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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  • F. Aquino

    hello, that's why you are required to take 101 and 102....micro AND MACRO...in macro, you learn that personal gains are only a fraction of the benefits society gains as a whole...i mean, you will benefit more overall living in a healthy society, as opposed to living in an unhealthy society.
    micro is essential to running a business, but you can have a successful business and not be greedy.

    greed comes from ignorance...the more you learn, the more you will understand that we will do better if we work together, not against each other.

    in economics, they also teach you to look at how studies are conducted, where, what, who, when.. blah blah... maybe these studies were conducted in those schools, and maybe most of those students came from wealthy families. maybe those students were young. i know i was more selfish when i was younger.

    i took a class on game theory with prof. shahriar. we did lots of experiments and got different results. sometimes people were greedy, sometimes people weren't. we also knew that we were just playing games. but usually, individual experiments showed that people were not looking out only for themselves, and were in fact more willing to share. group experiments were a bit more cut throat though.

  • CPO_C_Ryback

    Gee, is this right after the engineering colleges require daily bathing? Just asking ..

  • atimoshenko

    Our problem is not selfishness vs. selflessness, our problem is balancing the immediate against the long-term.

  • Claude Warner

    Intelligence can be useful, but it it is not always wise. Danah Zoahr writes in Spiritual Capital of the "monster that ate itself" when speeking of the greed aspect of capitalism.

    If you could make great money selling your body parts (greed is good!), you would ultimately kill the golden goose (yourself). What would your greed get you - a wealthy corpse.

    Capitalism is a great incentivisor for personal endeavour, but there is a caveat, and that is that taken to the extreme capitalism can ultimately destroy the very resources that make capitalism possible.

    The solution is sustainable capitalism which, although somewhat of an oxymoron like 'responsible gambling', is the only way to maintain the supply of golden eggs.

    The challenge is to find the balance.

  • Justin Pollard

    The adage "greed is good", which, at least recently, was popularized in the movie Wall Street, doesn't lend support to the argument that a capitalist would sell his own limbs to turn a profit. I realize you're simply using such an allegory to try to illustrate a point, but I don't think the example you've chosen is appropriate. As a practical matter, a true free market wouldn't support such self-defeating behavior (e.g. the market for limbs isn't profitable, especially when you're selling your own). In response, you might point out the lingering financial crisis as an event in which institutionalized greed led to the type of "limb-selling" you mentioned, but I'd point out that we were, in late 2008, and are now, not operating in a free market. Specifically, interest rates are not governed by market controls, but rather government entities (the Federal Reserve Bank, in this case). Maybe that's capitalism "taken to the extreme". I'd argue, though, that that extreme is not capitalism at all.

  • Overseerjames

    Maybe we need to consider the fact that greed might be a good thing. Human greed is the reason we have such superb standards of living. I'd argue that the more greedy the population the better things will get for the group as a whole. These economist are intelligent, and maybe that's why they have such positive views towards greed. 

  • Claude Warner

    We remember how quickly group opinion changed behaviour in "Lord of the Flies".

    Similarly, the 'everyone is doing it' mentality can change behaviour very quickly (especially for those who don't have their own clearly developed moral compass)