I read three blog posts about greed and feel that they all are missing a huge point. Likewise I laughed to hear that Alan Greenspan was shocked at the level of greed on Wall St. Has he ever met anyone who worked on Wall St?
An armed robber is greedy. We don't prosecute him for his greed, but for the robbery. Bernie Madoff was greedy, but his crime was fraud not greed.
For Adam Smith & the invisible hand, there is 'make the pie bigger' greed which you might see at a tech company or in a physician, and there's 'make my piece of the pie bigger, whether the pie gets smaller or not' greed that tends more towards finance and law. It is the government's role to shift effort towards the first and away from the second.
The first post I read somewhat hit my thought:
I think a lot of execs basically failed to do their primary job: to manage their firms’ assets responsibly on behalf of the owners of those assets: the shareholders and creditors. This makes them justifiable targets of outrage.
but Wilkinson is missing a huge point - were bailouts not necessary and the actions of financial firms not caused a recession, people would not be as angry. It is the actions that have required hundreds of billions of dollars of government money that people are upset about. It is not just the taking down of their own companies, but the taking down of the economy.
But Wilkinson's target of criticism took a much too simplistic approach:
"surely we could agree that the executives at these institutions are primarily bad people."
Yglesias fails to distinguish between 'make the pie bigger (MtPB)' and 'make my piece of the pie bigger (MMPotPB)' greed.
Wilkinson's other link gets close but still misses:
Indeed, if you buy Smith's argument (as I take it Matt does) it becomes hard to identify what's so bad about self interest.
That's the oft-cited line about how it's "not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest." ... What else should we expect?
Clarke misses the inherent assumption in Smith's examples - they are all doing universal goods. More meat, beer, or bread is nearly always good. Banking and finance do not create anything and their utility is mixed - sometimes good, sometimes bad.
There are some key actions that were taken under many current executive's watch that earlier on would have been illegal. Government needs to regulate the impact greed can cause, especially in the financial sector. Unfortunately we had a rough 30 year period where regulation was decreased which had a huge impact on the current crisis.
You had (1) increased leverage, (2) unregulated insurance in the form of credit-default swaps, (3) predatory lending & a complete disregard for any type of traditional lending standards, (4) ignoring mortgage default risk. These are all the results of greed, but they could all have been eliminated or limited through prudent lawmaking.
Beyond stopping the current bleeding, what I want to see from our government is fixing the system so that problems like those we are currently fixing are less likely to happen. That will necessarily eliminate many of the ways people were making profits during the bubble, but we are now reaping the results of those profits