Imagine you and your best friend are the final two contestants in a national game show. As your blindfold is removed, you see a suitcase containing a million dollars. The game host gives you two options: you can either split the cash in the suitcase or steal, walking away with $1,000,000, leaving your friend with nothing. Suddenly, the game becomes a test of your true friendship. In this modern spin on Prisoner’s Dilemma, the “split and steal” game becomes an extension of the morals of human behavior and the influence of the hope of personal gain. This allegory raises the question of what kinds of behavior are engendered by the hope of profit. Despite drawbacks, such behaviors are better not worse, on balance, than behavior if all enterprises were owned by charities or governments.

According to the Oxford English Dictionary, the definition of “behavior” is “the way in which one acts or conducts oneself, especially towards others.”1 For the purposes of this paper, behavior is an individual’s self-interested actions driven by the desire for financial gain. “Better or worse, on balance,” refers to the exploration of the negatives and positives for both the economy and the people, that results from such behaviors. “Enterprises owned by charities or government” replaces ownership with "run by a mission" or "by political authority" without the intention of making profit. More specifically, a charity is often a community-based or religious organization that distributes resources for free to the community via donations and fundraisers. Alternatively, a government is a group of people or set of institutions endowed with political power to enforce laws and make decisions for influencing society. The two are usually interlinked with the shared purpose of bettering society, through the government’s encouragement of charitable donations, which in turn betters peoples’ views on the government. In both cases, the idea of profit is out of the picture, setting the stage for people to explore certain actions motivated by the desire for financial gain.

Behavior in the hope of profit, not only shapes individual choices; it ripples through culture, institutions, and entire economies. It influences how businesses envision themselves, how individuals react and behave, and society as a whole. Every startup, or emerging business, is created from a vision. From an idea that people believe will help them achieve their goal. Whether that goal is to make an impact on the world, their bank accounts, or for some to prove something to others. However, founders are not launching startups just out of passion, but because of the potential of huge payoffs. This behavior fuels entire industries, from tech, finance, and biotech, all built on the idea that innovation leads to wealth. This behavior is evident in a Cambridge University study that investigated the link between investments and prizes, as well as their consequences on participant behavior. The study ran through a game that was designed in a way to test how people would react when their investments influenced the size of the prize. After testing six different conditions of the game, each being a different way to influence the prize pool, the researchers discovered that investments were higher when the winner's investment increased the prize.2

Although the investments in this study were points, this can be applied to the entrepreneurship and innovation engendered by the hope of profit. Similar to how the increased investments of points benefits their prize, the founders’ additional efforts to innovate to build a successful startup for financial gains follows the same idea. However, this behavior also comes with its negatives. In the same study, it was discovered that “high investments in competition can be considered wasteful and undesirable when the contestants’ investments do not change the social welfare or their own welfare.”3 This drawback presents a bigger picture as it's when many assume risks, another behavior fostered by the anticipation of profit.

            When the line between productive inputs and unnecessary inputs becomes blurred, people begin seeing risk not as a deterrent but as a necessity. It takes in the bigger picture of the familiar expression: “Go big or go home.” Although this behavior of risk taking and speculations can reveal itself in various different ways, it relatively follows the same guidelines. They are pursuing the faint green light in the distance, which appears larger at times and smaller at others. Investors put money into volatile markets or startups hoping for outsized returns. Businesses overextend or enter unstable regions because they are all chasing the biggest slice of the pie. According to the University of Cambridge Judge Business School, the pursuit for opportunity depends on an entrepreneur's capacity to simultaneously identify both opportunity and competitive advantage, even if it necessitates the utilization of whole new resources.4 With many bold enough to walk the road of high risk with the hope of profit, this comes with many dangers. Some ambition to take on risk overcomes the ability to think logically and cautiously, as their behavior can actually lead to booms and busts. Such was the case in the 2008 Housing Crisis, a severe financial crisis that tested the limits of the illusion of profit, particularly surrounding mortgages. Before the issue arose, many homeowners with poor credit ratings were often denied mortgage applications by banks. Nonetheless, the pattern shifted in the early to mid-2000s when banks started approving a greater number of mortgage applications from borrowers with a history of credit challenges, commonly known as subprime mortgages. The allegedly risky loans were suddenly considered low risk since they were pooled and sold to investors. The banks no longer had to worry about loan repayment; instead, investors were given the opportunity to profit from the loans. At first, this turned out to be a huge success for investors as home prices and demand skyrocketed. With most of the invested loans paid back to the investors, the "risk was off the radar screen" as everyone became too confident. When the home prices suddenly stopped rising, an issue that was overlooked, the borrowers were unable to sell their homes to pay back the loan. In the end, this resulted in the housing crisis because banks were less willing to lend money, investors were at a loss, and many people were left with debt they couldn't pay back.5 If banks and investors actually took a step back from their excitement, the underlying issues were explicit. Yet, their hope of profit overwhelmed them causing them to be obscured from the risks.

