The Ethics of Homo Economicus
Paul Krugman makes a joke:
In the years that followed, of course, banking became anything but boring. Wheeling and dealing flourished, and pay scales in finance shot up, drawing in many of the nation’s best and brightest young people (O.K., I’m not so sure about the “best” part).
This is reminiscent of a little dispute I was having on a secret off-the-record email list dedicated to plotting Ezra Klein’s march to world domination. I was saying that whatever one thought should be done with large financial institutions as a policy matter, surely we could agree that the executives at these institutions are primarily bad people.
It turns out we couldn’t agree on that. But my argument is pretty simple. These are people primarily motivated in life by greed. Not just by a desire to make some scratch, mind you. These aren’t immigrants who walked through the desert from Mexico in order to earn more money by washing dishes in a San Diego hotel. They’re not 24 year-olds looking for a hefty salary in order to pay off student loans. They’re multi-millionaires who want to earn millions more. It’s possible, of course, that Vikram Pandit really does find being a bank executive to be intrinsically interesting. But a good person, who’s primary passion was the life of a bank executive, would be donating the bulk of his massive compensation package to charity. But that’s not what Pandit’s doing. Rather he, like virtually all executives at major firms, is living a life that’s primarily oriented around an ethic of greed.
Now there’s a decent argument out there, familiar from Adam Smith and the whole tradition of economics, that a world full of greedy people isn’t necessarily quite the disaster that pre-modern ethical thinkers would have thought. This is all well and good. True even. But it’s a sign, I think, of a kind of sickness running through American society that we’ve lost the willingness to just say clearly that ceteris paribus greedy behavior is not virtuous behavior. In the spirit of decency, of course, we recognize that none of us are without sin. It would be crazy to try to condemn everyone who’s ever done anything greedy to the gallows. But the fact still remains that greedy behavior is not admirable behavior and that, as Krugman says, it’s very unlikely that the “best” young people were going into finance. And to say that they’re not necessarily good people need not entail that they’re criminals. Simply the fact that the best people are people who aren’t primarily driven by greed.
I don’t think Barack Obama should orient his policy agenda around that kind of moralizing. But it’s not an observation we should consider shocking to make in civil society.
141 Responses to “The Ethics of Homo Economicus”
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April 10th, 2009 at 2:48 pm
Very interesting comment Matt. But the problem for both of us, I think, is under what justification, what ethical system, do we reject greed? I admit I don’t like it because I was raised Catholic and am now not a believer and, like many “modern Catholics,” under Pew’s definition, am a liberal Democrat. But under what value system common to us all in the US can we say that greed is bad?
April 10th, 2009 at 2:51 pm
I’d much rather be ruled by people who lust after money than by those who lust after power.
April 10th, 2009 at 2:53 pm
Another hesitation I have, is that a lot of people, John McCain for example, blame “greed” and in so doing downplay the systemic problems inherent in the last crash.
I think the bigger issue is not that we extol greed, but that we often in public discourse allow economic efficiency to be the highest good in public policies and don’t take into account other goods.
April 10th, 2009 at 2:56 pm
Once you have enough money to satisfy any material desire, the rest is power.
April 10th, 2009 at 2:57 pm
I must have missed the part of this post that explains the leap from “they’re greedy” to “they’re bad people.” I’ll just wait for the update.
April 10th, 2009 at 2:58 pm
It’s an interesting definition of “good person” that leaves out almost the entire human race, because almost nobody donates “the bulk” of their income to charity, no matter how much they make.
April 10th, 2009 at 2:59 pm
Once you have enough money to satisfy any material desire, the rest is power.
Any material desire? That’s a pretty high number. I have friends who sold a business for +20million plus. They don’t think they are rich – after all “It’s not like we have our own plane or anything.”
Or, even better yet: http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/01/31/MNG62H06991.DTL
April 10th, 2009 at 2:59 pm
Nice balance. I think Ezra nailed this pretty well. But a further point–pursuit of self-interest is, pretty much by definition, amoral. That it turns out (insofar as Smith’s case holds) to be less than catastrophic amorality at least some of the time, when pursued at the macro scale, does not make it good, or ethical.
On an aggregate utility argument, if killing 49% of the population proves of benefit to everyone who remains, we do not necessarily have an ethical case for implementing the practice.
If it is not “bad” it is at least not “good”. It is amoral. What we call bad will depend on the axiological and ethical frames we are using.
April 10th, 2009 at 3:00 pm
YES! And the startling fact is that modern americans have become so oblivious to the inherent “badness” of greed that it’s not even something we can say out loud anymore. Then we just get accused of jealousy. Huh? I remember that when I was in college (an “elite liberal”outpost) people thought I was nuts for questioning the ethics/decency of my peers who would forthrightly say that they were majoring in econ because they wanted to make six figure starting salaries. Because that was all they could think about when they were 18 with the world open to them.
April 10th, 2009 at 3:00 pm
I’m sure it needs to be dressed up in fancier language, but the kindergarten lesson of being willing to share, along with a dose of humility would be a part of the justification.
Why should one person have so much, when others have so little? Exact equality is a futile and even counterproductive goal, but when the wealthiest rig the tax system and other sectors of the economy in their favor, while schools and infrastructure go down the tubes, the greed has gone too far.
We don’t, for instance, need to allow Wal-Mart to keep part of the sales tax collected at a new store as an inducement to build the store in a particular community. If it’s a worthwhile investment, Wal-Mart should spend the money to build the store. If it needs a tax break to be profitable, it’s “destroying value” in the terminology of capitalism. Let the mom & pop stores compete on an even basis.
April 10th, 2009 at 3:00 pm
whatever one thought should be done with large financial institutions as a policy matter, surely we could agree that the executives at these institutions are primarily bad people.
Ha, ha! Well, *they* might be “bad”, but I’d guess that their livers and kidneys are passably good…
To the Organbanks! To the Organbanks!
April 10th, 2009 at 3:02 pm
Very good, Matt. Of course, greed exists on a continuum; there’s no category difference between the Mexican migrant and John Thain, so greed inherently forms some part of the lives of anyone who wants to eat. But greed is also a sin and a man whose life is dominated by it, whether John Thain or some entry-level douchebag at Goldman, is not a good person unless he foregoes the major part of the gain to charity.
And I don’t mean the kind of charity where your donation is a net gain to you through tax manipulations, plus you get a dorm at Harvard named after you. I mean giving money to the poor.
April 10th, 2009 at 3:03 pm
I think you’re wrong about the psychology of rich people. A person with $2 million in the bank doesn’t necessarily feel just like a person with $5,000 in the bank would feel if you gave them $2 million.
As long as the person is spending at a rate that is something close to their income level, they probably feel like they need to earn more.
People who’s spending and earning don’t seem to be closely related, like say Warren Buffet, might act more like the way you think these executives should act or would in the absence of greed.
April 10th, 2009 at 3:04 pm
Matt says: “a good person, who’s primary passion was the life of a bank executive, would be donating the bulk of his massive compensation package to charity.” From this, the conclusion that CEOs are “living a life that’s primarily oriented around an ethic of greed” does not follow.
Also, seems to me that the same reasoning applies to movie stars, pro-athletes, etc. Maybe we also think they’re bad people too?
April 10th, 2009 at 3:06 pm
Why should one person have so much, when others have so little?
Well, I was recently a juror on a murder trial in which one homeless junky killed another homeless junky. Over the course of the trial references were made to the numerous chances the state have given the defendant to reabilitate himelf. He instead chose to continue to abuse drugs (as a recovering addict myself I say don’t let anyone tell you it’s not a choice.)
Sometimes people insist on making bad choices and when they do they should be left to deal with the consiquences of those decisions.
April 10th, 2009 at 3:07 pm
Eh. This is really weak stuff. Moreover, it’s illiberal stuff — classifying people as quote-unquote bad simply because they’re engaging in extraordinarily typical, unremarkable human behavior. No, investment bankers aren’t “bad.” They work at jobs, like most of us, that pay dividends to society. That they happen to get rich doing so hardly makes them evil.
And, yes, I expect a lot of blah blah pushback about how they crashed the global economy, but “they” didn’t. It’s not possible to pin our current predicament on specific individuals.
April 10th, 2009 at 3:08 pm
The only billionaire I knew gave away most of his money and wrote the bestseller, “JOY AT WORK: A Revolutionary Approach to Fun on the Job”.
I was surprised to find out that it wasn’t all that uncommon. I don’t think it’s the norm though.
April 10th, 2009 at 3:12 pm
I would argue that many of these people who desire to keep earning money do get a payoff – namely more political power. I would be happy to earn 1 million a year since I could get anything I want but 10 million a year would not make me any happier since there is only so much you can buy with out it becoming ridiculous. But 10 million a year buy more political influence than 1 million a year.
bender
April 10th, 2009 at 3:12 pm
Bankers are decent people. They provide services, they keep your money safe.
High finance guys are amoral narcissists who get off not only on material wealth but on the attention they command by having wealth. More wealth equals more attention. Amoral narcissists should not be in charge of anything. Finance guys ARE bad people.
April 10th, 2009 at 3:14 pm
On this Good Friday we might do well to recall that what pissed Jesus off more than anything was rich people who hoarded their money.
