How Important Was Greed to the Financial Crisis?
22nd November 2010
My own suspicion is that when people think that greed explains the financial crisis, they’re falling for a lazy explanation, akin to seeing a car blow up and “explaining” it by saying that there was oxygen present.
My friend agreed, but asked: “Are current laws against corruption really adequate, or are there useful opportunities for reform? Is our system of greed-channeling incentives rightly constructed? Doesn’t the behavior of the banks before, during and since the crisis demonstrate that in fact we are not channeling the right incentives?”
Those are just the right kinds of questions. Greed is a moral and spiritual problem, and its solutions are also moral and spiritual. But economically, what we want is to make sure that whether someone is acting out of greed, legitimate self-interest, or whatever, they don’t have incentives to destroy the financial system. If financial reforms require that no banker ever be greedy, however, we’re doomed.
Excellent thoughts.