Sometimes the hope of profit takes people beyond innovating and leads them down the wrong path. They become further strayed away from human morals and ethics as they turn into "profit at all costs." This is when behavior engendered by the hope of financial gains turns into manipulation and ethical flexibility, becoming not only risky but destructive. This can lead to harmful practices such as worker exploitation, environmental damage, and monopolistic markets. This is because, as a policy report from the UK Cabinet Office states, “we live for today at the expense of tomorrow.”6 Defined more technically as “hyperbolic discounting,” it’s the reason why people are not willing to give up the short term gains even if it leads to better gains in the future. This idea is most evident in the lack of willingness to make sacrifices for better future environmental outcomes. An example is the emission fraud by Volkswagen, one of the biggest corporation scandals in recent history. With this scandal dating back to the 2009 models, it continued until the 2015 models, when the public and U.S. Environmental Protection Agency discovered it in September 2015. With irrevocable damage to both the image of the company and the environment, Volkswagen was found to be selling their supposedly environmentally friendly cars through fraudulent marketing. While the vehicles with illegal software implemented for the EPA tests passed with flying colors, in reality, they emitted levels of nitrogen oxides 40 times more than the allowed emissions standards.7 During the time when society was in the transition to becoming greener, Volkswagen got lost in chasing the idea of more sales and disregarded the environmental damage they caused.

If all enterprises were owned by charities or governments, however, the behavioral outcomes would be different, if not worse. Let's imagine ourselves back at the game show. Rather than eliminating contestants, what if everyone received an equal share of the prize money? Everyone should be happy, right? This defines how charities and governments operate in theory, but not exactly how they work in practice. As Emory Paul indicates in the Harvard Political Review, “Charities were never designed to be a permanent and proactive solution to poverty, only a reactive resource of aid to struggling individuals and families.”8 Although charities spark a sense of positivity and unity, this model cannot be sustained in the long run. With charities being inherently reactive and providing solutions after an event, people will grow to be dependent, knowing that the treasure will always come. As time goes on, if everyone gets the same despite their efforts, the drive to innovate decreases and hinders those who innovate responsibly.

However, when the short-term fixes offered by charities prove insufficient, people turn to the government, which has greater influence and authority. In fact, the government is one of the driving factors of charity as James Andreoni indicates in International Encyclopedia of the Social & Behavioral Sciences, “the government is an active partner with private donors in funding the charitable sector of the economy,” through “direct grants to charities” and “by excluding income spent on charitable donations from income tax.”9 The more technical term for when all enterprises are owned by the government is a “command economy.” An economy with a centralized government controlling the means of production, it is also not infallible. Like charity-only enterprises, one of the main drawbacks of command economies is that there is less competition, which inhibits innovation.10 Even if one argues that this disadvantage could be outweighed by the motive for common good, history proves otherwise. With centralized control of the government, Brazil's Petrobras scandal is such a case where corruption can take over. It wasn't until a federal investigation that began in 2014 called Lava Jato shed light on fraud that began in 2003 and lasted for more than ten years. The main culprit Petrobras, Brazil’s majority-state-owned oil giant at that time, was uncovered to be overcharging the contracts with collusive construction firms. Approximately $2.1 billion of the overcharge was disbursed to politicians, corporate executives, and government officials after the prices were secretly inflated. The aftermath was overwhelming, most notably triggering the worst recession Brazil had experienced since 1901.11 This historical example of a command economy's lack of transparency and competition underscores how government-owned enterprises cannot only stifle innovation but how even the behavior engendered by the hope of profit can seep into such enterprises.