April 10th, 2009 at 3:15 pm
Yes, that’s our Al: the internet’s most legendary hack.
April 10th, 2009 at 3:17 pm
So where’s Matt getting the idea that greed is evil from? That’s a Christian idea, and he’s not Christian.
April 10th, 2009 at 3:20 pm
If you sincerely have to ask why a person primarily motivated by greed is a bad person, then you’re really not worth discussing morals with.
April 10th, 2009 at 3:21 pm
I’d just like to point out that MY didn’t use the term “evil” in his post. The leap from “bad” to “evil” was made by various willfully obtuse commenters on this thread.
April 10th, 2009 at 3:22 pm
That’s a Christian idea, and he’s not Christian.
Hardly. Jesus was hardly the first to characterize selfishness and greed as evil, though (according to the reports we have) he was awfully eloquent about it. Besides, Jesus himself wasn’t Christian. He was Jewish. Christianity was invented afterwards.
April 10th, 2009 at 3:22 pm
JMO,
I know there are plenty of people have pathologies that keep them at a disastrous level of poverty. That’s one of the reasons that anything resembling exact equality can’t happen, and trying to make it happen can be counter-productive.
When we seemingly can’t raise taxes for any common purpose besides “defense”, though, we’re into greed territory. Heck, we didn’t even bother to tax ourselves to pay for the Iraq war, so under what conditions can we ever raise taxes?
April 10th, 2009 at 3:26 pm
I think that Matt has it wrong. These guys don’t so much want to make money, as they want to WIN! They do end up giving a fair amount of it back, often through competitive philanthropy that also gives them a chance to WIN! Some of this philanthropy is nobbut social climbing: another venue to WIN! However, Soros and Gates have done some amazing things with their money–they are viewed as bigger WINners for it.
If you want to distinguish the evil Scrooge rich from the more common merely hypercompetitive rich, don’t look at what they do with their moneybags; look at their attitudes toward taxation. It’s the ones who don’t believe in rich folk paying taxes who are the greedheads. Taxes are about having, not WINning.
April 10th, 2009 at 3:26 pm
Like other ethical ideas, the idea that “greed is good” has a weirdly twisted history. Albert O. Hirschman’s The Passions and the Interests traces the idea that the commercial passions are basically peaceful ones back to a reaction against the devastating Wars of Religion. Turns out the quest for honor and glory ends up with a lot of slaughter. It’s a very clever but also sort of risky idea: use the “countervailing passion” of financial interest to counteract another, even more dangerous one. Even Smith doesn’t say that “greed is good” — just that it’s less dangerous than more naked ambition.
April 10th, 2009 at 3:28 pm
The problem isn’t greed. If a person does something that benefits many people and is rewarded for it I don’t have any problem with that. I doubt you have any problem with that. If a man chooses to be a garbage man rather than a kindergarten teacher because being a garbage man pays more I don’t have a problem with that. What I do have a problem is compensating people with millions of dollars when what they’re doing generates no value. If you work on an assembly line you contribute a little bit of value to every item that cross your path. If you teach kids value. If write a book value. If you figure out something that can make a better anti-impotence drug value. If you cook a meal value. If you play basketball well enough that people like watching you value. If you manipulate risk by mitigating the likelihood of a bad outcome in exchange for increasing the severity of a bad outcome you have not created value. You don’t deserve money. This isn’t an alien concept. Almost everyone can figure out how they create value in the world with their jobs. The people who can’t are not smart enough to get paid whatever it is they are paid, no matter how little or, as is too often the case, how much.
April 10th, 2009 at 3:31 pm
Ah, yes, the generalization.
So,
All liberals are morons. Why? Because some liberals are morons, therefore all liberals are morons.
No, there’s not a single executive (whatever the hell that means) in the financial industry that isn’t motivated by greed. They’re all greedy people because they’re trying to maximize the amount of money that they make.
I mean, how do you guys take yourselves seriously? Don’t you realize that it’s this type of thinking that brings about racism and bigotry in general…and you all have adopted it hook line and sinker on an easy target.
The problem is that so few of you don’t think about how you see the world. You simply react. Your principles aren’t based on reason, or ethics for that matter, you’re no better than David Brooks who posited that emotion comes before, and defines morality.
This is the problem, we’ve got a bunch of animals (or perhaps children) masquerading around as adults.
As a closing question, define executive. Please…endulge me. Is an executive a title? an amount of money that one makes? a greedy person? Once you think through that question and try and map out a fairly standard (and unchanging) definition, hopefully you’ll realize just how monumentally stupid an exercise that was.
And for all of you that are still willing to think through that, do you know any executives personally. I’m going to venture a guess that the answer is no.
April 10th, 2009 at 3:32 pm
Besides, Jesus himself wasn’t Christian. He was Jewish. Christianity was invented afterwards.
and yet Das Kapital could fairly be termed Marxist.
April 10th, 2009 at 3:33 pm
Also, why not take a moment and define greed.
I suppose that unions for instance can’t possibly be greedy, because management is greedy, therefore unions aren’t. Am I catching on to the braintrust here?
April 10th, 2009 at 3:34 pm
“It is easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven.”
I heard that as a kid and took it at face value. Really freaked me out. I now work at a low paying, idealistic-type job. I think I was scared straight. Or scared poor, maybe.
April 10th, 2009 at 3:34 pm
Calling top bank execs bad people is something that doesn’t feel right, I think, it doesn’t match our intuition. The way I would put it is that they (top execs) are people who are highly motivated to climb the corporate/social ladder. So a good society is probably one where the activities which allow you to climb the ladder are activities which lead to genuinely impressive accomplishments, building organizations which accomplish genuinely impressive things.
I think the main thing wrong with the bank execs was not any obvious moral failing, but that they used high leverage ratios and short-term thinking to create the appearance of immpressive accomplishment, the appearance of adding value, when they were actually destroying value.
April 10th, 2009 at 3:39 pm
Ah, victorianist beat me to it: “countervailing.”
Greed can be quite good and effective, as long as it is balanced by other countervailing values that are at least as important, ideally in a complete and complementary set of values.
When greed alone is sufficient as a major value, things run amok, thus the scorn it typically engenders in most pre-capitalist societies.
Max Weber mulls over the whole muddle in his famous essay “The Protestant Ethic and the Spirit of Capitalism.”
April 10th, 2009 at 3:40 pm
Proverbs 11:6, among other old testament verses.
April 10th, 2009 at 3:44 pm
God Matt is an idiot. I’ll never understand the liberals’ childish fear and loathing of various unnamed “executives” (which is a more evil subset of the notorious “rich people.”) Just because Matt will never attain the material success of the people he derides in this silly and vapid post, does not mean that he isn’t motivated by the exact same greed. Ask a poor person in Africa why Matt doesn’t give everything he owns to charity and live only on bare sustenance. It’s all relative. But no, only the “executives” are bad.
April 10th, 2009 at 3:45 pm
Wow, that was massive.
April 10th, 2009 at 3:46 pm
Oh, and Brad, have you ever deigned to actually listen to yourself?
April 10th, 2009 at 3:47 pm
Well, I’ve had bad pizza. As far as I can tell, it wasn’t evil. Evil can be quite insidious, though.
Bad – routinely reckless about overdrafting their checking account.
Evil – kills for fun.
April 10th, 2009 at 3:48 pm
Adam Smith wasn’t an apologist for greed. Smith was the guy who wrote:
and referred to:
… and attacked discussed Mandeville (who wrote the all-time greed is good classic, “The Fable of the Bees”) under the heading “Of licentious systems”:
April 10th, 2009 at 3:49 pm
Just so it’s not lost, Matt’s post was massive, because he put himself out there, he knows it, there’s no brand of butt kissing there, but Brad’s comment after the fact is just some kind of weird, mindless, I’m a dumb-ass kind of passive-aggressive.
April 10th, 2009 at 3:51 pm
Well, I’ve had bad pizza.
Well done sir.
April 10th, 2009 at 3:53 pm
“Ask a poor person in Africa why Matt doesn’t give everything he owns to charity and live only on bare sustenance. It’s all relative.”
So because we can’t all be saints, we’re all free to be sinners? Let me get my rapin’ and murderin’ gear on and have some fun!
Mike
April 10th, 2009 at 3:56 pm
Humans are born with a range of emotions, including greed, competitiveness, love, anger, fear, etc.
Humans (at least non-sociopaths) are also born with an innate morality. They understand what is “righr” and what is not.
But humans also have an affinity for groups or tribes, and how they define their group is a distinquishing feature.
Those who define their group very narrowly are what most would call greedy, while those who define their group broadly (like all of humanity) would generally be considered generous.
So, for me, the question of greed boils down to how big your “group” is.
April 10th, 2009 at 3:56 pm
To Ed and DTM,
do you actually, umm, know people on Wall Street? Of course they’re largely motivated by greed. In fact, I’d dare say that’s considered a positive ethos for many of them (you know, the whole Ayn Rand thing, greed and selfishness drive productivity, etc. etc.). I’d also guess that based on your comments, it’s an attitude that at least Ed holds.
I don’t know about the greed = evil thing. But to claim that Wall Street folks, particularly those who have stuck around long enough to become executives, aren’t driven to a large degree by greed, is pretty naive and ignorant.
