
Do Economists Breed Greed and Guile? - peter123
http://blogs.harvardbusiness.org/how-to-fix-business-schools/2009/04/do-economists-breed-greed-and.html
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jderick
I'm not sure if it is really economists to blame here, they are merely trying
to build models that approximate the world the best they can. In fact, a lot
of the work they have been doing lately has been based on behavioral
economics, where actors are not necessarily concerned only with selfishness.

However, I do agree with the broader point here that the financial and
corporate worlds have accepted a corrosive morality where greed is good. I
think part of the problem here is lack of regulation. Without any punishment
for bad behavior, it just grew out of control.

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anamax
> I think part of the problem here is lack of regulation. Without any
> punishment for bad behavior, it just grew out of control.

We had regulation that rewarded bad behavior. Subprimes were "encouraged" by
regulation because it was considered a social good to for folks who couldn't
afford houses to get them. AIG was told to figure out how to "insure" loan
portfolios. Banks were given favorable treatment if they held fannie and
freddie stock. And then there's fannie and freddie themselves, creations of
regulation. The only lack of regulation was of fannie and freddie themselves -
they were protected from oversight by the very pols who are currently
screaming about more regulation. (One of Obama's chief financial advisors was
CEO of Fannie and pulled out $90M. You don't hear anyone asking him to "give
back".)

FDIC insurance tells depositors that their money is safe, so they don't worry
about whether they're depositing their money in a bad bank.

Regulation also pushed banks into technical insolvency when they arguably
weren't insolvent. (Many of the portfolios are performing as predicted, cash
flow and everything, yet the market is spooked so the market price is so low
that the banks are deemed insolvent. The banks want desperately to keep these
portfolios or to "buy" them at the current market value.)

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h34t
Interesting:

"A host of studies show that people with stronger training in economics are
more self-seeking, less charitable, and more corruptible than people trained
in other subjects."

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kiba
While some economists surely act that way as mentioned in the article. Not all
economists act that way or even think the same way.

Not all economists build fancy mathematic model to explain their world.
Indeed, there are economists who emphasized the improtance of the entrepeneur
in society. There are even economists who think building mathematical model is
the wrong way to approach the science of economics.

Unlike other scientific fields, you couldn't trust an opinion of one economist
as the consenus of everybody in the field.

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zupatol
If this article wasn't from a reputable source, I would have simply dismissed
it. So many things sound wrong.

I studied economics, but not business. Since when do business schools work
with complex mathematical models? I thought they were just the place where
'soft' skills like leadership were trained with lots of exercises, in a
practical but completely unmathematical way. Surely they would not study
agency theory?

I don't think studying economics affected my greed or my guile, and I never
had much of either. It did brainwash me in another way. Economics is the
religion of the invisible hand, and I really did believe that if you just let
the market do its magic everything would fall into place. There is this belief
that greed will make you do something useful in order to get paid. For me this
has never meant that 'greed is good'. My interpretation of this was that the
market will reward you for doing useful things.

I went on to do useless things anyway, but it took me some years to be proud
of it. And having lived through a few bubbles I don't find the market so magic
anymore.

