The Importance Of Self-Interest And Competition

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Adam Smith described self-interest and competition as the two forces that drive the invisible hand of the market. Self-interest in this context can be described as one’s advantage and well-being. The choices made on a day-to-day basis solely depend on which is the best option available. These choices involve time and the allocation of scarce resources all in the pursuit of self-interest; which in turn could potentially harm those who are less fortunate. Taking money from the less fortunate further increases the inequality gap between the upper and lower class. In Joseph Stiglitz essay “Rent Seeking and the Making of an Unequal Society” he describes rent seeking, a term used by the top 1% of the upper class to further expand their profit. Consider…show more content…
These groups receive extra money and can do with whatever they please, such as pay large amounts to the company’s CEO’s. In Michael Moss’ article “The Extraordinary Science of Addictive Junk Food” he gives us a glimpse of the world of the food markets aggressive mannerisms to achieve a higher profit. Although some say CEO’s operate to benefit the company, they function in their own self-interest to shape the economy. CEO’s manipulate the units of economy by using market strategies to create a product that is more appealing. An individual person is simply a unit of the economic world that can later on build things such as firms and industries. With individuals collecting together to create these larger units, competitive markets will form to boost the economy. In Stiglitz essay, he talks about the rivalry between two markets saying, “When markets are competitive, profits above the normal return to capital cannot be sustained…are driven down to zero, a disaster for those seeking big profits” (Stiglitz 398). For a market to be deemed successful it must make a profit. With a competitive market, rival CEO’s will purposely drop prices of certain services and products to seem more appealing. Whichever product that is cheaper and considered more appealing, the consumer will buy more of that

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