Table of Contents

Handbook of Economics and Ethics

Handbook of Economics and Ethics

Elgar original reference

Edited by Jan Peil and Irene van Staveren

The Handbook of Economics and Ethics portrays an understanding of economic methodology in which facts and values, though distinct, are closely interconnected in a variety of ways. From theory building to data collection, and from modelling to policy evaluation, this encyclopaedic Handbook is at the intersection of economics and ethics.

Chapter 62: Self-interest

Johan J. Graafland

Subjects: economics and finance, behavioural and experimental economics, history of economic thought


Johan J. Graafland Introduction Self-interest is an extraordinarily powerful assumption in economics. The reasons for its dominance have been partly positive and partly normative. On positive grounds, the assumption is defended because it leads to reasonable empirical predictions. Economists tend to believe that societal processes can be explained and predicted by assuming that people act out of self-interest. Members of the so-called public choice school, such as Gary Becker, believe that self-interest can explain all behaviour. In their view, individuals will not allot resources to public goods, will free-ride whenever they can get away with it and will lie, cheat and violate other moral precepts and laws when the penalty is smaller than the gain. Self-interest, however, is not only a descriptive assumption in economics. It is also defended on moral grounds. In his famous Wealth of Nations Adam Smith (1776) argues that self-interested behaviour facilitates efficient operation of the economy. This view remains more or less intact in modern economic theory. As K.J. Arrow and F.H. Hahn state: There is by now a long and fairly imposing line of economists from Adam Smith to the present who have sought to show that a decentralized economy motivated by self-interest and guided by price signals would be compatible with a coherent disposition of economic resources that could be regarded, in a well-defined sense, as superior to a large class of possible alternative dispositions. (1971, p. vi, cited in Sen 1977, p. 321) Whereas we might expect chaos in a situation where...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information