On Greed

Larry White of Division of Labor by way of Steve Horwitz:

On greed, let me repeat: If unusually many airplanes crash during a given week, do you blame gravity? No. Greed, like gravity, is a constant. It can’t explain why the number of crashes is higher than usual. And let me add: This isn’t a morality play. What we’re seeing are the consequences of monetary-policy distortions of interest rates and regulatory distortions of incentives, amplified in some degree by private imprudence, not the consequences of blackheartedness.

Julian Sanchez:

I’m bemused at the way we’re perpetually told the fundamental cause of the ongoing meltdown is Wall Street “greed,” as though that somehow counted as an explanation. How, pray, would we describe it if mortgage lenders had rejected many more applications from lower-income folks, on the grounds that they were poor risks? Well, greed, of course. Pretty much whatever they did, they’d be doing because they expected it to maximize their profit; the issue is their judgement, not their motives. Or put another way: The problem isn’t that people were greedy, it’s that they weren’t very good at being greedy.

Me, responding to one of his commenters, while channeling Larry White:

It seems to me that if the banking system was set up such that individuals on Wall Street and in the City of London could make huge gains by endangering the stability of that system, then the blame should be properly placed on the system and those who set it up that way, and not on the participants who acted as we would expect.

Greed appears to be a constant, like water running downhill: you don’t blame the water for leaking through the cup - you blame the holes in the cup.

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