Self-Interest: Is it Good or Bad for the Economy? Self-Interest, Does it Produce Wealth and Create Jobs?

There has been raging debate amongst economists on whether or not self-interest really promotes economic growth. In 1776, Adam Smith, the father of economics, asserted the important role of self-interest in the economy through his popular statement, "it is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner…, but from their regard for their own self-interest." Smith's argument has, however, been brought to question severally, and as a result, it has become increasingly difficult for philosophers to reach common ground on the issue. Three decades ago, for instance, in his article titled 'The Tragedy of the Commons', Professor Garrett Hardin demonstrated, using the open pasture metaphor, that if everybody acts in their own self-interest, the economy suffers in the long-term. According to Hardin, if all herdsmen bring their cattle to feed at a common ground ('the commons'), and each one is compelled to maximize his gain by increasing his herd, 'the commons' suffers the effects of overgrazing, and consequently, all the herdsmen and their herds are destroyed in the long-term. So, to what extent is self-interest beneficial to the economy?

In an attempt to distinguish the negative effects of self-interest from the positive ones, economists have categorized self-interest into two -- legitimate self-interest and illegitimate self-interest. Legitimate self-interest is demonstrated through market processes, where people, in their attempt to maximize their own gain, produce and exchange goods and services, in the process creating jobs for others, and concurrently increasing their own wealth. This was the type of self-interest encouraged by Smith.

When self-interest goes too far, however, and becomes the only...

This type of self-interest is manifested in various forms including police corruption, lack of government transparency, and political violence; and is more rampant in the less-developed nations. We often blame regulatory agencies and public figures for these occurrences, but what we need to realize is that economic success/failure goes beyond just a handful of prominent persons and regulatory frameworks -- it is more about moral values. Self-interest does drive wealth-creation and economic success, but when it is unaccompanied by moral values, it creates breeding ground for economic disaster. Towards this end, in as much as self-interest drives entrepreneurial innovation, technological progress, and profit-making in the economy, it could cause mayhem if there are no social structures restraining its application.
Zambia is a perfect example for analysis; for years it was among the top beneficiaries of foreign aid, yet the economy continued to deteriorate even in the wake of all this aid. Well, this was primarily because a bulk of its aid never reached its intended recipients; instead, it went straight into the pockets of a handful prominent figures who were out to maximize their own gain at the expense of the population. The reason why it was so easy for these unscrupulous figures to get away unnoticed was because the country lacked a social system that was sufficiently capable of upholding the values required to steer economic development by encouraging self-interest as a way of stimulating growth and at the same time keeping it in check to ensure that it does not harm others.

Closer home, we recently experienced (and are in fact still grappling) with the effects of what has proven to be one of the worst…