The Capitalist Manifesto: Greed Is Good (To a point)

http://www.newsweek.com/id/201935?from=rss

by swombat • 17 years ago

23 34 17 years ago

gaius2• 17 years ago

What Gordon Gekko actually said:

The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA.

quizbiz• 17 years ago

They are making a sequel.

bwd3• 17 years ago

And remember that Gordon Gekko was Oliver Stone's foil for Carl Fox (the father of the main character) who was meant to embody the evil of the 80s takeover era. This speech was based on a University of California speech given by Ivan Boesky, in which he said: "Greed is all right, by the way. I want you to know that. I think greed is healthy. You can be greedy and still feel good about yourself."

gaius2• 17 years ago

Gekko was the embodiment of capitalism itself and therefore amoral, not evil.

The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated. In the last seven deals that I've been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars. Thank you. I am not a destroyer of companies. I am a liberator of them!

lionhearted2• 17 years ago

A good piece. I have a serious question for people smarter than me about the following:

"Then there was the 1997 East Asian crisis, during the depths of which Paul Krugman wrote in a Fortune cover essay, "Never in the course of economic events—not even in the early years of the Depression—has so large a part of the world economy experienced so devastating a fall from grace." He went on to argue that if Asian countries did not adopt his radical strategy—currency controls—"we could be looking at the kind of slump that 60 years ago devastated societies, destabilized governments, and eventually led to war." Only one Asian country instituted currency controls, and partial ones at that. All rebounded within two years."

How'd Krugman ever get accepted as an economist? He seems to be a massive doomcrier who is consistently wrong, and uses a lot of anecdotes and very few hard numbers. Which works great for Gladwell, but not so good for economics (heck, I dropped economics as my major because I didn't want to deal with econometrics - but I still have a healthy respect for it).

There's some tremendously intelligent economists that I disagree with their overall message, but very much respect their contributions. If you take the time to read and decipher Marx, Gramasci, and Keynes, they said some really brilliant things. Very, very smart people.

But Krugman? The guy seems totally bankrupt. And I've tried to read his stuff, and I keep seeing anecdotes, doomcrying, and him just being provably wrong often without being verifiably correct ever. Can someone point me to some smart reading material of his, not babysitter scrip anecdote nonsense? I'd like to learn from the guy if he has made some good contributions, or get to the bottom of why he gets respect if not. Always been curious about this one.

nazgulnarsil8• 17 years ago

there is a selection effect going on in the higher levels of economic analysis whereby those who tell politicians the narratives they need to justify power grabbing are the ones promoted into the public sphere. most economists will decry such shameless behavior (but who is to say how much of this is jealousy). the other economists you mention are guilty of the same thing. Keynes in particular just bases entire chapters of his General Theory on trivially fallacious theses. Marx isn't even wrong, he's just exploring a world that isn't related to reality (there is no working model of the labor theory of value that makes predictions).

lionhearted2• 17 years ago

> there is a selection effect going on in the higher levels of economic analysis whereby those who tell politicians the narratives they need to justify power grabbing are the ones promoted into the public sphere.

That makes sense, good point nazgulnarsil. Thanks.

> Keynes in particular just bases entire chapters of his General Theory on trivially fallacious theses. Marx isn't even wrong, he's just exploring a world that isn't related to reality

Definitely true - but both of them made observations that were true and correct, which lends a bit of credibility to their work. Keynes for instance, "workers resist a reduction in monetary wages, [but] it is not their practice to withdraw their labor whenever there is a rise in the price of wage goods" (General Theory, p9). Which is true and correct - laborers don't notice gradual inflation, so governments can use it to lower wages and increase tax revenues under a progressive tax system (wages gradually rise, tax brackets remain fixed, therefore a greater percentage of GDP goes to tax revenues without an official tax increase).

These aren't good reasons to do what he advocates, but Keynes at least has some correct observations. Really insightful ones actually, if you listen to people who violently disagree with Keynesian economics, many of them have the utmost respect for him. (Friedman is the first one to come to mind, who always spoke well of Keynes).

