Friday, February 27, 2009

Sheldon Richman's talking about Greed today:

Greedy people by definition want more not less. So they will be as concerned to hold on to what they have as they will be to increase their wealth. Risky investment is a way to get more but also a way to end up with less. Greed, therefore, will tend to restrain recklessness if people know their profits and losses belong to them. The corollary is that the restraints on recklessness will be weakened to the extent that people expect the losses to be absorbed by others. Market discipline is the key.

For large financial institutions in the United States, Scenario B is far closer to reality than Scenario A. As Gerald P. O’Driscoll Jr.writes, “Deposit insurance, access to the Fed’s lending, and the implicit (now explicit) government guarantee for banks ‘too big to fail’ all constituted a system of financial corporatism.” What these interventions have in common is the potential to shift losses forcibly from those who should be responsible for them to someone else—making reckless behavior and losses more likely than they would be. That’s the definition of moral hazard.

Greed is an easy target. But blaming greed gets us nowhere. As Lawrence White says, it’s like blaming gravity for a plane crash. It certainly doesn’t suggest any sensible policy response. The religion professor said we need more regulation. But if people are greedy, how do more regulators promise to improve matters? They are people too.

If we can’t trust people with freedom, how can we trust them with power?

People can't be trusted with anything. We should just drug 'em all up and keep them in tanks of saline solution like the whatchamajiggums on "Minority Report."

BTW, make sure you read the comments after the article as well.

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