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Economics of Greed

Increasingly in the political and economic spheres, there is a polarisation between the Left or Right, Capitalism vs Socialism, Progressive vs Conservatives, etc. These are the debates about the effectiveness of systems, and while these debates are important, they often miss a crucial aspect, that is, the human aspect. While we would like to believe that humans are altruistic and “good,” the theory doesn’t hold up to scrutiny. People are greedy — not for the same things — but greedy nonetheless. Higher socio-economic and political status is certainly very alluring to most of us. It is precisely this greed that over time leads to systemic failure, inequalities of income, wealth, and power.

Greed here refers to the desire to obtain supernormal utility. Wanting better pay to live comfortably isn’t greed but wanting to earn billions upon billions of dollars is. Supernormal utility, if strictly defined, would be any utility (satisfaction) a person obtains beyond what is necessary to sustain themselves, but I use it more liberally as obtaining excessive utility which is more than what is required even to live very comfortably/luxuriously. To be fair, there always have existed hierarchies and some people have significantly more resources and opportunities. Even when the social order got drastically restructured in the past, the older aristocrats still did manage to keep some of their influence and by the virtue of that, their supernormal utility. For example, the Upper Hindu Castes of old transitioned into the British education system with an advantage of wealth and educated parents. A lot of French Aristocrats were able to flee from the french revolution with a lot of their wealth intact to start anew.

Even revolutions that intended to create more egalitarian societies eventually led to a creation of a new aristocracy and that has been so under both the communist USSR, which began with the Russian revolution, and capitalist America, which started with the lofty goals of the Bill of Rights. The top 10% of Russians earned 45-50% of their national income in 1990[1], around the fall of the USSR, and in 2016, the top 10% of Americans owned a staggering 77% of National Wealth[2].

We, as a human civilization, have tried and tried again to create a utopia, especially for the last century or so, since we became cognizant of human rights. We would want a society like the so-called “Ram Rajya”. Everybody is doing what they are capable of and skilled in. There is fairness and justice.

Imagine a system that begins with no hierarchies. Everyone has access to the same resources and opportunities. Even in such start conditions hierarchies are inevitable and some people or families will do better than others. This would be fine if everyone aims for normal utility, but due to human nature itself, some people will desire supernormal utility. Over a large number and long periods, it is statistically obvious that a few of these people would end up in positions of power and influence, and that is when a vicious cycle begins. Such people safeguard their vested interests by weakening the institutions that are meant to provide equal opportunities and resources. With weakened institutions, the bad apples have more wiggle room to rise to the top. Over time, this will have a cumulative effect. The rich will become richer, the poor will become poorer. Opportunities will be reserved for those who can afford them, whereas those who need and often deserve the opportunities will get shunted to the chawls and slums. All of this can and statistically will happen even in societies that have hypothetical clean slates so it is all the more probable and real in our world which is, by far, messier. And none of this is contingent on the strength of the systems and institutions. It is only human greed that results in these events. And when this inequality becomes unbearable, a discontinuity happens. Sometimes it is as simple as the complete wipeout of an incompetent government in an election, other times it is a bloodbath, a military coup, or a civil war.

The problem of the contemporary world is that the powerful are insanely more powerful than the weak. They have an extensive arsenal of hard and soft power. Media is strongly swayed by the powerful politicians, both on the left and right-wing of the stage and among propaganda, development of the poor and weak gets lost. The internet, which was supposed to be a knowledge superhighway is now a dumping yard of misinformation and propaganda. Even if, by some miracle, those on the bottom of the hierarchy become agitated enough to turn violent, there are enough nuclear warheads in the world to quell dissent.

It hardly matters whether the society is capitalist or communist, authoritative or democratic; greed makes sure that the eventual result is a skewed society. Early, some events would act as corrective measures and reduce the wealth and power gaps but as mentioned above, the effectiveness of those measures can now be negated to a large extent. As a result, the inequality keeps on increasing and the vicious cycle keeps on turning.

Of course, our world has to deal with systemic failures like racism in the USA and the western world, the radicalisation of Islam in the middle east, and the oppression of lower castes in India, but even perfect systems will not give us perfect outcomes. Solving the problem of greed is a primary way to create as close to a utopia as possible, and I believe that it is not a socio-economic or political problem, but one that deals with ethics and human emotion.

One way to influence these spheres was religion, but that approach has its own problems. Another way to approach it might be through creating a society that respects and promotes empathy. An aggressive “go grab what you want” policy in the society discourages empathy because no one “likes to play the role of the sucker” as was shown by the result of repeatedly playing the Public Goods Game[3]. The game admittedly was about how much will each player contribute to the public good fund and while initially, the contribution was about 50%, when played repeatedly, it reduced because people came to know that some of them were not paying anything at all. The Game is not entirely analogous to the scenario discussed in the article but a thought experiment on how this game would turn out in a world where empathy is highly rewarded by society would make you understand its importance.

The maxim “Give as much as you can, but don’t jeopardize your financial safety” is probably a good place to start for humans who are not monks. If all of those who have the surplus to give, or even 95% of them starts following this maxim and all that donated fund is properly channeled, we may head in the direction of some egalitarianism, and though it would often mean reducing one’s own supernormal utility into a normal one, as a society, I believe, this is a way to our salvation.

Mokshit KothariWriting Mentorship 2021


[1] [2] Federal Reserve Bank of Saint Louis [3] Paraphrased from “Misbehaving” by Richard H. Thaler
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