April 10th, 2009 at 3:58 pm
Jeffrey, you may have a point about Jesus’ reaction to the Pharisees and the scribes. Still, toadstool in #36, above, captured what I was thinking about a central point of Jesus’ message. And let’s not forget that the only thing that provoked him to violence (albeit directed only at inanimate objects) was the moneychangers in the temple – a combination of the religious functionaries and greed.
April 10th, 2009 at 4:00 pm
For the record, greed is never good, but industry, hard work? Those are things you can bank on.
April 10th, 2009 at 4:00 pm
Greed is the big, bad devil that sits on Capitalism’s shoulder. The current problem is, the little angel on the other shoulder has been knocked off. Greed has been screaming in both ears of our national conscience for a long time.
There must be balance. Capitalism, by definition, is unpatriotic. Capitalism’s sole functions is to continually maximize profit. It will seek to circumvent, or if need be destroy, any edifice it perceives as a hindrance to this ineluctable goal, including nation-states and the people that dwell within those boundaries.
Greed is Capitalism’s fuel. The United States Government, by championing greed and unfettered Capitalism, has essentially been unpatriotic.
April 10th, 2009 at 4:00 pm
This is not obvious! Suppose you make $100B and give it away when you are 60. Is this better or worse than making $50K/year and giving some fraction (5%, 10%, or so) away every year?
Since money gives you the unique ability to make more money, and money is often not put to good use, perhaps it is best to steal as much as you can from other people who would not give it to charity, build up your millions, and then give it away to charity.
April 10th, 2009 at 4:03 pm
By the way, Matt, where did the money that paid for your extremely expensive education come from?
April 10th, 2009 at 4:07 pm
As strange as may hear to say this, capitalism really isn’t the issue here, and capitalism is here to stay, don’t even bother going down that road. Just actually read Adam Smith or Henry George before opening your trap.
April 10th, 2009 at 4:08 pm
Anon,
Once again, define greed.
And yes, I know people on Wall Street (and NYC writ large) and no, they’re all not motivated by greed. Many of them enjoy what they do and work hard. Some of them have families and children that they want to send to college. You see, it costs a lot to have a family in NY (especially in the surrounding areas) and so they work extra hard and try and make as much money as they can to impart a better life for their families than they had growing up (even though some of them were certainly very fortunate growing up). Personally, I couldn’t work in an environment like that…doesn’t interest me, nor do I like having to stay late at work. But I don’t fault them for it…perhaps you should consider doing the same.
Do you have a family Anon? Do you have any idea what it’s like to want to be able to provide for your children, or your spouse? Do you own a home? Do you know how much it costs to live in NY?
April 10th, 2009 at 4:16 pm
If your primary focus is to provide for your children, which it should be if you’re a parent and provision doesn’t equal money, you don’t choose to live in high-rent districts.
April 10th, 2009 at 4:16 pm
Oh and Anon, most people that work in NYC don’t know who Ayn Rand is (nor would any of them really care). The people that read Ayn Rand are the folks that work in Washington, where it’s all bullshit philosophy and second-class work. You ever wonder why this country is so fucked up…Perhaps its because they moved the capitol to DC.
Ignorant. Yeah, I’m the ignorant one. I grew up in NY, knew people from all stages of life in NY…and I’m the ignorant one about what folks in the financial sector are really like. Where did you grow up Anon?
April 10th, 2009 at 4:18 pm
Greed is bad. But the inordinate love of riches is like many other flaws in human nature. It’s one of those areas in which healthy human desire has the easily-activated potential to grow intemperate and even megalomaniacal. This is the truth in traditional religious and non-religious teaching about human virtue an vice.
There isn’t much point in just moralizing about it and hoping people do better. Recognizing their own proclivity toward vice and anti-social behavior, people have frequently responded by creating laws accompanied by practical and concrete sanctions – social mechanisms with more teeth than mere moral injunctions. They work with others to coerce their own and everyone else’s behavior down the desired paths, to tie themselves to the mast so they can sail by temptation without going too nutty.
Now of course people in the financial sector provide valuable services in the management and investment of other people’s money. And not just for the individual investor: but socially, since this kind of activity is essential to a modern economy. The crazy thing is the system of extravagant rewards and skewed incentives provided for this admittedly valuable activity. We have come to accept a system in which the degree of compensation is straightforwardly proportional to the amount of money involved. But that’s an irrational system of compensation. It’s like saying that if a doctor gives a child a shot that ends a life-threatening allergic reaction, he is entitled to some fixed percentage of that child’s future earnings. By all means, people who do a better job managing people’s money should be paid more than people who do a poorer job. But that shouldn’t mean that the pay is a proportion of the size of the “score”.
Our current compensation practices also produce an extremely inefficient system that drains a lot of potentially productive wealth out of the economy into the unnecessary consumer expenditures of the wealthy, and also prevents people in the middle and lower rungs of the economic ladder from being paid more – where the compensation would probably produce more marginal value.
The only good argument around these days for paying these guys fortunes is that, since other businesses are also paying their top dogs fortunes, a fortune is the going rate in the competitive market for talent.
OK, so let’s level the playing field. If we legally enact a a 20 to 1 rule or 30 to 1 rule governing compensation in all firms, then the top dogs won’t be able to hold everyone up for more.
April 10th, 2009 at 4:19 pm
A person isn’t a pizza. In case you haven’t noticed. It’s a poor analogy.
That was an excellent analogy, if somewhat mocking in tone, I was chuckling over that one for awhile. In my experience, mostly evil people, or people lost in evil (culture), talk about evil, good people really don’t even experience the concept, and certainly don’t spend too much time talking about it and inviting it in.
April 10th, 2009 at 4:20 pm
It’s one of those areas in which healthy human desire has the easily-activated potential to grow intemperate and even megalomaniacal.
So, are we supposed to defend that? Look the other way? What would Jesus do?
April 10th, 2009 at 4:23 pm
Are you serious Smithe?
Most folks who work on Wall Street, particularly those at the Executive level, are Ivy League graduates. Check the pedigrees of Wall Street’s executives much?
Don’t try to play some populist nonsense here. And Ayn Rand isn’t exactly high literature, and is in fact, as you likely know, required reading for the libertarian right.
LMAO. Trying to claim that Wall Street executives: 1) aren’t motivated by greed (ya, they spent 20 years working and living in Manhattan with 80 hour weeks because of family concerns, families which btw they never saw until this downturn), and 2) are working class.
Nice try, fellow. FYI, your conversations with your janitor cousin at Deutsche Bank don’t count as talking with a high level Wall Street exec.
April 10th, 2009 at 4:28 pm
DTM,
that’s a fair point. to be clear, i am only talking about Wall Street executives, not Main Street banking/insurance/etc. execs. I don’t know the latter, but I think it’s pretty ridiculous to claim that greed is not an ethos which most, if not all, Wall Street execs have.
It pretty much defines the culture, and they would argue it’s a good thing.
so sorry I directed my fire at you. It’s just Ed Smithe that doesn’t know what he’s talking about. Unless we all believe his claim that he’s been talking to a high level Wall Street executive who’s been working those 80 hour weeks for countless years because of a sense of duty to the wife he’s divorced or kids he doesn’t see.
April 10th, 2009 at 4:41 pm
If we legally enact a a 20 to 1 rule or 30 to 1 rule governing compensation in all firms, then the top dogs won’t be able to hold everyone up for more.
I own my own business does this mean my profits can’t be higher than 20 or 30 times what I pay the new guy? What if bring in a new partner – can he make 20 or 30 times as well. Or can total partner salary only be 20 or 30 times the new?
What if there are 30 partners can they all make only as much as the new guy?
Your proposal doesn’t sound too practical.
April 10th, 2009 at 4:44 pm
Bankers make regular plain old pizzas. They guarantee your satisfaction, even if their pizza is boring. Finance guys make deep dish pizza (just how do they make that shit?) filled with vague exotic ingredients. When Finance Pizza customers get food poisoning (which is all the time) Finance Pizza does not apologize, they ask for a subsidy to sell more of their delicious pizza, because their pizza is fucking important or haven’t you heard? Finance Pizza never fails, losers who get sick eating at their establishment fail Finance Pizza.
April 10th, 2009 at 4:45 pm
Anon,
No, they’re not. Statements like that just demonstrate how little you know about the sector (or about what an executive is).
As for populist nonsense…No…Those are the facts. And for your information, I guarantee you that most people on Wall Street don’t even know what a libertarian is. Obviously you work in the DC area and never once sat down in an NYC bar and tried to talk politics. No one up there cares…That’s why I don’t live there anymore.
As for greed. No…I’m claiming that many Wall Street executives (again, whatever the hell an executive means) aren’t motivated by greed. You’ve got my thinking confused with the budding bigots and racists (like yourself) that see no problem generalizing an entire population of Americans.
And finally, I don’t need to prove who my friends are and who I can pick up the phone and call. Clearly you’re the one who:
Doesn’t know anyone in the NYC financial sector
Probably has never been to NYC in a serious capacity
Doesn’t have a family (so doesn’t have any idea what its like to provide for another human being)
Is in his/her 20s
May or may not currently be in school
And is a developing bigot (or may already be one).
April 10th, 2009 at 4:46 pm
Wow, let’s be clear what Krugman said (”maybe not the best”).
