October 2019
Steven Suranovic
Abstract: This paper demonstrates that economic efficiency is enhanced when market participants adhere to certain ethical constraints. These ethical constraints are implicit in the neoclassical economics models, but are rarely emphasized by the economics discipline in standard texts. Avoidance of this issue has contributed to many misunderstandings including the role that individual self-interest plays in promoting economic success. This paper applies the ethical principles identified here to establish a definition for greedy behavior and to distinguish it from enlightened self-interest, which is the mode of behavior required of homo economicus. The paper offers numerous examples that show that many of the negative impressions people have about economic and business activity arise largely when market participants act greedily and therefore are not conforming to the necessary ethical restrictions on homo economicus.
JEL Codes: A2, B4, P1
Key Words: Ethics, efficiency, greed, homo economicus, self-interest, economics, business ethics
