Tuesday, October 14, 2008

Greed is NOT a valid answer...

...to the question of what caused the current financial "crisis." Don Boudreaux put it well here:
Saying that "greed" caused today's problems is like saying that gravity caused the death of someone pushed from the top floor of the Empire State building. Some things are sufficiently constant in human affairs - and self-interest, even greed, is among them - that they explain nothing....

Any compelling explanation of any observed economic reality must take "greed" as a given while identifying the specific incentives provided by prevailing social institutions.
The problem is not that people were greedy. The problem was that they were awful at being greedy, and it backfired rather horribly.


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