14 Sep 2010

Mutual self interest

Some more useful thoughts from WEH:

I heard a discussion the other day that "self interest" in capitalism is really "mutual self interest."

The discussion should be framed as "mutual self interest" because exchange does not occur due to self interest as that is individualistic. Exchange occurs when two or more parties have "mutual self interest". Self interest has been framed as "greed" and used politically when the the case is really mutual self interest. It is much more difficult to frame mutual self interest as "greed" since you are then arguing that all parties are greedy.

For example, you buy a gallon of gasoline. It's mutual self interest that drives this transaction between you and the gas station owner (refiner, oil company, oil driller, etc.). Are all parties "greedy," including YOU? The political argument that oil companies are greedy is more difficult to make when it includes all the mutual players in the exchange, including YOU.


  1. Good point. Thanks.

    For there to be a seller, there always has to be a buyer.

  2. I agree to an extent. I propose that the missing piece of the puzzle is embedded in negative externalities. The cost of the gasoline does not necessarily reflect the environmental impact of the gasoline from production to consumption. The buyer is "greedy" in that he/she is purchasing a good that inflicts negative collective impacts.

    In other words, yes, it is mutual self interest and all parties are "greedy" when there are significant negative externalities not reflected in the market price. Based on the inelasticity of gasoline, consumers have little choice in this case. We are dependent upon the technological path created before us and accept what is given to us, not out of greed but out of necessity.

    But, yes, we are all at fault. It cannot be reduced to corporate greed. Mutual greed!

  3. I greedily spend money all of the time. I usually extract greater value from the transaction than the amount of money I spend. My position on the demand side of the equation, along with countless others, affords me greater ability to control the transaction by simply organizing my fellow demanders and shopping somewhere else.



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