Although there are downsides to behaviors driven by profit motives, charities, and government, behavior with the hope of profit does more good than harm compared to the other two economic models. Even though it can cause people to be hyper competitive or corrupt, profit motives drive innovation and create an economic ecosystem rather than centralized control. It’s economically better to give society the drive to take 100 risky shots, even if only half go in, yet worse in a completely charitable or government-focused model where society doesn’t have the motive to take any shots. Ideally a society runs best if all 3 mechanisms - profit, charity, and government - are in place and balance each other to create a healthy economic ecosystem.

Yixuan Yuan is a senior at The Webb Schools who focuses his studies on business and economics. His past research includes a co-authored paper, “Post-COVID Stock Market Reactions to FOMC Announcements,” and he is passionate about teaching personal finance to ensure generational wealth. Yixuan is his school’s Student Council President, he enjoys playing baseball, soccer, and music, and is an award-winning photographer.

Endnotes

1. Oxford English Dictionary, “behaviour | behavior (n.),” March 2025, https://doi.org/10.1093/OED/5943371974.

2. Hart, Einav, Judith Avrahami, and Yaakov Kareev. “Enlarging the Market yet Decreasing the Profit: An Experimental Study of Competitive Behavior When Investment Affects the Prize.” Judgment and Decision Making 11, no. 4 (2016): 380–90. https://doi.org/10.1017/S1930297500003806.

3. Ibid

4. Cambridge Judge Business School. “Understanding Entrepreneurial Behaviour and Why It Is Important.” The Mastering Entrepreneurship Blog. May 5, 2021. https://masteringentrepreneurship.blog.jbs.cam.ac.uk/understanding-entrepreneurial-behaviour-and-why-it-is-important/.

5. Duca, John V. “Subprime Mortgage Crisis.” Federal Reserve History, 2025. https://www.federalreservehistory.org/essays/subprime-mortgage-crisis.

6. Dolan, Paul, Michael Hallsworth, David Halpern, Dominic King, and Ivo Vlaev. MINDSPACE: Influencing Behaviour through Public Policy. London: Institute for Government, 2010. https://www.instituteforgovernment.org.uk/sites/default/files/publications/MINDSPACE.pdf.

7. U.S. Department of Justice. “Volkswagen to Spend up to $14.7 Billion to Settle Allegations of Cheating Emissions Tests and Deceiving Customers on 2.0 Liter Diesel Vehicles.” Justice.gov, June 28, 2016. https://www.justice.gov/archives/opa/pr/volkswagen-spend-147-billion-settle-allegations-cheating-emissions-tests-and-deceiving.

8. Paul, Emory. “Why Charity Can Never Be More than a Band-Aid.” Harvard Political Review, November 20, 2021. https://harvardpolitics.com/charity-band-aid/.

9. Andreoni, J., "Economics of Philanthropy." International Encyclopedia of the Social & Behavioral Sciences, 2001. https://econweb.ucsd.edu/~jandreon/Publications/IESBS-Andreoni.pdf.

10. DePersio, Greg. “Command Economy: Advantages and Disadvantages.” Investopedia, March 25, 2015. https://www.investopedia.com/ask/answers/032515/what-are-advantages-and-disadvantages-command-economy.asp.

11. Sotero, Paulo. "Petrobras scandal." Encyclopedia Britannica, September 29, 2022. https://www.britannica.com/event/Petrobras-scandal.