Matt Yglesias

The Ethic of Greed and the Spirit of Capitalism

Washington Post article on the hedge fund holdouts who forced Chrysler into bankruptcy is headlined: “In Chrysler Saga, Hedge Funds Cast As Prime Villain: Firms Say They Were Right to Hold Out”.

I was interested to see what kind of argument the firms would be able to mount for the proposition that their actions were “right,” which I take to be a term connoting something like “ethical” or “morally justified.” It turns out, however, that they mean something rather different:

“Some of the characterizations that were used today to refer to us as speculators or to say we’re looking for a bailout is really unfair,” said one executive who spoke on condition of anonymity because of the sensitivity of the matter. “What we’re looking for is a reasonable payout on the value of the debt . . . more in line with what unions and Fiat were getting.”

George Schultze, the managing member of the hedge fund Schultze Asset Management, a Chrysler bondholder, said, “We are simply seeking to enforce our bargained-for rights under well-settled law.”

They’re not actually saying that what they did was right. Rather, they’re saying that it was selfish but also legal. Which is fair enough. People aren’t allowed to just do any old selfish and greedy thing they like. You can’t break into my house and steal my TV. But the law does afford wide latitude for the impulses of selfishness and greed. So one is within one’s rights, under certain circumstances, to insist on one’s ability to inflict suffering on vast numbers of people in order to make more money for your rich self and your rich clients. But it seems very odd to characterize it as “unfair” to be subjected to moral criticism for one’s conduct.

This, however, is one of the signal properties of our age. It’s one thing to model human activity as driven solely by the relentless pursuit of money. Such models can enlighten various situations. But it’s another thing entirely to actually recommend such a lifestyle as optimal or moral, or to make the claim that any conduct that rationally serves the goal of increased personal wealth is therefore “right” or that to criticize self-interested and socially destructive behavior is “unfair.” I think Obama is to be congratulated for his handling of the situation. He didn’t have the FBI storm in, guns blazing, and take these people’s money. He respects the law. He respects property rights. He’s going to go through the bankruptcy process. But he also didn’t respect the ethic of greed that’s come to dominate American public life. He reserved the notion that some conduct is wrong and worthy of criticism and held out the ideal that selfish people might someday be motivated not only by acquisitiveness but by some kind of shame and a desire to behave—or, at a minimum, be seen as behaving—in a public spirited manner.

Reclaiming the idea that there are ethical issues in life that don’t relate to gay marriage or abortion will be an uphill struggle, but it’s an important one.

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.

Department of Fake Conflicts of Interest

The New York Times takes a look at some potential conflicts of interest involving Obama appointee spouses, and after a few legitimate points moves on to some weird stuff:

Several other spouses of people tapped for top Obama administration jobs have careers connected to government.

Susan E. Rice, the United Nations ambassador pick, is married to a producer of the ABC program “This Week With George Stephanopoulos.” Gregory B. Craig, the White House counsel designate, is married to a graphic designer who has worked on Postal Service stamps. And the wife of Timothy F. Geithner, who is Mr. Obama’s choice for Treasury secretary, once worked for Common Cause, a watchdog group that lobbies for tighter ethics rules.

The worry is that Geithner might be unduly influenced by his wife’s penchant for ethical government? That Craig will somehow pervert the ordinary postage stamp design process? That doesn’t make any sense. A married person who lives in Washington, DC and has a spouse will almost certainly have a spouse who has some kind of connection to politics and government. That’s pretty much what people do here. But being married to a graphic designer who’s done contract work for a semi-independent government agency is about as far from a conflict of interest as you’re going to find.

The Moral Sense Test

If you’ve ever taken a philosophy class, you know that a lot of reference gets made to our moral intuitions. This, of course, raises some empirical issues about what “our” intuitions are. The Moral Sense Test” is part of a project to address those issues. Check it out.