It’s pretty clear that the best are altruistic, as well as hardworking and intelligent.
April 10th, 2009 at 4:46 pm
Just to balance things out, I worked in banking, worked closely with people who could very well be in prison right now, the culture is greedy, it’s not just on the person, though there is still something to that, at least in my estimation.
April 10th, 2009 at 4:47 pm
I don’t think there’s scripture for that view. To these ears, Re: He reserves his most scorn for religious functionaries who were parasites and judgmental hypocrites. “By what you measure you measure, so shall it be measured to you.” And “Woe to you, scribes and pharisees, hypcrites.” Sounds like He wanted to rid the world of the doleful, parasitical clergy and religious toadies. Poverty was the ideal. The rich young man who couldn’t give it all away “went away sad.” Paul was harder on the rich than Jesus was, but Paul seems to me a fanatic, always just a couple of steps away from his careeer as a coat holder for an angry mob.
Jesus had some pretty damning words for the rich. “Ye cannot serve God and Mammon.”
I find it interesting, and somewhat consoling, that so many of the Yglesian commentariat seem to aggree that greed is a bad thing, intrinsically, even if they can’t say why. Greed is fundamnetally unworthy of a virtuous and healthy human life, they seem to be saying, independent of whether it actually causes bad results.
Guess what, I agree with you. You’re right, and your political enemies are wrong. Now here is my question: is it possible to make the argument that greed- as a passion, as an emotion- is wrong in the absence of some concept of natural law? And if it isn’t, then aren’t we forced to accept some concept that there is an objective standard of moral law out there, to which we are bound to obey?
April 10th, 2009 at 4:49 pm
If Matt’s parents indeed paid for his education themselves–and you don’t know that they did–that means absolutely nothing about Matt himself. He was in no position to direct that money to the poor, because it was not his money, it was his parents’. He could have chosen not to get an education, but that wouldn’t necessarily have meant the money went to charity instead.
And was it greedy for his parents to try to educate him well? We usually think of parental investments in children as being either their responsibility, and/or at least in part motivated by altruism toward those children (although certainly the parents reap some rewards in the form of status when the child is clever and successful, like Matt).
This line of attack seems rather ridiculous (and kind of pathetic, too) to me.
April 10th, 2009 at 4:49 pm
Didn’t you go to Harvard? You of all people should know that “going into finance” was just what was done in those years, largely independent of any ethical quandaries or inner reflection. I think easily 60% of my class (Chicago, 2003) either went into finance directly after graduating or did an MBA and then got a job in finance.
April 10th, 2009 at 4:51 pm
And by the way Anon. One of those execs (or former execs) runs a blog that a bunch of Wall Street execs and government decision makers read. I link to it. I can tell you that the guy was so greedy that he turned down a huge (read: massive money making opportunity) in Los Angeles to keep his family in New York. Why, because his kids didn’t want to leave NY. Greed on display right?
I suppose you might look at that as populism, but for the people that live in the real world…that’s real life.
But God forbid that doesn’t mesh with your warped view of the world. Again, how old are you? You must be a kid…because few adults would be so incredibly ignorant.
April 10th, 2009 at 4:52 pm
This post is total unadulterated bs. Why is the desire to earn money, even lots of money, intrinsically bad? And if it is, who gives a shit? What are we – the moral police? I am so sick of the cons always making value judgments about who is good and bad … and now the very liberal MY joins the bandwagon. You know I wish I was a rock star with lots of money and groupies. That would be so bad, it would be really good!
There are a lot of people who get outsized paychecks and not all of them are bankers. As long these folks pay their taxes, society gets its cut. Now one might say that they pay too little but that is not the argument being made here.
April 10th, 2009 at 4:53 pm
jmo,
I think it’s pretty easy: no employee at a firm can be compensated at a level in excess of 30 times the compensation level of the lowest-compensated employee.
April 10th, 2009 at 4:58 pm
Hey Ed Smithe, I’ve met and worked with investment bankers in the Midwest, the east coast and the west coast. The best of them were merely greedy and perhaps wanted to do good someday, after their years of doing well for themselves until they had enough.
The worst of them were greedy, vain, entitled, prep school trained, ex frat boy monsters. They were proud of their lack of moral scruples (I’ve attended mandatory Friday afternoon showings of Glengarry Glen Ross and Scarface in the lounge, accompanied by $200/bottle scotch).
Moreover, all of htem – good and bad – were retained or fired based on their transaction volume, each quarter, every quarter, and none of their compensation was based on whether the investors were happy, as much as one year later, with their investments. And if anybody distracted themselves with the long term health of their client businesses that they were busy indebting or flipping, then they would lose out in the annual transaction volume contest and be fired. Those that would work hard to create great, lasting new businesses in the economy were idiots who needed to be weeded out; those that would bend any rule and twist any arm to make the quarterly nut were kept and rewarded – and given supervision over everybody else.
So now you tell me how the “best” are retained and prosper under that system.
April 10th, 2009 at 5:01 pm
Ed,
you’re hilarious.
i’m not going to give you my life bio, but i’ll tell you that i spent a good part of this decade in nyc, on the buy side. i will also say that i talk with bank execs, hedge fund execs, and pension fund execs a lot. some of them are into politics (goldman for example is pretty heavily involved, unsurprisingly), some are not.
it sounds to me like you’re describing the trader culture much more than the i-banker culture. i-bankers by and large are ivy-league educated. to the extent they’re not, they’ve worked their asses off, they have a chip on their shoulder, and they vote republican.
wall street execs (and by this term, i don’t mean “Vice Presidents” which you may or may not know typically is not really a high end position, but folks who would be subject to TARP limitations on exec comp, and/or MD types) are largely both highly educated (Wharton, HBS, etc.), and they typically revel in the culture of greed, which they btw don’t view as a bad thing.
as far as your stupid questions, i’m not in my 20s, i have a family, and frankly none of that matters. your ad hominem attacks are really indicative of your lack of substance and knowledge. as are your unbacked claims.
So i’ll ask you again, how many execs (and again, this doesn’t count folks who have fancy titles but are like 5 years or less out of b-school) do you know at Wall Street banks/funds/etc. who aren’t Ivy-league educated?
The fact that you describe this decidedly white-shoe, white-collar cabal as blue collar and middle class is awesome. As is the fact that you call me a racist. LMAO.
April 10th, 2009 at 5:03 pm
jmo – It’s pretty simple to enact compensation limits for publicly traded companies, you just establish a ratio involving some variable that accounts for ownership. I don’t think anybody is proposing limiting what entrepreneurs who start privately held companies pay themselves. Pay limits are a response to the supposedly rational boards of public companies turning compensation decisions into a self-dealing circle jerk of historic proportions. I don’t care what Bob Nardelli makes leading Cerberus. I do care what he makes if the company he runs is being supported by public funds. What he made at Home Depot and what he voted to give Dick Grasso at the head of the NYSE are issues because those businesses are highly regulated public entities.
April 10th, 2009 at 5:07 pm
I have trouble with this argument just because I don’t see a natural stopping point. Call it the Singer objection: if rich executives are immorally greedy because they want to make lots and lots of money, then how am I significantly less greedy, when in the global scheme of things, I want to make lots of money, too? I mean, let’s say I made $70,000 a year — how could I justify spending that on a middle-class life with occasional meals out, vacations to interesting places, a computer that lets me talk to all the other computers in the world, etc., when I could live a threadbare existence on much less and give it to charity?
It’s not that I disagree that Wall Street bankers are greedy. I’m just having trouble coming up with any kind of reasonable rule about how rich you’re allowed to want to be before you start being immorally greedy.
April 10th, 2009 at 5:11 pm
^
Hector, you should definitely stick around, you’re interesting.
April 10th, 2009 at 5:16 pm
I think easily 60% of my class (Chicago, 2003) either went into finance directly after graduating or did an MBA and then got a job in finance.
I consider that a dire failure of education, you were supposed to be smart, instead you were stupid, besides probably never reading a Greek tragedy word for word.
April 10th, 2009 at 5:17 pm
Hector, you should definitely stick around, you’re interesting.
Yes, his intemperate fondness for Russian autocrats is indeed, um, interesting.
April 10th, 2009 at 5:18 pm
Anon,
I grew up in a town 15 miles away from NYC (I spent 18 years of my life in NY and another 4 years getting my masters). There were probably 15 (or 20) people in a class of 80 that went to an Ivy-league school. Of those folks I’d say less than half work in a financial institution. Of the folks that didn’t go to an Ivy, (that’s about 60) I’d say about 20-30 of them went to work in a financial institutions. Including them, and friends of my family I’d say that I’m good friends with around 50 people and friends with about 150-200 more. Of that, maybe 20 to 30% went to an Ivy at some point in their life and of the 250 odd people that I know, maybe 30 or 40 of them are execs. Of those maybe 15 to 20% went to Ivy’s. Apparently we have different experiences…and apparently there are businesses in NYC were close to 100% of the folks that work in them have degrees from Ivy League schools. Boy, it must be getting much easier to get into those schools.
With respect to execs, thank you for clarifying. Does that include executive VPs which aren’t terribly high on the totem pole either (depending on how large your institution is)?
With respect to your family…Glad to hear that you have one. I guess you can understand what’s it like to want to provide the best possible life for them…Or is that something that only conservatives do for greedy reasons?