But bringing it back around - Krugman... I haven't seen anything intelligent from him, ever. Not a single observation of the way the world works or implication that seems correct. He seems like a two-bit fearmonger, and he doesn't back off when he's proven wrong. I'd like to be wrong though, if there's any admirers of him that have links to good work by him. It doesn't have to be popular economics either - a link to a good academic paper would work too, if there is one. I really cling to a hope that it's not possible for an economist to get mainstream recognition just by partisan sucking up - I really hope so, as economics has such huge implications for society.

rms2• 17 years ago

Here is a summary of Krugman's work leading to the Nobel Prize with all the references for you to follow up on. If you don't have journal access, email me with a link to the paywall site and I can send you the articles you want.

http://www.economics.ox.ac.uk/Research/wp/pdf/paper423.pdf

Basically, you have to separate his work as an economist from his politics or make a general distinction between quantitative and literary economics. Quantitative economics involves functions and calculus. Literary economics involves English words. I respect Krugman's intuitions even if his predictions are often wrong. It's hard to predict the future, even for a noted economist.

anamax• 17 years ago

> Basically, you have to separate his work as an economist from his politics or make a general distinction between quantitative and literary economics.

And we think that the Nobel folks made that separation and didn't do it to "kick Bush in the leg" (to quote a committee member's comment in a previous year about a given award)....

> I respect Krugman's intuitions even if his predictions are often wrong. It's hard to predict the future, even for a noted economist.

The point of science is to predict the future....

bwd3• 17 years ago

"How'd Krugman ever get accepted as an economist? He seems to be a massive doomcrier who is consistently wrong, and uses a lot of anecdotes and very few hard numbers."

You need to separate Krugman's work as an academic economist from his work as a "popular economist" and political commentator. I'm not an economist, but my understanding is that his academic work is outstanding and has contributed significantly to improving the models for understanding international trade. He also correctly predicted that fixed exchange rate regimes would be dangerously unstable (a lesson that not everybody has learned yet).

As you point out however, he was incorrect in his prescription for how to deal with the currency crisis. I'm going to postulate here that economists don't have really good models for studying how to recover from crisis events because they are relatively rare in comparison to their complexity, so the mathematical tools of economics are unable to explain them well. When you're placed in a situation in which you do not have enough information to make a good recommendation, the correct action is to admit that fact. That goes for the current crisis as well. Krugman seems to have very strong idealogical tendencies, given that he wrote a book called "The Conscience of a Liberal," and thus expresses his opinion about how to handle these matters much more forcefully than is warranted by the information that is provided by economics. In my opinion, this is an abuse of the natural authority provided by his economic credentials, and he should probably stick to writing articles for the academic community and not the popular press.

nazgulnarsil8• 17 years ago

us free marketers have already lost...capitalism, greed, these are terms invented by anti-free market ideologues. the free market existed before the term capitalism was coined by Marx, what is greed but self-interest? those who pretend to be concerned with something other than their own welfare are in denial at best, and manipulative liars at worst.

If we only ever debate on their terms we can not hope to avoid the stupid Randian take on liberty and markets that dominates most people's thoughts about capitalism.

rw• 17 years ago

What do we want to achieve?

Markets, with all of their permutations, are just a few tools in our toolbox. I completely agree with you that the debate needs to be made much less ideological and much more precise, but we cannot pretend these discussions are happening in a vacuum.

I am a fan of Rawls' "veil of ignorance" line of reasoning. This is probably because I want to embrace "luck" not as an excuse for domination, but as something orthogonal to control and subjugation: diversity necessary for us to successfully traverse the fitness landscape, hopefully enabling us, collectively, to move towards the stars and friendly posthuman intelligences.

nazgulnarsil8• 17 years ago

markets are not really a thing. they are just what happens in the absence of people shoving guns in other peoples faces. in the absence of force the only way to get what you want is to offer other people things that they want in exchange. this is civilization, the alternatives are barbarism.

geezer• 17 years ago

"...those who pretend to be concerned with something other than their own welfare are in denial at best, and manipulative liars at worst."

