Economic opportunism


Economic opportunism is a term related to the subversion of morality to profit. There exists no agreed general, scientific definition or theory of economic opportunism; the literature usually considers only specific cases and contexts.

Description

There is no agreement about why this is so. Oliver E. Williamson comments:
Market trade supplies no universal morality of its own, except the law of contract and basic practical requirements to settle transactions, while at the same time legal rules, however precise in their formulation, cannot control every last detail of transactions and the interpretation thereof. Since economic opportunism must be assessed against some relevant norm or principle, controversy about what that norm or principle should be, makes a general definition difficult.
Adam Smith famously wrote in The Wealth of Nations that:
If that Smithian view is accepted, then it is difficult to establish that "taking selfish advantage of an economic situation" can in any way be considered "opportunist", because it does not transgress any moral principle or principle of trade. Indeed, the pursuit of self-interest is in this view beneficial for all, it is exactly what makes the market tick. Furthermore, it is in the interest of market actors to conduct their affairs properly, because if their trading reputation is destroyed, they will be out of business. If it is believed that markets gravitate spontaneously to an equilibrium state, so that price-levels ensure that everybody gets what they want, how can there be any "opportunism"?
At best one could draw a subtle distinction between "selfishness" and "self-interest". For example, "self-interest" could be defined as a healthy concern with one's own wellbeing, necessary to survive and prosper, while "selfishness" could be defined as an exclusive or excessive concern with one's own advantage while disregarding the interests of others. Any trading relationship usually involves both cooperation between the trading partners, so that each gets what they want from others, and competition by each party to get the best deal for themselves. So the trading relationship is normally both self-directed and other-directed at the same time. The issue then is, just how far the concerns of other party or parties to the trade are really taken into account, or to what extent the expectations of others are fully met or honoured.
"Selfishness" would then denote a specific type of self-interest which violates a shared principle of trade in a way that is illegitimate, unfair, unjust in some sense. Adam Smith does not rule out that possibility, acknowledging implicitly that the self-interest and the interest of society may not always be compatible, only "frequently". Opportunism could then be thought of as an aberration, a "market imperfection" or a "grey area" that sometimes occurs in normal trading activity.
People would not normally trade, if they did not expect to gain something by it; the fact that they do trade, rather than simply rob each other, normally presupposes at least a respect for the basic rights of the party being traded with. Nevertheless, the gains or benefits of trading activity, although entirely legal, might be distributed very unequally or in ways not anticipated by previous understandings, and thus accusations of "economic opportunism" can arise nevertheless in many different settings. The entitlement to make some economic gains is then considered to be illegitimate, in some way.
If this is the case, relevant trading obligations are usually considered as not being met or honored, in the pursuit of economic self-interest. Greed is frequently mentioned as a primary motive for economic opportunism. Even so, people might just try to get the most out of a situation for themselves with the least effort they can get away with, disregarding the interests of others who also have a stake in the situation. An editor of the Financial Times, Martin Wolf, remarked famously about the financial sector that "No industry has a comparable talent for privatising gains and socialising losses." Some years later, he explained that "Today’s banks represent the incarnation of profit-seeking behaviour taken to its logical limits, in which the only question asked by senior staff is not what is their duty or their responsibility, but what can they get away with."
What exactly the rightful or correct obligations of trading parties are to each other, can be open to interpretation "in good faith" by those trading parties or other parties. It may depend on the "understanding" that exists in a business situation. This creates the possibility that, even although – strictly speaking, or formally – everything is done "within the law", economic actors nevertheless do not honour their trading obligations in some way, for selfish motives, and therefore commit what amounts to deceit, trickery or cheating, by utilizing a somewhat different "interpretation", "intention", "expectation" or "understanding". Therefore, there is always much controversy about what these obligations really are, in the fine detail – it may be that "one man's opportunism is another man's opportunity".
At issue here is, what one might legitimately expect a trading party to understand or comply with in a business deal, i.e. how the meaning of it is construed, which can differ between trading parties with a different stake or interest in the deal, and might itself change in the course of negotiations. Whether a trading activity is viewed as "opportunist" might just depend on one's moral viewpoint or informal expectation, because "there is no law against it". For this reason, institutional economics often evaluates economic opportunism in relation to those norms of acceptable human conduct that, though not necessarily stated in laws, are nevertheless implied by legislation or by jurisprudence.
Glenn R. Parker claims that the five most discussed examples of economic opportunism are:
In transaction cost economics, opportunism means self-interest seeking with guile, involving some kind of deliberate deceit and the absence of moral restraint. It could involve deliberately withholding or distorting important business information, shirking, or failing to fulfill formal or informal promises and obligations. It occurs in trading activities especially where rules and sanctions are lacking, and where the opportunist actor has great power to influence an outcome by the attitude he assumes in practice.
However, others argue that this reflects a narrow view of economic opportunism, because there are many more ways that economic actors can take selfish advantage of other economic actors, even if they do not violate the law. For example, managers can tilt the details of financial reporting in such a way that it favours their own position.