Finally, with respect to generalizing. Once again, you’re doing it again. The fact that all of these people are greedy, and no one has a good work ethic demonstrates how warped your thinking is. I didn’t call you a racist, I merely pointed out that your tendency to lump people together puts you at risk to become one. I could see how you could confuse that…perhaps you might look to look at a list of the Ivy League schools and see if it includes, Michigan, UVA, Stanford, Northwestern NYU, or Univ. of Arizona (Thunderbird)…Yeah, no execs in NYC have degrees from those horrible schools.
April 10th, 2009 at 5:18 pm
I have trouble with this argument just because I don’t see a natural stopping point. Call it the Singer objection: if rich executives are immorally greedy because they want to make lots and lots of money, then how am I significantly less greedy, when in the global scheme of things, I want to make lots of money, too? I mean, let’s say I made $70,000 a year — how could I justify spending that on a middle-class life with occasional meals out, vacations to interesting places, a computer that lets me talk to all the other computers in the world, etc., when I could live a threadbare existence on much less and give it to charity?
Is that supposed to be a smart argument? Just curious, because it sounds simple-minded to me, and I’m talking about Singer.
April 10th, 2009 at 5:20 pm
As a favor, I’m going to point out that the natural stopping point is you, your will, if you’re confused read Otto Rank, very carefully.
April 10th, 2009 at 5:21 pm
“Primarily” sure, but not all bad people. One important case is Robert Rubin. He clearly is not motivated by greed. He chose to leave Goldman Sachs to become 1st chair of the NEC exactly when G.S. was going public. To avoid conflict of interest he converted his share to bonds. That cost him one the order of 100 billion. Then at NEC he fought tirelessly for his number one priority — raising taxes on rich people. Clearly not greedy and notoriously a nice guy. And number one boss on Wall Street.
I think a lot of people go into finance motivated by only very moderate greed, that is, because it is the only way they can make at least as much money as the median person with their schooling. I think a lot of quants are ex Physics grad students (poor) and post doctoral fellows (poor). Not in the unemployed person in Mexico income bracket, but very poor compared to MDs and lawyers and stuff.
On giving it away (very key issue) first they might think there is no rush as they can make their wealth grow so investing with them is good even for the poor. Second, people used to deciding which apparently similar asset to buy will have real trouble just giving money without investigating the NGO to which they give and they don’t have time for that. So it’s put it off till I retire and I can do it right (for some).
I’m told that there is a real need for smart people who tell good super rich people how to do good with their money. This blog is written by a smart person. Assuming the worst about people is not good strategy.
April 10th, 2009 at 5:24 pm
Does that include executive VPs which aren’t terribly high on the totem pole either
Everybody knows, or should know, that VP’s are glorified marketing people, entry level bring me money or you’re out.
April 10th, 2009 at 5:28 pm
Waldmann, you’re fairly interesting too, but could have said what you meant to say in 5% of the words, we can work on that.
April 10th, 2009 at 5:37 pm
This is an agncy-structure problem. A social institution can exist – say, the institution of gladiators – which is structured by rules and norms such that those who become gladiators become bad people. Of course, the gladiator system existed for hundreds and hundreds of years, longer than the modern financial system will ever last. But it was normalized so that watching one person murder another person in an arena was not considered a bad thing. However, on the edges, where the philosophers, the moralists, the Christians, the worshippers of new Persian deities all existed, it was obvious that it was a bad thing, producing bad people.
Of course, you could make the argument that the gladiators ultimately did something good by providing an escape hatch for latent violence in the imperium. And you could argue that hedge funds do a good thing, too, by distributing capital to where it is most needed. The latter is a much weaker argument, in that the distribution quickly gets skewed when hedge funds are so profitable, so more and more money circulates in the financial sector.
However, if MY does feel like this, then I think he should consider the Theodore Roosevelt solution, which is to shutter much of the speculative economy. How? By ensuring that market capitalization is always equal to the tangible worth of the company. What we call a P/E of, say, 20/1, was called watered stock in the progressive era. As people begin to realize that their assets – their investments, which they made intentionally or simply by signing off on some payroll plan, are not going to pay for college for the kids or retirement, and thus begin to revolt against the tacit wage pact of the last 30 years (I cede my higher rate of wage increased because that makes my company more profitable, which raises my stock investment), it would be an excellent time to reform the system.
1. all interstate companies must incorporate on the state level.
2. the amount of all stock issued by a company must equal and be worth no more than its real value.
3. revamp the tax write off for 401(k)s.
4. Put in place Therese Ghilarducci’s much better retirement money fund scheme.
April 10th, 2009 at 5:38 pm
Oops, 1 should be… must incorporate on the FEDERAL level, with the commerce department. No more picking and choosing favorable state laws. An end to Delaware tyranny.
April 10th, 2009 at 5:53 pm
This is the best post Matt has written this year. It’s about time people started talking about this stuff.
April 10th, 2009 at 5:57 pm
In the 21st century, after a few millennia of philosophical and theological debate and a near infinite supply of practical examples…there are supposedly intelligent people on this thread arguing…
1. There is no such thing as greed, or…
2. Greed exists and there’s nothing wrong with it.
Ye gods.
Mike
April 10th, 2009 at 6:29 pm
Greed itself may be a bad thing (though I don’t think unambiguously so). But everyone has bad and good in them. The presence of bad attributes doesn’t make a person a “bad paerson.” That makes no sense at all. That is a ridiculously low bar for badness. You have to say how much of the bad attribute needs to be present and consider what redeeming characteristics the person might have. This seems elementary. So sure, if what Matt means is that excessive greed is bad, that’s easy enough. But all the top bankers are bad people? Wow.
April 10th, 2009 at 7:11 pm
That cost him one the order of 100 billion.
Hmm.
April 10th, 2009 at 7:23 pm
Wow, I only skimmed the 100 comments, but no one seemed to take Matt up on this:
I really, really want to see the quality of this discussion. Can’t someone, please, publish this email thread, with names? I think Matt’s point and post are way below the usual quality level of this blog, but I can’t wait to see the actual back-and-forth. No doubt both sides embarrass themselves.
April 10th, 2009 at 7:23 pm
These are people primarily motivated in life by greed. Not just by a desire to make some scratch, mind you.
Focusing on motivations is just dumb. A greedy person will do a lot of things, some of which are morally good, some of which are morally neutral, and some of which are morally bad. If the greedy person lies and steals — and people on Wall Street do this — then we have a problem and we need to design our social institutions to fight against this.
The #1 difference between the Wall Street millionaire and a “regular guy” (like Harvard-educated political pundit Matt Yglesias) is that the former has opportunities to make significant money, and the latter doesn’t. Saying that the biggest difference is that the former is a bad person whose greed knows no limits while the latter is God-fearing and salt-of-the-earth is, well, dumb and distracting.
April 10th, 2009 at 7:26 pm
Why isn’t soullite on this thread? He finally has a chance to deliver one of his sermons on topic.
April 10th, 2009 at 7:32 pm
How much of your salary above your basic needs are you donating to charity? Make any frivolous purchases lately?
Thought so. Now STFU
April 10th, 2009 at 8:10 pm
There are several things in Christian teaching that, when read plain, show that modern Christian practice is as alien from the documents it’s derived from as rock is from bread. Christianity seems to me to be have been a He’ll Be Right Back belief. Doing without, while you’re waiting, seems prudent, and almost doable. As a 700 generation long regimen? A little more unlikely, I think.
April 10th, 2009 at 9:34 pm
Doesn’t necessarily make sense to generalize from Vikram Pandit to “young people going into finance.” There are different ways of going into finance.
April 10th, 2009 at 10:34 pm
Isn’t any income above a subsistence level inherently “greedy”? By definition, any amount beyond subsistence levels is not necessary. It only serves to further one’s material interests in excessive comforts.
Moreover, the existence of a world of “rational actors” — individuals who operate to maximize their own self-interests — is the underlying assumption of most of public policy. What is so surprising about financiers being rational actors?
Do we really think that only a select group of bailed-out businessmen maintain profit-maximizing motives (ie. greed, or “hubris” if you really want to go the self-righteous, pseudo-intellectual route)?
If we’re ridiculing those who are greedy, the criticism should not stop at those members of the financial sector. Doubtless, we all are regularly driven by the same motives of self-interest maximization.
April 10th, 2009 at 11:14 pm
The thing that really blows my mind about Matt and Garance and Ezra and Spencer and their confreres is that they really think they’re better than all of us. If only the great and goodhearted twenty-something pundits of the left were permitted to direct our personal affairs, the world would be at peace and prosperity would fall upon all of us equally like the rain!
Here’s my view: The money isn’t the problem. Kill the aristocrats, divide up their lands, chop the heads off the bourgeoisie, give their businesses to the state, and what do you end up with? A bunch of ambitious assholes who lord it over the rest of us, just like it was before you spilled all that blood.
April 11th, 2009 at 8:07 am
We’ve seen that investment bankers debauching themselves in NY in behalf of a Park Ave. coop, a place in the Hamptons, and a suitable entry in the Harvard alumni magazine trigger events that lead to a cancer patient in Nevada losing his chemo as his clinic is closed due to budget cuts. We need a new form of justice to compensate us for the damage these people do.
