Greed and self-interest. Good or bad?

From an economic perspective, "greed" (self-interest) is neither good nor bad. It's simply a fact of the world that human beings generally care more about themselves, their families, and their friends and communities more than they care about those more socially distant from them. That's all the assumption of self-interested behavior has meant in economics from Smith onward.

What matters is whether "greed" has good or bad consequences, and THAT depends on the set of economic, political, and social institutions that constitute the social space in which humans choose. Self-interest is "good" when market institutions lead entrepreneurs to seek profits by developing new products and services that benefit consumers. Self-interest is good when social institutions enable us to collaborate outside of the market and state to solve problems in our families, neighborhoods, and communities. Self-interest is good when institutions encourage positive-sum human cooperation.

Self-interest is a problem when those institutions encourage instead zero-sum or negative-sum predation. When institutions do not protect people against robbery, assault, rape, murder etc., it enables some to exercise their self-interest by engaging in those behaviors to the detriment of the victim and the rest of us. When institutions encourage and enable profit-seekers to work through the political system to obtain subsidies, protections, and privileges that redistribute toward them at the expense of others, self-interested behavior creates problems. Corporate welfare, farm subsidies, export subsidies, import protections, cab licenses, occupational licensure, Jim Crow laws, and a great deal of other forms of regulation are all examples of self-interest gone bad because profit-seekers have access the power of the state to turn the positive-sum game of the market into the negative-sum game of political privilege. Those privileges benefit the few at the expense of the many, as opposed to markets which benefit both the few and the many.

Finally, and perhaps most important, markets both rely on and encourage the "bourgeois virtues," most of which are things other than Prudence ("self-interest"). Markets level status-based hierarchies. Markets encourage and enable us to treat each other as fellow cooperators (think of the "double thank you" when you buy something). Markets, as Paul Seabright put it, turn strangers into honorary friends.

It's not about "greed" (either good or bad). It's about discovering and defending the social institutions that enable us to turn our natural propensity to care more for those close to us into actions that benefit both them and anonymous others. That's what the institutions of market liberalism do.