Self-Interest

AAA

DEFINITION of 'Self-Interest'

Acting in the way that is most personally beneficial. Adam Smith, the father of modern economics, famously explained that it is possible to achieve the best economic benefit for all even when, and in fact because, individuals tend to act in their own self-interest.

INVESTOPEDIA EXPLAINS 'Self-Interest'

Smith wrote, "It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own self-interest." Smith's explanation of the invisible hand showed that through the self-interested actions of dozens, hundreds and even thousands of people, without any centralized planning, goods and services get created that benefit both producers and consumers.



RELATED TERMS
  1. Adam Smith

    An 18th-century philosopher and free-market economist famous ...
  2. Equilibrium

    The state in which market supply and demand balance each other ...
  3. Classical Economics

    Classical economics refers to work done by a group of economists ...
  4. Stakeholder

    A party that has an interest in an enterprise or project. The ...
  5. Monopoly

    A situation in which a single company or group owns all or nearly ...
  6. Invisible Hand

    A term coined by economist Adam Smith in his 1776 book "An Inquiry ...
RELATED FAQS
  1. How can a company control its holding costs?

    A company can control its holding costs through efficient management of its inventory and the efficiency of its overall logistics ... Read Full Answer >>
  2. What is the difference between the cost of capital and the discount rate?

    The cost of capital refers to the actual cost of financing business activity through either debt or equity capital. The discount ... Read Full Answer >>
  3. How is the economic order quantity model used in inventory management?

    The economic order quantity model is used in inventory management by calculating the number of units a company should add ... Read Full Answer >>
  4. What risks does a business owner face under a business structure with unlimited liability?

    The risks that a business owner faces under a business structure with unlimited liability are literally unlimited, but they ... Read Full Answer >>
  5. How does the market share of a few companies affect the Herfindahl-Hirschman Index ...

    In economics and commercial law, the Herfindahl-Hirschman Index (HHI) is a widely used measure that indicates the amount ... Read Full Answer >>
  6. How can individuals or businesses handle transaction costs for economic externalities?

    Externalities, also known as external economies, and transaction costs are two significant and evolving issues in contemporary ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    How Influential Economists Changed Our History

    Find out how these five groundbreaking thinkers laid our financial foundations.
  2. Insurance

    Save Money The Scottish Way

    Take a trip through history to learn from some (in)famously frugal Scots.
  3. Entrepreneurship

    Adam Smith And "The Wealth Of Nations"

    Adam Smith's 1776 classic may have had the largest global impact on economic thought.
  4. Economics

    Adam Smith: The Father Of Economics

    This free thinker promoted free trade at a time when governments controlled most commercial interests.
  5. Fundamental Analysis

    4 Misconceptions About Free Markets

    These fallacies have hounded free market economists since the days of Adam Smith.
  6. Fundamental Analysis

    Calculating Future Value

    Future value is the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today.
  7. Economics

    What is Deadweight Loss?

    Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.
  8. Economics

    How to Do a Cost-Benefit Analysis

    The benefits of a given situation or business-related action are summed and then the costs associated with taking that action are subtracted.
  9. Economics

    The Big Chill: What’s Wrong With The U.S. Consumer

    Based on the most recent April data, investors may, once again, be disappointed when the second-quarter gross domestic product (GDP) report comes in.
  10. Fundamental Analysis

    Calculating the Herfindahl-Hirschman Index (HHI)

    The Herfindhal-Hirschman Index, (HHI) is a measure of market concentration and competition among market participants.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center