April 11th, 2009 at 9:10 am
I’d love to see that journolist debate made public. I can only imagine which members of the lameosphere felt it their obligation to defend the masters of the doucheverse, and that’s a shame.
April 11th, 2009 at 9:38 am
southpaw- nice try, but you were born a serf. The banksters love your ilk, who keep the wheels greased for their masters’ getaway cars.
April 11th, 2009 at 9:50 am
Bad != evil
E.g., you might scold your dog – Bad Rover, bad dog! Not evil dog! Or for that matter – Tommy, you’ve been a bad boy, and not Tommy, you’ve been an evil boy.
In most of its manifestations greed results in bad behavior, and sometimes in evil behavior.
When we say “greed is good”, what we mean really is that we do not condemn the “I want… {material objects}” drive, as is done in some systems of ethics. “I want….” is a normal human characteristic.
HOWEVER, this drive should really be subordinate to ethical considerations. I build business value as a means to satisfying my “I want…” is great. I prevent the traders I manage from talking to the risk assessment group at the company, because they might frown on the trades we’re doing which are currently so lucrative, and then I won’t get a big bonus (e.g., what’s his name at Merrill Lynch) is wrong if not criminal.
April 11th, 2009 at 9:52 am
While I’m generally sympathetic to Matt’s point of view, I don’t agree with it.
My view is that its a mistake to judge people by their motivations (greed); they should be judged by their actions (destroying the world) and, secondarily, by their awareness of their actions.
More specifically, judgement should be made by the following criteria:
1. Did the person do a bad thing? (destroy the world)
2. Was the person aware of the consequences of the actions?
So, I try to avoid saying things like “Joe is greedy and is bad”. Its better to say, “Joe was a willful participant in a bad system (a system that destroyed the world) and, therefore, is bad”. Better still, say that “Joe’s life has been dominated by bad behavior”.
The main point is that what is going on in Joe’s head is not all that interesting to me. Especially if he’s involved in high finance.
April 11th, 2009 at 10:36 am
“I like tsars and the aristocrats, but their deeds are not always good deeds. I will give them a good example, by not destroying them.”
April 11th, 2009 at 10:53 am
I’ll agree with the fellow who suggested that we’d be wise to read Henry George before pursuing this. He shines a light on things we all need to understand.
Start with Progress and Poverty, available online at progressandpoverty.org, or search the front page of wealthandwant for “Progress and Poverty”.
Or look at George’s essays in “Social Problems” or four of his speeches, all linked at wealthandwant. You’ll come away with new lenses through which to view our situation.
April 11th, 2009 at 11:06 am
The current economic crisis is a moral crisis. Very bright, very wealth people with no sense of social justice and no communitarian spirit, played high risk games with other people’s hard-earned money. They used their power and influence to get the federal government to let them do this with no oversight or regulation. They also used their power and influence to make sure that the government would bail them out if they made any mistakes. Many became spectacularly wealthy doing this. These moral degenerates should not be let off the hook. Their short-term greed has caused suffering for millions of people.
Greed is evil. Greed that harms other people is criminal. Greed that destroys an economy is crime of the highest order. Throw these guys in jail.
April 11th, 2009 at 11:33 am
I totally agree with this post.
As for the commenter who asked under what ethical system do we reject greed, I find that appallingly blind. Who needs an “ethical system” when we all have consciences? Jesus H. Christ, it’s wrong because IT HURTS OTHER PEOPLE… Greed is also a manifestation of fear and lack of love, lack of empathy.
Doesn’t anybody understand karma? The well has been poisoned in this country for so long…and the whiny-ass-titty-babies COMPLAINING that we’re picking on poor widdle Mr. Greed really, truly, absolutely need to get a life. This is no small sickness.
April 11th, 2009 at 11:50 am
I really don’t think it’s this simple. During the bubble years, a banker who was conservative about leverage and concerned about social justice was not going to be a banker for long. The ambitious, cutthroat risk takers in the banking industry were the guys who were generating the incredible returns, and the money flowed their way. Bankers who didn’t act that way during a period that was nearly a decade long presumably generated crappier returns and were marginalized for fired. The locus of the problem was not the individuals who rose to the top of these companies but rather the political and regulatory environment that allowed them to do so. If you’re looking for a bad actor, look to Phil Gramm or at least to Sanford Weill. Vikram Pandit (much like Tim Geithner) is just a shmo, a patsy they brought in when the deluge was upon them.
April 11th, 2009 at 12:36 pm
Southpaw, the kind of bankers you describe didn’t go to wall street. And they found good jobs, prestige, and peaceful sleep in numerous banks all around the country.
But you are totally right that the locus of the evil, here, was institutional. It is in fact an interlocking series of evils. There is, firstly, the evil of educating people that it is natural and right to want a lot of money. In actual fact, one should think about money in terms of other, much more important wants and desires – the want to be loved and to love, the desire for family, the desire for beauty, a feeling of solidarity with the earth itself, the desire for justice. Money is, of course, simply a means. But when a means becomes an end, we have a classic addiction situation, one with a nation full of enablers. Then there is the specific institutional setup of the speculative economy. Hefre, just as computer power allowed farreaching projects for amassing and losing amazing amounts of fictitious money came on-line, the government went off-line – it gave carte blanche to disaster. And when that happened, the institutions ate themeselves, first by bloating with huge amounts of money (anytime the financial sector composes thirty percent of the profits in an economy as big as the U.S., you know you have an out of control situtation), and then by imploding.
Hannah Arendt coined the phrase the banality of evil, but myself, I think the direction is the other way – the evil oof banality. By normalizing procedures that made no sense – for instance, AIG’s by now notorious CDS shop – and seizing large amounts of money for personal use on the way up, the institutions became such that nobody who worked for them could be good. The AIG guy who wrote the resignation letter taht they published in the NYT is a perfect example of the banalization of evil. He still doesn’t get it that the excuse, I didn’t know what was going on, doesn’t cut it. Especially when, at the next moment, he prides himself on continuing to work for AIG cause only he could fix what was going on – casting his excuse into the garbage can. After all, if he didn’t know what was going on, why is he getting paid a bonus for his expertise in… what was going on?
Change the institutional structure, and free these slaves of their own worst impulses. But the change has to be at a deeper level, just as Civil Rights legislation had to be accompanied by a cultural and spiritual shift.
April 11th, 2009 at 1:02 pm
Greed, when tied to transparency and liberty, isn’t an especially troublesome vice or sin. In fact, where transparency and liberty exist, greed can provide positive social good. Of course, many greedy people endeavor to achieve opacity, which is when the real problems begin, as also happens when greedy people seek state power to destroy liberty.
Covetous desire (and greedy people who seek state power with which to destroy liberty are usually more accurately labeled covetous), on the other hand, is much more often destructive than greedy desire. In fact, it is quite often the case that those denouncing greed are merely covetous themselves.
Unfortunately, human beings are in large measure mere status-seeking, relatively hairless, baboons. This prompts the question; which follically challenged primate is more dangerous; the one which feels threatened by another’s higher status, no matter that the lower status ape is no way threatened with death via material deprivation, or the high status ape who constantly strives for yet more recognition?
I’m not sure there is a correct answer, but given the right structure which protects liberty and promotes transparency, the high status and low status ape will at least devote their energies towards doing stuff which other apes value. Absent liberty and transparency, status seeking can be a zero-sum game, where it is gained only at others’ expense.
April 11th, 2009 at 1:15 pm
OK, I agree with you 100%, but then, I’m a Catholic. I share the question of some of the commenters here–how are we going to ground an ethical system that denigrates pure greed in a pluralist society? [I am not desiring everyone to convert to christianity or even belief in God--it's just that I don't quite see how we can have an ethical system at all *without* either a belief in God, or a way to make it all about enlightened self-interest.]
April 11th, 2009 at 1:45 pm
Again, no one talks about the executive responsible for giving out small business loans somewhere in Middle America. Or the executive responsible for providing immediate annuities to retirees somewhere in Middle America. Or so on. And yet all these people are executives in the financial industry too.
Yeah, you know what? “Big name” banks weren’t recruiting the best and the brightest out of Harvard to become retail bank managers in the small-business-loan office. They were recruiting people to work with derivatives and find arbitrage opportunities. And the people they recruited weren’t interested in the mechanics of small-businesses and analyzing business plans to make sure they were loan-worthy; the people they recruited were interested in making a lot of money in a short amount of time.
The doctor who makes a lot of money… what’s he good at? He’s good at being a doctor. He knows a lot about medicine. Even if he went into it because it was a well-paying profession, after spending 8-10 years in post-college training, the culture of health care has probably basically molded him into a “health care provider.” Same with a restauranteur. Sure the successful ones make money, and sure maybe many of them opened restaurants because it can be lucrative, but the resteranteur’s daily life is consumed with acquiring and cooking food and ensuring it is delivered to customers with as pleasant an experience as possible.
What about the guy in finance? What’s he concerned with? Money, and nothing but money. Insofar as there are other concerns, they involve ego positioning with colleagues over how much money they have.
And that’s the problem: it’s money in the service of money. And I think that’s why these people end up rightly receiving special opprobrium for greed.
April 11th, 2009 at 2:07 pm
Now that TPM has linked to this thread, I’m going to add something more judgmental to it (like in #55 above).
