The idea that people maximize their individual interests is one of those crazy ideas that economists have to postulate in order to make their crazy theories work. In fact, people sometimes maximize their personal interests, sometimes their family interests, and sometimes, with great ferocity, their group interests, at the expense both to group and family. I have no general opinion which of these is better. They all can be terrifying.
N From: [email protected] [mailto:[email protected]] On Behalf Of joseph spinden Sent: Saturday, October 22, 2011 3:07 PM To: The Friday Morning Applied Complexity Coffee Group Subject: Re: [FRIAM] Next Dictator I think the problem is incentives -- not simply on Wall Street, but in the broader world as well: In general, people act to maximize their own individual rewards. As long as the system provides individuals with opportunities for large rewards with little personal risk, people will act to maximize their own individual rewards. If they are right, they earn big rewards. If wrong, others pay. Joe On 10/22/11 9:55 AM, Owen Densmore wrote: On Sat, Oct 22, 2011 at 9:09 AM, Alfredo Covaleda <[email protected]> wrote: After Gadaffi's death a local newspaper wrote : "who is going to be the next dictator to fall?". Well, my answer is: Wall Street. -- Alfredo I certainly agree with the sentiment. And I do believe the core signal in our noise is the lack of a robust middle class, thus I find very troubling the divide between the wealthy and the "rest of us" and our immense struggle just to get by nowadays. But I don't think the problem is wall street per se. After all, wall street funds companies who build things that are useful. I think the problems are 1) in the financial sector 2) caused by too-big-to-fail, including monopolies. The financial sector is "different". It makes money by manipulating money. Sometimes that's fine, for example futures markets help stabilize the price of components of products we buy. Hedge is not a bad word here. Even lending is important when it too relates to real things like houses and companies building products. I think the disconnect is when real products and people are abstracted out of the financial world, when we're building bundles of loans, slicing and dicing, and nothing real in sight. Or when we are trading in currencies. Big is different too, distorting markets and dangerous if they fail. As much as we hate them, regulations are important. But they are very hard to manage, and with the global economy, they need to be balanced world wide. And we don't really know which ones will really build the right incentives. We have, however, just learned by experiments gone wrong, that letting banks also be insurers is a mistake. And that banks and companies are too large, they distort the economy, and worse, need rescuing when they err. So yes, let the financial dictator fail next. Now lets figure out how! -- Owen ============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org -- "Sunlight is the best disinfectant." -- Supreme Court Justice Louis D. Brandeis, 1913.
============================================================ FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org
