🤑 Why are Humans so Greedy?

Evaluating the origin and outcome of greed through the lens of three world famous economists!

Is greed good or bad? What are the consequences of greed?

These are some questions that mankind has pondered for a long long time. As society progressed and changed, so did the answer to this question.

Sit back and read on, as we unearth the meaning and consequences of “greed” across the realm of time.

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In the earlier days of Christian era, richness was considered to be a sin. 

After all, if you had a larger share of the pie, someone out there was suffering from the possession of a smaller share. A wealthy man could never land at the footsteps of heaven, they said. And so, wealth was encouraged to be given away.

But you know humans, right? 

We drifted from this theory pretty soon. Society began to progress. The concept of loans and interest gained traction. The wheel of Innovation and development started moving at a faster pace. 

And then, came in Adam Smith. He taught the world that greed is good and relieved us from the moral baggage of being rich or aspiring to be so. How?

Collective progress. 

If more restaurants open up in a neighborhood, it won’t mean that they are eating into each other’s share. Instead, people will start consuming more and all the restaurants will prosper. If someone is selling skirts, and you start selling pants, it won’t mean that an increase in your sales will lead to a dent in the sales of skirts. Because of course, who doesn’t like a wardrobe with multiple options? 

Yes, humans are always in the pursuit of ‘more’. Life is short and death is a mystery. So what better way to make the most of it than by gathering everything that we can in our limited period of existence, right? 

And if you could essentially increase the size of the pie without eating into someone else’s share, then greed is not bad, huh? 

In fact, it is good! You see, when you get rich, you employ more people, expand your offerings and everyone prospers.

Adam Smith morally justified that greed ain’t a bad thing. But, there is a (not so) small problem. 

He saw the vastness of the universe, but not the limitation of the resources. (Tweet this)

Crossover of Tragedy of the Commons and Nash Equilibrium

Woah. Woah. Why are you suddenly speaking jargon, ReadOn?

Let us break this down.

The tragedy of commons was theorised in 1833 by William Forster Lloyd, a British economist. 

Imagine a common grassland where all the herdsmen take their cattle to graze. Now if there were no restrictions, what would you do in such a situation?

You would be tempted to increase the size of your herd. You have the resources after all. Right?

And so will everyone else. Prosperity for all, like Adam Smith said. 

But, how long will this prosperity last? Collective greed will exhaust the limited resources on the grassland and then everyone will be worse off.

This is the tragedy of the commons. People use a shared resource but act in their own interest, eventually causing harm to all.

Our harmful activities of deforestation, extraction of natural resources, hunting, yada yada has put us in a spot. 

What’s the solution?

Let’s say you decide to install very expensive machinery in your factory to prevent pollution. After all, we should all play our parts, right?

Uggh. Bad news. Your competitors don’t give a damn and continue using the cheap environment harming machines. They will be able to produce and sell the products at a lower cost. 

On the other hand, your profits might take a hit. You did the right thing, but you are left worse-off. To top it all, since others continue to use the environment-harming techniques, your actions might have a negligible impact.

For you, the problem aggravates all the more. This is a classical prisoner’s dilemma. If only a few parties act in favor of the environment, they are left worse off. But if none give a damn, all of them will be screwed pretty soon. 

Solution? 

The Nash Equilibrium

All or most of them pivot to preserve nature. We could do this by government mandates, by re-aligning incentives to benefit good behaviour towards the environment. And we need to find a way!

After all, the survival of our species depends on this.

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