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Does Studying Economics Make You Greedy?

To help protect the economy (and our citizens), do we need to start teaching our future businessmen and women differently?

The financial crisis showed that people can be greedy. But, where does greed come from? Is it something innate? Or something that’s taught and nurtured—for example, at business schools? And, if so, what exactly is it that turns decent people into greedy people?

A study published earlier this year—looking at the effect of economics education on B-school students—provides some hints. And the conclusions ought to worry colleges offering Econ 101.

Wanting to test whether economics leads students to have more positive views of greed—that is, to rationalize, or feel more comfortable with, greedy behavior—academics from Northwestern and Harvard designed three experiments.

The first compared how economics and non-economics students played a "dictator game," where participants are given $10 and choose how much to keep, and how much to distribute to other players. It found the economics students kept more of the $10 than the other students.

The second asked a range of students (a third were economics majors) to describe times when they had been greedy, and to say how they felt about that (e.g., justified or unjustified). The economics students were more likely to have positive attitudes about greedy behavior.

The final test split non-economics students into three. One group read a short statement from a famous economist on the benefits of self-interest; the second read about the negative effects of self-interest; and a third read an unrelated control statement. The first group were more likely to accept greedy behavior.

The authors note that mainstream economics routinely teaches the value of self-interest. As far back as Adam Smith, economists have said that everyone benefits when economic actors act self-interestedly. But the study shows how easily this can be misconstrued and abused. Students can see the righteousness of self-interest as an excuse to act greedily, and end up harming others. The third experiment hinted at how "repeated exposure to positive statements about self-interest" could have "longer-lasting effects on people‘s opinions about greed, including their reactions to their own greedy actions."

The research builds on previous studies showing how economic models can exclude considerations of other people’s welfare, crowd out "moral emotions," like guilt, and encourage people to believe, falsely, that everyone else is also behaving dishonestly. Research has also shown how economics doesn’t just model behavior, but helps direct it—for example, by rationalizing self-interested behavior.

Perhaps the most important revelation in the latest study is that economic actors will conceive of the same behavior differently depending on their situation. Without economics training, students will see the action as greed; with it, they see it as self-interest. "People‘s perceptions of greed, and their willingness to engage in—and justify—greedy behavior, are malleable," as the authors put it.

Many business schools have responded to criticism following the financial crisis by adding or beefing up their ethics courses. But this study suggests more fundamental reform may be in order. There is no point in having ethics courses if the rest of the curriculum, albeit unwittingly, encourages unethical behavior.

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