Do Economists Breed Greed and Guile?
blogs.harvardbusiness.org
blogs.harvardbusiness.org
However, I do agree with the broader point here that the financial and corporate worlds have accepted a corrosive morality where greed is good. I think part of the problem here is lack of regulation. Without any punishment for bad behavior, it just grew out of control.
We had regulation that rewarded bad behavior. Subprimes were "encouraged" by regulation because it was considered a social good to for folks who couldn't afford houses to get them. AIG was told to figure out how to "insure" loan portfolios. Banks were given favorable treatment if they held fannie and freddie stock. And then there's fannie and freddie themselves, creations of regulation. The only lack of regulation was of fannie and freddie themselves - they were protected from oversight by the very pols who are currently screaming about more regulation. (One of Obama's chief financial advisors was CEO of Fannie and pulled out $90M. You don't hear anyone asking him to "give back".)
FDIC insurance tells depositors that their money is safe, so they don't worry about whether they're depositing their money in a bad bank.
Regulation also pushed banks into technical insolvency when they arguably weren't insolvent. (Many of the portfolios are performing as predicted, cash flow and everything, yet the market is spooked so the market price is so low that the banks are deemed insolvent. The banks want desperately to keep these portfolios or to "buy" them at the current market value.)
"A host of studies show that people with stronger training in economics are more self-seeking, less charitable, and more corruptible than people trained in other subjects."
Not all economists build fancy mathematic model to explain their world. Indeed, there are economists who emphasized the improtance of the entrepeneur in society. There are even economists who think building mathematical model is the wrong way to approach the science of economics.
Unlike other scientific fields, you couldn't trust an opinion of one economist as the consenus of everybody in the field.
I studied economics, but not business. Since when do business schools work with complex mathematical models? I thought they were just the place where 'soft' skills like leadership were trained with lots of exercises, in a practical but completely unmathematical way. Surely they would not study agency theory?
I don't think studying economics affected my greed or my guile, and I never had much of either. It did brainwash me in another way. Economics is the religion of the invisible hand, and I really did believe that if you just let the market do its magic everything would fall into place. There is this belief that greed will make you do something useful in order to get paid. For me this has never meant that 'greed is good'. My interpretation of this was that the market will reward you for doing useful things.
I went on to do useless things anyway, but it took me some years to be proud of it. And having lived through a few bubbles I don't find the market so magic anymore.