Two Events Motivated by Incentives comparison

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The word "self-interest" refers to actions that have the greatest personal gain. While several economists disagree on fundamental concepts, they all recognize the importance of self-interest in promoting societal economic development. According to Robert H. Nelson, there are two types of self-interest: legal and illegitimate. The former can be explained by market dynamics, in which individuals, in their search for money, generate goods and services and share them with others for their gain. The latter takes the form of bribery, aggression, and deception, in which people profit from the sweat of others. In this case, specific people increase their wealth at the expense of others. Therefore, the latter form of self-interest is disadvantageous to the society (Investopedia, 2017).

Advantages of self-interest behavior to the society

According to Adam Smith, a pioneer in the field of modern economics, the best economic benefit can be achieved in the society when people perform activates with their interests in mind. He further stated that when many people put their self-interest above all other things, it results in the production of goods and services that ultimately benefit producers and consumers. The importance of self-interest can be portrayed in the market economy. For instance, people possess the majority of the resources in the society such as labor, capital and land and they make decisions that seek to fulfill their self-interests which ultimately leads to the control of the marketplace. Therefore, if more people have self-interest behaviors that result in the growth of the economy, then the society as a whole will benefit from the creation of wealth in the marketplace. For example, a baker does not produce bread as a charitable action but rather as a means of satisfying his self-interests of making money. However, the meal becomes a valuable source of food for the entire community (Freiling, 2012)

The society comprises of either consumers or producers or both. Majority of adults are both producers and consumers because many people are either employers or employees in business units that produce goods and services. We assume that human beings act shrewdly and thus put their self-interest above all other things. The decisions made by individuals are based purely on intrinsic satisfaction and financial gain (Simons, 2015). The assumptions are a crucial factor in the explanation of commercial success in the society. In a capitalist community, the market interaction determines the price of services and goods that are exchanged freely. It is assumed that the actions of consumers and producers are determined by the level of self-interest they have and their rational thoughts. The two parties interact in the marketplace where the goods and services are exchanged based on the self –interests of the two sides in such a manner that benefits everyone (Smith, 2005).

Disadvantages of self-interest behavior to the society

As mentioned in the introduction, the “Illegitimate” self-interest is harmful to the society in that it is fuelled by violence, deceit, and coercion. Therefore, this type of self-interest is illegal and condemned because it involves injustices against fellow citizens in the name of making money. In the United States, the “illegitimate” self-interest is rare. However, countries in other parts of the world have a high percentage of this type of self-interest. For instance, there is no transparency in the Chinese Communist government, consistent political violence plagues most African states, and there is a high degree of police corruption in countries such as Afghanistan, Sudan, and Mexico.

The U.S has over the years critically analyzed the states where illegitimate self-interest is rampant, and it has discovered that it is the features of the regional economies and specific public figures that have resulted in such scenarios. For instance, the presence of famines, oil or drugs has resulted in a lot of violence with many people dying daily. A typical example is Congo where militias and the government have terrorized natives for a long time. It is evident that the same drive that pushes individuals and countries to succeed economically is the same drive that results in economic breakdown when moral values are not included in the process (Anik, Aknin, Norton, & Dunn, 2009).

Self-interest has a significant impact on charitable and profit-making organizations. It also drives entrepreneurial innovation and technological progress. However, if there is lack of social control that can exert pressure on self- interest, there is a high chance that economic mayhem will result regardless of the current financial condition of any society. Each society should have a social system that can uphold the values needed for economic advancement (Kirchgassner, 2014).


Nowadays, the significance of self-interest is not given the attention that is required in the society. Companies offer bonuses to employees who have excellent performance records. Schools set high grades scores so that students will take their studies seriously. The government reduces the tax levied to some business organizations which are environmentally friendly as an incentive to minimize environmental degradation Today's world is driven by self-interest which plays a crucial role in the economic growth of any society thereby improving the lives of people in these communities.


Anik, L., Aknin, L. B., Norton, M. L., & Dunn, E. W. (2009, September 10). Feeling Good about Giving: The Benefits (and Costs) of Self-Interested Charitable Behaviour. Retrieved from Havard Business School Working Knowledge:

Freiling, N. (2012). Self-interest: A Powerful Force for Good and Evil. Retrieved from Values and Capitalism:

Investopedia. (2017). Self-Interest. Retrieved from Investopedia:

Kirchgassner, G. (2014, June). On Sellf-Interest and Greed. Center for Research in Economics. Management and the Arts. Retrieved October 14, 2017, from

Simons, R. (2015, October 14). Self-Interest: The Economist's Straitjacket. Havard Business School. Havard Press. Retrieved from

Smith, A. (2005). Adam Smith, Behavarial Economist. Journal of Economic Perspectives, 131-145.

December 28, 2022


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