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Politics : View from the Center and Left
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To: thames_sider who wrote (92270)10/28/2008 2:01:50 PM
From: cnyndwllr  Read Replies (3) of 541798
 
Thames, am I missing something?

Greenspan and Brooks find it bizarre that:

"Economic models and entire social science disciplines are premised on the assumption that people are mostly engaged in rationally calculating and maximizing their self-interest.

But during this financial crisis, that way of thinking has failed spectacularly."

That's just ignorant. The premise "that people are mostly engaged in rationally calculating and maximizing their self-interest" has not been undercut by this crisis, it's been reaffirmed!

The DECISION MAKERS for the major investment banks absolutely calculated and maximized their self interest. Their window of opportunity was short and they looted the store, cooked the goose that laid the golden eggs and banked the profits in the form of large bonuses.

Sure, the businesses are failing, investors are holding empty bags and the economy is reeling, but no one's taking the money they took for years and hoped to take for another few years. After all, all good things come to an end sometime.

The true problem was that the personal finances of the decision making executives were tied to short term goals, rather than the long term health of their corporations. And their "investors" were also more interested in short term stock prices than long term investment in the company.

If you want to change the long term health of the major corporations then you have to create a system where the executives of those corporations are rewarded for longer term success. If you don't then the very real fact that people will be "rationally calculating and maximizing their self-interest" will often be the undoing of the corporation's long term health. Ed
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