The jurisprudence of greed.

• Author: Posner, Eric A.
• Position: Preferences and Rational Choice: New Perspectives and Legal Implications

Although a reader might arch an eyebrow at Wilkow's strategy, an allegation of greed is not defamatory; sedulous pursuit of self-interest is the engine that propels a market economy. Capitalism certainly does not depend on sharp practices, but neither is an allegation of sharp dealing anything more than an uncharitable opinion. Illinois does not attach damages to name-calling. (1)

Greed--the motive Kumpf attributes to Steinhaus--does not violate a "fundamental and well-defined public policy" of Wisconsin. Greed is the foundation of much economic activity, and Adam Smith told us that each person's pursuit of his own interests drives the economic system to produce more and better goods and services for all. (2)

[W]hen a pig becomes a hog it is slaughtered. (3)

INTRODUCTION

Antonio, the merchant of Venice, is an admirable, or at least unobjectionable, figure. (4) He cares about his friends and the finer things in life. Although he is a merchant and deals with money, he conducts his trade honorably and discreetly, and his work is not the focus of his life. He is intelligent, generous, and patient--a good fellow on whom his friends can rely.

Shylock, the usurer, cares almost exclusively about making money. When his greed is thwarted, he is consumed by his desire for vengeance. True, he loves his daughter, but moneymaking is the focus of his life and he treats his daughter like a possession. Shylock is not so much intelligent as he is cunning, and in the end his cunning leads to his undoing. He feels no generosity, shows no mercy, and is shameless about his love of money and his hatred of Christians.

Shylock is the personification of greed; that is clear enough. He is supposed to be loathsome, even if he makes some telling arguments on his own behalf and is an object of fascination throughout the play. But when we examine Antonio, and question his motivations and how we should regard them, we are puzzled. Antonio is a wealthy merchant, as much a stock figure of greed as the Jew in Elizabethan and Jacobean drama, (5) but there is nothing loathsome about him. Indeed, though he has wealth and fine friends, he is slightly pitiable, for he is passive and suffers from a curious lassitude.

To understand Antonio, we must jump forward to the Scottish Enlightenment, which made a sustained effort to address the Elizabethan anxiety about the disorders of capitalism, (6) a theme reflected in the tensions surrounding Shylock and Antonio. The writings of David Hume and Adam Smith focus on someone who resembles Antonio: a figure of moderate temperament, with some sympathy for friends and other people; far-sighted but not cunning; acquisitive and probably pleasure-loving but not self-indulgent; (7) and certainly not shameless. This person is not quite as generous as Antonio, nor as moralistic; he is not as heedless of consequences, but is similarly unobjectionable. He is a blank. This person has interests and follows them, but in a way that tends to benefit society rather than hold it hostage. This person, after further pruning over the generations, has come down to us as Homo economicus.

Although the Antonio-like character is present in the writings of Hume and Smith, there is no place for Shylock in either of their theories. Shylock's cunning, greedy, vengeful, and shameless character is pressed to the margins, for while the philosophers acknowledge the existence of these vices, the vices are in tension with the social order built upon reasonable self-interest. (8) In the lightly regulated market economy, there is no role for Shylock.

Shylock was banished from economic theory but not commerce and society. He reappears even today in the judicial opinions of American courts, causing problems and provoking responses that would be recognizable to his nemesis in the play, Portia. Shylock's reappearances, I will argue, provoke contradictory responses from the courts, which sometimes punish greed because of its destructiveness, and at other times tolerate or even encourage greed because of its role in the market and the legal system.

1. CONCEPTUAL PRELIMINARIES: GREED VERSUS SELF-INTEREST

   Shylock embodies greed and plays the crucial role of creditor in commercial Venice. Yet greed has a paradoxical relationship with economics: it is at once a paradigm of the self-interested behavior at the heart of economics and a contradiction of it.

