Opinion

Edward Hadas

Greed, justice and deception

Edward Hadas
Dec 19, 2012 12:15 UTC

Greed contributes to all the economic and financial woes of prosperous societies. The United States and other rich countries produce much more than is needed to support all of their people in comfort, so if desires were all truly modest, there would be few problems. Greed encourages people to decide that their own share is too small. Greed influences the popular desire for GDP growth (more, faster), financial gains (higher house prices as a human right) and total economic security (guaranteed pension, come what may). Voters’ greed encourages governments to spend more and tax less.

During the boom years, politicians and economists consistently underestimated greed’s disruptive power. While few endorsed the extremist view that greed is actually good, even fewer acted as if it were dangerous. The rhetoric changed during the crisis. It has become fashionable to add “greedy” to the description of any unpopular group – bankers, highly paid executives, rich people in general, welfare cheats.

In theory, the entry of greed into the public discourse ought to be helpful. If those subject to immoderate desire could be identified with certainty, then society might take up arms against them. While we might never win the battle, we could at least hope to shame and restrain the malefactors.

As a political agenda-item, though, “the fight against greed” has a big problem; greed is much easier to identify in other people than in ourselves. The current debate on raising U.S. taxes on the very rich is typical. Few people have any doubt over who is being greedy about the tax system: it’s someone else. Yes, there is the odd Warren Buffett, a multi-billionaire who thinks he is under-taxed. However, the tiny platoon of the self-accusing is up against two large armies of the self-justifying. The privileged force, small but powerful, is certain that the government is already getting at least a fair share of their incomes. The poor, the middle class and the old, who make up the much larger tax-them-more brigades, fight among themselves, but they are all certain that their motivation is justice, not greed.

The problem is profound, and not merely economic. In all domains, greed can be crude – think of a toddler reaching for a sibling’s toy or slice of cake – but it often masquerades as a virtuous desire for deal that is “only fair”.

A tale of two half-centuries

Edward Hadas
Dec 12, 2012 14:05 UTC

The future rarely turns out as expected. Imagine, for example, two sets of economic predictions for the half-century that began in 1962. The first, the Blind Guide, is written with only the knowledge available then. The second, the Retrospective Guide, is based on what actually happened.

The biggest economic issue a half-century ago was the battle of economic systems: communism versus capitalism. The Blind Guide would have predicted a lively rivalry in 2012. True, communist countries were already falling behind economically in Europe, but political oppression would keep the system well entrenched. Besides, 50 years ago many Western experts still believed that communism’s social levelling and central planning offered poor countries the best hope of rapid economic growth.

In the retrospective volume, the future abject failure of communism has a prominent place. The decline would be slow, but the people would inevitably become increasingly disenchanted with the system’s incompetence, hypocrisy and cruelty. The will of the people ultimately prevailed.

Economics for Christmas

Edward Hadas
Dec 5, 2012 12:51 UTC

The Christmas season is a particularly good time to think about the fundamental weaknesses of conventional economic theory. Frenzied shopping for gifts cannot easily be reconciled with the standard model’s dour “economic man”, a creature who “who inevitably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial”, in the classic definition of John Stuart Mill. The joyful Christmas season is also a good period to offer praise for a line of economic thinking which draws on a much more flattering view of human nature.

Historically, this approach has been closely associated with the Catholic Church, but “Catholic Economics” is a misleading title, since the thinking is not denominational – for example, Justin Welby, the incoming leader of the Church of England, is a fan. It is not really religious; many atheists would reject the conventional assumption that people always and everywhere calculate their selfish advantage. In honour of the season, I will use “Christmas economics” to describe this anti-Scrooge analysis, which is based on what might be called the Christmas economic person. Unlike the simple and narrowly rational economic man, this is a complicated creature, largely motivated by the desire to be and to do good, but also prone to greed and foolishness. That combination is illogical, but it is realistic; people always show a frustrating mix of virtue and vice.

A comparison shows the advantages of Christmas economics over the standard approach. Consider the difference between the conventional idea of a market and “giving in order to acquire”, a phrase used by Pope Benedict XVI in his Caritas in Veritate. Note that the economists’ market is not a physical place to shop, like a supermarket. It is a conceptual place where purely self-interested economic men trade with one another until they are all as satisfied as they possibly can be, a state known as equilibrium.

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