Sunday, February 05, 2006

How Selfish Interest Can Promote Public Good?

If improving public good can increase a person’s tangible benefits, would that person not do it out of self-interest? The answer to this question is not a definitive yes. Making that tangible benefit a tradable monetary value will help induce the behavior. Once it is made tradable, even if that action results in a reduction in a personal benefit in another way, as long as the net effect is an increase of monetary value, the desired behavior may be induced. For example, if a person is given cash for each pound of garbage brought to a collection center, homeless people may find it to their self interest to make money from collecting garbage from the streets. On the other hand, an employed person earning a good wage would not be induced to do such work because it would take time away from the other paying job, unless of course, if garbage collection pays more.
In a corporate environment, if a corporate decision results in greater profits but reduces public good and there is a monetary penalty to the corporation due to that reduction of public good, the executive would likewise be induced to change the decision to maximize profit less the penalty. That decision would be to maximize the corporate self interest. In doing so, the corporation would also increase public good, if there is money to be made.

1 comment:

Unknown said...

Adam smith ...Wealth of the Nation....Stevn Stoft article says same ...In India the Balancing market is designed on the same principal...non cooperative Game theory and Nash equilibrium is achieved...Real time pricing stretched to limit as per Scheweppe's dream....
Soonee