The SEC as Spiritual Apparatus

Insider trading rules help us spiritually--by letting people pursue self-interest without being corrupted by it.

Reprinted with permission from e-CLAL, the online weekly webzine of CLAL: The National Jewish Center for Learning and Leadership.

Enronomics 101: The Enron Business Model. First, take a sound business. Then tie top executives' remuneration to unsustainable levels of profit and growth. Next, exploit all possible conflicts of interest to ensure that nobody blows the whistle on the tricks used to maintain the appearance of success. Offer auditors consulting contracts to make them more compliant. Distribute corporate largesse to politicians in return for relaxed regulation. Offer sweet private deals to the bankers who underwrite your share offerings and advise clients on investment strategies. And so the list goes on.

Conflicts of interest are part and parcel of every financial scandal because of the central role that our economic system assigns to the pursuit of self-interest. A truism of economics is that the best way in which one can serve the common good is through dogged pursuit of one's own self-interest. This idea was beautifully summarized by Adam Smith (1723-1790) who observed that "[i]t is not from benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest...[Man is] led by an invisible hand to promote an end which was no part his intention."


The problem arises, as we are beginning to see in the Enron case, when the pursuit of self-interest gets out of control, when people take undue advantage of each other beyond the limits prescribed by society as acceptable. Within the boundaries of what is acceptable, to pursue one's self-interest is called striking a deal. Beyond those boundaries, the pursuit of self-interest harms others in an illegitimate way. It also undermines the long-term health of markets as people become more cautious about being cheated out of their capital by unscrupulous speculators and crooks.

But there is also a spiritual dimension to this conflict of interests. From a spiritual perspective, the opposite of Smith's conception of economic motivation is actually true. One cannot attain life's true joys through pursuit of self-interest but only through service to others. True joy comes to a person who can quiet the constant clamoring of the acquisitive drive within her - in Judaism the

leave comments
Did you like this? Share with your family and friends.
comments powered by Disqus