Column on Prudence versus Greed

Prudence versus Greed

Tibor R. Machan

Most people mean by greed an “excessive or rapacious desire, especially for wealth or possessions.” As to prudence, it is the quality of being cautious with regard to practical matters and especially in regard for one’s own economic interests, being careful in the management of resources, heeding economy and being frugal.

Why is this of any interest? Because the sense of “prudent” as used to mean being economical, frugal is now being distorted by confusing it with being greedy. When Gordon Gekko declares greed to be good in Oliver Stone’s notorious movie, Wall Street–notorious since it managed to exacerbate the already hostile attitude toward business that sadly prevails in much of the world–he doesn’t differentiate between excessive or rapacious desire for stuff and the prudent management of one’s resources. They are lumped together.

And sadly some professional economists tend to agree. When I took my first economics course in the mid-60s at Claremont Men’s (now McKenna) College, my econ prof was University of Chicago PhD Procter Thomson who did use to tell his classes that “greed is good.” But it was said with a mischievous look in his eyes–he didn’t really mean to say that greed as understood as a vice or sin is good, only that the pursuit of one’s self interest, as argued by Adam Smith the father of modern economic science, is useful, enhances economic productivity.

Critics of the free market system have been capitalizing on the casual identification of prudence and greed, the sort that Professor Thomson and quite a few other economists continue to indulge in. That identification has a complex history. In a nutshell, there was a time when prudence counted as one of the most important human virtues, even a moral principle, meaning living carefully, attending to one’s life in a way that will be of benefit to oneself, enhance one’s human excellence. When some girls used to be named “Prudence,” they certainly weren’t meant to be declared greedy. Even the name of that major financial company The Prudential, isn’t meant to convey that those working there are rapaciously bent on acquiring riches. No, the idea is that original one, namely, that being prudent is taking good, proper care of oneself and of one’s clients’ funds.

But then in the 16th century, mostly at the hands of the English philosopher Thomas Hobbes, prudence was used not to much as a term for being careful but for being ambitious, even power hungry. The drive to gain power, wealth and such was taken by Hobbes and his followers to be innate in us, the engine that moved us forward, no different from how other biological imperatives push us to behave as we do. Prudence was thus changed from a virtue to a drive or motive, from a character trait and virtue to an inborn psychological disposition.

This is where we get the idea so many of my students repeat, “Everyone is selfish.” They just cannot help it! And thus there can be no credit or blame ascribed for being prudent–it is how we simply must be, how we are, as it were, hard wired.

But the evolution of ideas is rarely smooth and seamless, so a mixture emerged in time where many, especially in the social sciences, saw prudence as both a drive and an attitude, except it stopped being a praiseworthy one. Being selfish as a prudent person would be got replaced with being selfish as an avaricious or greedy person would be. Since the latter is, of course, widely taken to be a bad trait, its association with economic ambition served the critics of the free market system very nicely: they could now link plain old, innocent economic prudence with a vice! But since the term “prudence” didn’t easily fit this idea, given its honorable original meaning–”greed” became the term which then was used to smear economic self-interest.

So nowadays even those on Wall Street and elsewhere who are trying conscientiously to increase their and their clients’ wealth are dubbed greedy, even as it’s becoming evident to most folks that without their good works the economic system is going to tank.

Just imagine all the brokers, money managers, company presidents and chief financial officers resigning their posts and joining a monastery. That would really boost employment, wouldn’t it?

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