   In consumer choice theory, a person has a budget constraint and preferences over outcomes, yielding a choice among the packages of goods and services available in the economy. The theory assumes that preferences have certain characteristics--preferences must, among other things, be consistent and stable over the period of study. Because choosers' preferences are their own rather than someone else's, economists often say that people act in their self-interest. The term "self-interest" is therefore morally neutral within an economic analysis. If one equates self-interest with greed, as Judge Easterbrook does in the first two epigraphs, then greed is made a morally neutral term as well, and greed and self-interest are deprived of separate meaning. If greed and self-interest were the same thing, then the miser and the saint would be greedy because they both seek to satisfy their preferences. For that reason greed has no meaning in economics.

   To understand greed, we need to bring in motivations, emotions, and moral judgments, concepts that cannot be incorporated into economics without some violence to the theory. (9) Greed is at its core a disposition (or motivation): greedy people have certain preferences, very intense preferences for a narrow range of goods and services. But the dispositional sense of greed breaks into two meanings: a hunger for food and other sensuous or material pleasures related to the animal appetites ("carnal greed"); and a narrow urge to accumulate wealth ("social greed"), which is abstract, for money is not an intrinsic pleasure--it is not sought by animals--but has value only from its capacity to purchase other things. Thus, a millionaire who lives plainly and gives away a lot of money, or a rich eccentric who squanders a fortune on an expedition to the North Pole, would not be considered greedy, in part because greed is always relative to a norm. At one extreme of greed are misers who hoard wealth, and at the other extreme are gluttons who gorge themselves on food. An excessive, narrow longing to satisfy bodily appetites or to acquire purchasing power is the hallmark of greed in the dispositional sense.

   The carnal greed of the glutton is closely related to the emotion of disgust. Greed conjures the image of a person gorging on food to the point of nausea. The greedy person and the observer are both disgusted by the very attempt to satisfy greed. Greed thus denotes not only excessive and narrow preferences; it also implies inconstancy, for the greedy person vacillates between intense longing for an item such as food and intense aversion to it. Greed is myopic, for even the prospect of nauseating engorgement does not deter excessive consumption in the moment of greedy hunger.

   The social greed of the miser is more abstract, and so is the disgust that the miser excites. People who accumulate wealth but live frugal lives are rarely considered greedy. They are not disgusting people because they work hard and generate a surplus; they do not take more than their fair share. Misers, on the other hand, accumulate wealth by fair means or foul and, because of their pathological obsession with money for its own sake, will not share or show mercy; they are indifferent to the needs of others. Misers, unlike gluttons, do not make us think of saliva, vomit, and other bodily fluids, but they disgust us because misers, like gluttons, consume too much of the social surplus, leaving others with too little.

   Thus, greed carries with it a moral charge. In everyday speech, an accusation of greediness is always an accusation of immorality, and there is rarely the ambivalent tinge of admiration associated with similar accusations, such as the charge of pridefulness or ambition. Evolutionary psychologists might conjure up the image of a dominant tribe member consuming most of the hunt, then vomiting. Disgust reflects not just the bodily fluids but the waste and unsatisfied hunger of other members of the tribe. In modern times, charges of greed usually refer to the more abstract notion that greedy people consume too many resources and do not leave enough for others. The visceral reaction, however, might owe something to primal experiences coded in the brain. Greed creates special revulsion because of its openness, its indifference to the feelings of others: Quaker millionaires are discreet; nouveaux riches are disgusting.

   Because carnal and social greed are closely related, both connotations usually accompany a charge of greed. When we accuse a tycoon of greed, we do not take care to separate the carnal and social aspects, because the carnal connotations of greed give sting to what is otherwise a contestable moral judgment. Reasonable people disagree about business ethics and the proper distribution of wealth; no one wants to be disgusting. Cartoonists take advantage of these associations when they depict wealthy people as fat and pig-like.

   Greed, then, carries with it a heavily laden train of associations. By contrast, as I observed above, self-interest as it operates in textbook economic theory is nearly empty of such associations. It refers to a set of preferences that obey certain formal assumptions and takes no position on the content of these preferences. Yet as we turn from the textbook models to self-interest in applied economics, and especially law and economics, some content is added, necessitated by the need to get the models off the ground. Preferences are well-behaved in certain ways: to be deterrable by sanctions, for example, people must care enough about the future, and have...