"Greed is good," says Gordon Gekko in the movie Wall Street. Milton Friedman seems to agree. I hear this pronouncement too often, especially from free market enthusiasts. Yet intellectual history conflicts with this view: the classical liberal thinkers, like Adam Smith, never condoned greed, but argued that enlightened self-interest allows for a well-functioning society. Greed is unenlightened, primitive self-interest, and is thus evil. The distinction between these two concepts is important: classical economists would have condemned contemporary free market ideologues' idealisation of self-interest.
Let me start with Adam Smith, who clearly separates greed from self-interest. Smith famously writes in The Wealth of Nations that "it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest." However, he is skeptical of businessmen's secretive and selfish coteries: "People of the same trade never meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." While Smith recognises that self-interest can result in efficient resource allocation, he nonetheless condemns greed (self-interest taken too far). These arguments are more pronounced in Smith's Theory of Moral Sentiments, which argues that concern for others should restrain self-interested behaviour. If Adam Smith were alive today, he and free market fanatics would be at odds, to say the least.
To classical liberals, self-interest must be contained by rational thought and empathy with others. This is seen clearly in Smith's writings, as well as those of John Stuart Mill. In Utilitarianism, Mill posits that only human beings possessing enlightened self-interest can work towards society's betterment. Because people are equal, they must be brought into society learning to cooperate with one another, and only through this cooperation can their self-interest be positively channeled. This is a marked departure from Friedman's dogmatic assertion that a corporation's only social obligation is to increase profits.
The mantra that "greed is good" distorts the original conceptualisation of self-interest. Adam Smith must be rolling in his grave now. Greed is unambiguously bad, and we should instead seek to build our economies on the classical model of enlightened self-interest.