retrieved February 23, 2015, from http://www.econedlink.org/lessons/index.php?lid=390&type=student
Smith, A. (1776). Of the Principle which gives occasion to the Division of Labour. In An inquiry into the nature and causes of the wealth of nations (p. 21, 22). Raleigh, N.C.: Alex Catalogue.
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