Self-interest is a motivating passion in capitalism, but for Smith it co-existed the passion of social sympathy (as in comment #46, quotes taken from “Theory of Moral Sentiments”). What we’ve got in America today is greed PLUS a horrible arrogant self-righteousness about that greed. Where do we get that? I’m inclined to see it as the final gift of the defeated South, whose ancient curdled resentments have spread everywhere in our culture. Krugman’s probably right about our resistance to welfare being a legacy of race. Nietzsche would call it “ressentiment.”
We have basically become a nation of assholes. Would any pundit be caught in public advocating compassion for the poor, especially the “undeserving”? Our overwhelming desire to scapegoat the Octo-mom tells the whole story.
April 11th, 2009 at 2:53 pm
Wow, it’s almost as if the very act of trying to make money arouses some concern about the moral and social order. As Adam Smith and Edmund Burke noted, “we have become a nation of assholes.”
April 11th, 2009 at 3:06 pm
A lot of people posting in this thread mistake Self-Motivation
and the desire for Security and Prosperity as Greed. And yes, that too is a sign of a sick, philosophically retarded society.
There are those dominated by their primitive Reptilian brain functions. No empathy, no ability to plan for the future. Just self-serving behavior that uses destructive action to get its way.
There are those who are more evolved and use their Higher Brain to harness their more primitive impulses. They know Life isn’t a Zero-Sum game and long lasting success involves cooperation and consideration of others needs.
There is such a thing as enlightened self-interest. Wherein, the pursuit of ones personal goals occur as we are willing to acknowledge the results our actions have on the rest of society.
Those who engineered this current financial crisis and have profited by it have engaged in self-centered, destructive behavior that borders on the sociopathic. They knew the financial edifice they were building was founded on unstable ground and that it would ultimately crumble leaving millions worldwide in despair.
But they fired and silenced the whistleblowers. They paid off the Congressional aides and politicians. They used the Media to cheerlead for their schemes.
It’s one thing to make large amounts of money. It’s entirely another to make millions and use that money to prevent others from advancing or for society to progress.
For instance, Petroleum and Detroit. They made billions and refused to advance technologically.
It’s another to use that money to make sure you don’t have to contribute to the infrastructure that allows you to advance materially or to the welfare of those who toil the fields underneath you.
Unbridled lust for material wealth, power and influence over the lives of others is Greed. And it is a huge stumbling block towards Progress.
Wealth, whether resources or money, is essentially the Life Blood of a society. It MUST be circulated throughout the Body Politic.
When any one smaller, constituent part amasses a disproportionate percentage of a society’s wealth and then refuses to allow the distribution of that wealth, they become functionally the same as a cancerous tumor.
Humans tend to congregate and figure out how best to prosper and protect themselves. But there always needs to be an Authority set with the task of making sure the Common Good is protected and served.
This is why Obama’s seeming capitulation to the sociopathic financiers leaves such a bitter taste. It’s expected behavior from the Reptilian-brain Republicans but ideally not the Left.
April 11th, 2009 at 4:28 pm
Glad someone is finally pointing this out. When, by the way, did greed stop being one of the seven deadly sins? When Reagan was elected?
April 11th, 2009 at 4:48 pm
Reagan defined “freedom” as the freedom to make as much money as possible.
There are other ways of defining freedom, of course. Not that the Democrats seem particularly interested in taking up this task.
April 11th, 2009 at 5:01 pm
I strongly believe in a free-market system, and as I — as I think people understand in America, at least, people don’t resent the rich; they want to be rich. And that’s good.
-President Barack Obama, April 2, G-20 Press Conference
April 11th, 2009 at 5:03 pm
If you take Yglesias’s view, any penny you keep above what you need to subsist is greed. After you’ve earned more than enough to subsist, then you’re just earning money to earn money. The reason is the opportunity cost.
After all, do you REALLY need cable, when you could send a third world child to school with that monthly bill? Isn’t a child’s education more worthy (and less greedy) than cable?
After all, do you REALLY need to eat out for dinner, when you could just eat pasta at home and buy livestock for poor villagers with the monthly savings? Isn’t giving a family a means to earn income more worthy (and less greedy) than buying yourself a lavish dinner at an Italian restaurant?
And the list goes on.
The $100,000 cut-off mark may make sense to some people (if you earn more than that, you’re greedy), but you could easily argue, “Hey, people making $80,000 aren’t starving, and you could do a lot of good donating the extra $20,000 per year.” Which is why it’s best not to have these arguments. I don’t view someone saying, “I need $1 million per year to subsist” as any more greedy than someone who says, “I need $300,000″ or “I need $80,000″ considering 1 billion people live on less than $2 a day!
April 11th, 2009 at 5:27 pm
Well written and thoughtful. Thought-provoking. My understanding is that once you get beyond a certain income level (i.e. 2x average or around $100K), your level of happiness no longer correlates to increased income. An awful lot of people are chasing their tail these days.
April 11th, 2009 at 5:41 pm
P.S. my own thoughts:
I must admit I kind of sympathsize with Al’s comments above.
I am very skeptical of a writer understanding what greed really is who regularly writes about things like his new technological gadgets as if everyone can afford them, and has the background of growing up at expensive Manhattan private schools, Harvard thereafter, and quickly found paid writing work thereafter.
This line
These aren’t immigrants who walked through the desert from Mexico in order to earn more money by washing dishes in a San Diego hotel
suggests to me you don’t understand what greed is, where it comes from. He walks through the desert to get more than the fellows left behind had, to get as much as he can, to be safe. You know, the famous line from “Gone with the Wind”: “as god is my witness, I’ll never go hungry again!” whereafter Scarlett O’Hara goes on thereafter to run a lumber business in Atlanta employing convict labor?
If someone has always made sure most of your wants and desires have been filled, since childhood, you have to write more to convince me that you understand what greed is, where it comes from. It’s real easy to look down on the greedy when you’ve never had to experience the drive (and the feeling of powerlessness) that constant unfulfilled material needs and desires can give someone. Some have it so bad they can never shake it off, there’s never enough. I feel myself lucky to have gotten past it, but I understand.
April 11th, 2009 at 5:49 pm
It’s easy to look down on those who are ambitious for money when your ambition is for something else (fame, recognition, whatever). Yglesias is just a regular guy — “Matt the Pundit” — who grew up in the West Village, attended an expensive private school, went to the most prestigious university in the world, and is pursuing a career where as a 20-something yuppie he tries to tell other people what to think.
But why would someone want to go to Wall Street and make lots of money? A huge number of Matt’s classmates at Harvard went to work at investment banks and burned out within a year or two. I’m sure Yglesias has no idea what motivated them to make the effort, it’s just totally inexplicable. What’s the pull? Money? As every commenter knows, once you reach a certain amount of income (maybe twice as high as that particular commenter’s income) money doesn’t mean anything. These people must have been motivated by evil.
Now political punditry, writing for the Atlantic Monthly and The American Prospect, that sort of ambition just speaks for itself.
April 11th, 2009 at 6:25 pm
I am shocked that a pundit would judge an entire class of people, including impugning their character and blaming them for social decay, based solely on their income.
April 11th, 2009 at 9:26 pm
Have to love the sanctimonious bullshit from a Dalton and Harvard grad. You have to marvel at the someone who fails to see the idiocy in condemning people for income alone when they’ve had their dear parents pay over 300,000 for their education (at today’s tuition rate). I wonder what’s going to happen to Matthew’s kids. Will they get to attend Choate or Dalton and private colleges or will they have to settle for public school because I guarantee you it takes an income far in excess of the 100k posited by some here to send children to those schools. It’s easy to bemoan supposed greedy levels of income, when you get all the benefit from it.
There is nothing wrong with financial self interest. Poorly structured incentives are a problem, inadequate regulation is a problem. There’s a reason that virtually all of economics is built upon the foundation that people act to maximize their own utility.
April 12th, 2009 at 6:59 am
[Emphasis added]
Smith also wrote, All for ourselves and nothing for other people seems, in every age of the world, to have been the vile maxim of the masters of mankind.
April 12th, 2009 at 10:04 am
So, according to “progressive” thought, every time I lift my fork to put a morsel of food in my mouth, everytime I drive my SUV to work to earn a living, etc., I am being greedy and should sacrifice my time, efforts and food to those more “needy”. Kant was wrong…John Galt and Howard Roark were correct.
April 12th, 2009 at 11:27 am
So, according to “progressive” thought,
Actually, according to Christian thought.
April 12th, 2009 at 12:23 pm
“If you take Yglesias’s view, any penny you keep above what you need to subsist is greed. After you’ve earned more than enough to subsist, then you’re just earning money to earn money.”
You might think that, if you were morally and ethically retarded.
Mike
April 12th, 2009 at 1:04 pm
Wow, the ignorance displayed in this post is astounding.
April 13th, 2009 at 9:52 am
Off the top of my head, Mr. Yglesias. I noticed that there wasn’t a list of your charitable contributions, you know, so the rest of us can have a guide as to how we should determine what a “bulk” would constitute for someone of your means, or ours.
