On Greed: How to Not Take the Bad With the Good?

Greed is the spur to action for many of our businesses and leaders Without their greed, we wouldn’t have as much production or as high a standard of living. Greed has been recognized as a good thing going back,at least, to the English and Dutch mercantilism of the 1500s, if not earlier. Since then, influential people such as Increase Mather extolled what Max Weber later called the Protestant Work Ethic, and Adam Smith who implicitly praised greed and its role along with the invisible hand of markets.

But sometimes, greed goes too far. The events of recent years show us the need for reforms:

(1) Too much greed, in the form of corruption, takes money from taxpayers and from worthy projects that could have been funded instead – such as reducing the national debt.  Some greed is just inexcuseable.

(2) Too much greed can hurt our political process, by spending donations on personal treats instead of their intended political campaigns, or by buying decisions that are bad for everyone else except the bribe-payer.

(3) Too much greed, hurts our businesses in the form of excessive pay packages, excessive and incompetent risk-taking, and sometimes, outright fraud.  Such greed and fraud can also hurt our investors, which are anyone with a retirement account too:

(4) Too much greed, results in deaths when safety regulations are ignored.

(5) Too much greed, can result in major problems for many, as when banks engage in widespread evil business practices – something that individual consumers don’t have the time, legal skill, or bargaining power to fight.

How do we harness greed to create value for society, without so many negative side-effects? Economic theory tells us that society should create an incentive to do good without also doing bad. This suggests several reforms, most of which are already in place, and doing good, in many, but not all, areas:

  1. Immediately investigate any alleged fraud. Convictions in corruption, bribery and fraud cases should result in the immediate cancellation of any contract obtained by bribe or fraud, the immediate removal of all convicted persons from their posts in the public and private sector, and a ban on all convicted persons from serving in any future position of fiduciary or public responsibility. This, together with reform 2 would resolve problems 1 and 2.
  2. Money paid for work performed should be reasonable and customary for the work performed. All work should be bid for in a process open to all. This, together with reform 1 would resolve problems 1 and 2.  Notice that reforms 1 and 2 are already, in place, to some extent, in most areas.  They just need to be made consistent and universal.
  3. Enact the reforms listed in my blog entry On Corporate Strategy: tie pay to current and future performance, and reduce the executive workload, by better defining the function and sharing the burdens (coming soon!)
  4. Increase the severity of existing mandatory OSHA fines for injuries and deaths that occurs in a workplace or as a result of something that happens in a workplace – such as prolonged exposure to toxins.  The fines should be increased annually, so they keep pace with inflation. Also, people who can be shown to have directly contributed to the deaths or injury should still be subject to existing criminal and civil procedures. This would resolve problem 4.
  5. Make changes to the contract law to prevent certain businesses from taking unfair advantage over consumers. Create and empower the proposed Consumer Protection Agency to oversee things.  This would resolve problem 5.
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