Additionally, why just the bankers? Lets take this line “But a good person, who’s primary passion was the life of a bank executive, would be donating the bulk of his massive compensation package to charity,” and change it to “But a good person, who’s primary passion was playing basketball in thr NBA or and actor making movies, would be donating the bulk of their massive compensation package to charity.” The difference is, in your statement the banker helps bring about building blocks to society by accepting someone elses money and putting it to work for the betterment of the rest of society while the characters in my statement did nothing but entertain us. Something that doesn’t happen unless we are a wealthy society.
The irony is that the poor, who I presume you believe should recieve the “bulk” of the bankers donations, put much more of their money into the NBA’er and actor than they do the banks.
April 13th, 2009 at 10:56 am
Wow. The willingness to label an entire group of people as “bad” or “greedy” and the casual assumptions about what must make them tick — this is an example of “progressive” thought? Who, exactly, do you think make up many of CAP’s major donors? I think it’s great that people choose to toil away at a nonprofit for less money than they might earn otherwise (in fact, I do it myself), but make no mistake, that comfortable, though not particularly renumerative, life is funded in large part by all those “bad” and “greedy” folks who set up foundations. Thanks George Soros! Seriously, what’s next? Criticizing some particularly “lazy” group? I think you’ve just proven that progressive Washington intellectuals can be every bit as biased, narrow-minded and ill-informed as any wealthy right-wing banker.
April 13th, 2009 at 11:20 am
Very interesting blog and discussion. When I was young, in the 50’s, greed was “bad”, and the top Federal income tax rate was 90% I believe. There was old money but not much new money, at least that was obvious. I believe there was more given to charity; why not pick the recepiant if the money would otherwise go to the government. There was lots wrong with our society then, but I do think the cultural pressure against greed produced a better society in this respect than what we have today. Conservatisim changed this, and Reagan’s tax cuts together with his mantras, “greed is good”, and “…government is the problem”, were turning points. Many people are influanced by “convential wisdom” and will restrain their inherent greed if it’s unpopular and there exist effective governmental policies that provide dis incentives.
April 13th, 2009 at 11:43 am
“Self-interest” and “greed” are not synonyms, as many posters seem to be implying. Greed, by definition, implies self-interest narrowly construed as personal material gain taken to an excessive or unbalanced extreme, producing negative results. By definition, greed is bad.
To suggest that “greed is good” is to propose that there is no point at which the pursuit of material gain as an end in itself becomes unacceptably corrosive to other values that are equally or more important to a person’s (or a society’s) real self-interest. To say “greed is good” is to say that there is no such thing as greed; that all material self-interest, no matter the extent or the results, is inherently good.
I’m not sure how anyone can hold that belief, frankly. Our legal system certainly does not endorse it.
I think we all understand, though, that it’s quite common that the negative effects of unbalanced self-interest are felt first and most acutely by others, and that thus these others will label the behavior as greed well before the agent is willing to consider his own behavior as anything other than natural and healthy self-interest.
April 13th, 2009 at 2:42 pm
I understand the desire to dehumanize the enemy you intend to plunder, in order to ease your conscience.
But, it must be bittersweet to have to acknowledge that your theory implies that liberals are worse people than conservatives because they are, on average, less generous to charities with their wealth.
April 13th, 2009 at 4:48 pm
…surely we could agree that the executives at these institutions are primarily bad people.
Actually, while the left has no trouble making the assumption, no evidence has been provided to suggest that banking executives are, ‘primarily bad people,’ when compared to their counterparts in government, non-profits, or other industries.
What clearly is ‘bad’ is the entire idea of central banking and banking cartels that can lend out multiples of what they hold in deposits and are permitted to create purchasing power out of thin air. But for some reason the overwhelming commentators from both the left and the right never say anything against the clear fraud that is the basis of central banking, fiat money and fractional reserve lending.
That is why both the left and the right have been discredited and were unable to see the crisis developing even as it could not have been more obvious to anyone who had a basic understanding of classical economics. I suggest that you abandon the populist search for villains and start learning a little about the economics you should have learned a long time ago. A good place to start would be to look at Mises, Hayek, Rothbard or the countless of Austrian School economists who saw the crisis developing and explained what would happen when the unsustainable inflationary actions of the central banks had to end if the fiat currencies were to be saved.
April 13th, 2009 at 5:14 pm
To suggest that “greed is good” is to propose that there is no point at which the pursuit of material gain as an end in itself becomes unacceptably corrosive to other values that are equally or more important to a person’s (or a society’s) real self-interest. To say “greed is good” is to say that there is no such thing as greed; that all material self-interest, no matter the extent or the results, is inherently good.
I’m not sure how anyone can hold that belief, frankly. Our legal system certainly does not endorse it.
There is nothing wrong (or unnatural) with self interest. All rational beings care more about their families and friends more than they care for casual acquaintances. They certainly care about those acquaintances than they do about people that they do not know.
I suspect that your confusion comes from assuming that self interest implies that individuals will commit fraud or use force to get their way. But that does not have to happen when people engage in voluntary transactions. If I decide to use my savings to purchase a Ferrari in the unhampered marketplace I do not need the company’s workers, managers and investors to be altruistic because I obviously value the car more than I do the cash. When I buy the car I win. So does the company because it values my cash more than it does the car.
The free market works well and does not have a need for altruism. And the laws against the initiation of force and fraud certainly work well enough. (That is how the Enron people were convicted.) The problem is not greed but the power to create money out of thin air and to protect favoured groups against market competition. Take away that power, and the system becomes much more stable. Sadly, that power resides with governments and they will not give it up just so that the economy can work more effectively.
April 13th, 2009 at 5:24 pm
Matt,
I normally agree with you, but you’re a better writer than this. There’s a danger that we liberals will overreact to the current crisis, by letting our anger color our analysis. I think that’s what you’re doing here.
My take here:
http://talentedearthquake.blogspot.com/2009/04/defending-rich-bankers.html
April 14th, 2009 at 12:06 am
This post is shameful and stupid.
Where would the world be without greed? Why would I work as hard as I do to graduate college with a 4.0 if it weren’t for greed? Why would I work 80 hour weeks over the summers to pay for it?
Why would you take the time to develop an expertise at something if you weren’t to be compensated for it?
You have benefited from the “greed” of a very few exceptional men. Henry Ford gave you the opportunity to buy a car at the price you buy it. Thomas Edison let you work into the night by creating the light bulb. The Wright Brothers allowed you to visit other countries in mere hours by inventing the first airplane.
Greed is a surrogate for ambition. And each of these people made a fortune off their work, and rightfully so. You have no right to the production of other people’s hands and minds.
Have you considered that a million dollars in compensation every year makes sense if you bring your company ten million in profit?
Some people are worth $30,000 a year. Some people are worth $150,000. Some are worth $15,000. And the rare, exceptional individual is worth $1,000,000 or $1,000,000,000, or maybe more. That’s how the world is. Maybe we should strive for Justice instead of equality.
April 14th, 2009 at 3:26 pm
Until there is a scientific definition of “greed”, I suggest the reality-based community avoid it’s use. I’m sick of it because it doesn’t have a real meaning. It is like creationists talking about “kinds” versus scientists talking about “species”.
The true failing of these executives was not that they were “greedy” but that they were unable to truly appreciate the risks of what they were dealing in.
Of course, the same risk-blindness can be said of all the Senators and Congressmen pushing “affordable housing”, etc.
Let’s concentrate on punishing inadequate risk assesment. That applies whether you are a financial CEO, launching the space shuttle, or if you’ve had a few drinks at the bar and wondering if you should drive.
April 14th, 2009 at 4:14 pm
I didn’t comment on this post when I first saw it since I was so taken aback by this claim I didn’t want to post some screed in return. So a few days later, here’s my take.
1) this is the most crazy claim I’ve seen in a while from a blogger I respect. Which should probably tell me something about where my perspective comes from and where MY’s perspective comes from. But I’m not sure what it tells me. I suspect it is only that MY is a twenty something year old with no professional exposure to finance, while I’m older and do have professional exposure to finance.
2) The notion that ‘the executives at these institutions are primarily bad people’ is any more meaningful that equivalent constructions like ‘members of Congress, health care executives, newsroom managers or Americans are primarily bad people’. Thes statements seems impossibly broad it their coverage to be true in the generality stated. As stated, the claim seems very much like a outsiders lack of perspective leading into a sort of prejudice and a hope that blanket moralism provide a shortcut around actual research and analysis.
3) I might even see that one arrive at the claim that ‘the executives at these institutions are primarily bad people’ as a conclusion. But to be surprised that that is not where people from different perspectives start out when they analyze these problems is just bizarre.
4) I don’t seem much room for moralizing in analyzing what went wrong here, except to the extent — and this is a big exception — that moralizing can help in resolving some of the political collective action problems we face in reforming how finance works. But you want to be careful here in blanket moral condemnations of whole classes of people. There are lots of people in finance — pretty much everybody I know, including people who made many millions — who are going to agree that the wrong people benefited during the run-up to this crisis, but that isn’t because they were bad people but because institutions and governance failed for reason we should try to understand. And I don’t see the ‘executives were primarily bad people’ as holding much water, no more water than ‘politicians are primarily bad people’ or ‘journalists are primarily bad people’.
April 15th, 2009 at 5:18 am
How shocking you aren’t going after sports stars, movie stars, or book writing politicians, but instead people who work in a recently reviled sector of the economy.