True, but some people view self-interest much more narrowly than others. For example, some oppose welfare for the poor because they do not want their money going to people who do not work as hard. This is a narrow view of self interest. Others support welfare because they believe that in the absence of welfare, the poor will engage in illegal activities, such as robberies, which will inevitably cost more than taxes that go towards paying for welfare. This is a much broader view of self interest.

Capitalism, unfortunately, has come to be identified with the narrow view of self-interest.

gort• 17 years ago

"those who pretend to be concerned with something other than their own welfare are in denial at best, and manipulative liars at worst."

http://wiki.lesswrong.com/wiki/Typical_mind_fallacy

You are not me.

nazgulnarsil8• 17 years ago

my statement wasn't based on anecdotal evidence.

Ardit20• 17 years ago

We are self-interested creatures. We are selfish. Evolutionary psychology will go as far as to say that altruism is selfish. The question is, assuming that each for his own self is a natural state of being, is it a good thing?

If we all act for our own interest, then there is competition and I suppose the more adapted will win, which as it happens is the foundation of evolution. So to speak of checking our own moral compass is empty rhetorics because morality as such does not even exist. Only jusgments as to what is right to do for my own interest and what consequences there are.

Therefore, supposing that morality does not exist, the only way to enforce this "moral compass" is by legislation or culture. The culture in such places is greed and perhaps rightly so as if someone makes money, that money will go somewhere surely, hence making more money, etcetera. If the culture is greed therefore, the only way is imposing a code of conduct supervised by some governing body and or imposing legislation and or, there are ups and downs in life, why should we expect the economy to be up always and never go down.

I think the system is fine, I would have liked to see the banks fail to be honest. If they did not do their job properly they should be out of a job. Otherwise we are just feeding an artificial creature which does not adhere to the laws of evolution and by association competition, perhaps to the detriment of us all.

rue• 17 years ago

As Marx summarised it, capitalism is characterised by a pattern of cyclical booms and crashes, generally crashing deeper each time.

He was not, actually, positing that it would eventually collapse but that it may survive its cycles so long as there are enough "willing" people to take the brunt of the crashes and least of the booms at the bottom rungs of society.

Of course, he probably had less of an idea about the resource problems we will be facing in the near- to mid future, complicating capitalism's crash-recovery.

Personally, I think it will take at least two more of these before there is anywhere near enough support for abandoning capitalism.

known• 17 years ago

I think Greed seeds and stimulates Passion to some extent.

bokonist2• 17 years ago

Any exchange between two actors can be in one of four categories:

1) voluntary in-kind exchange ( Christmas presents, buying each other rounds of drinks)

2) coercive in-kind exchange ( corvee, slavery, conscription, bound serfdom)

3) voluntary monetary exchange ( buying food at the super market )

4) coercive monetary exchange ( taxes )

#1 is great, but unfortunately is does not scale. It works very well among family, friends, and small communities, but it quickly breaks down in larger economies.

Of the remainder, #3 seems obviously the superior way to engage in transactions. And #3 is free market capitalism. Capitalism is not good because greed is good. Capitalism is good because it forces greedy people to actual produce something of value and exchange it, rather than just taking it from others.

The financial crisis is not an example of #3 but of #4. The "too big too fail" and "lender of last resort" policies have been in place for decades. They allowed banks to take huge risk, and then when the risks failed, the government uses its coercive powers to tax the public and bail out the financial system, thus encouraging even more risk taking.

viggity• 17 years ago

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." - Adam Smith

johnnybgoode• 17 years ago

There's a big problem here. When people like this use the word "capitalism" to mean the massive, ultra-financialized, state corporatist economy we have today, they confuse many into thinking this has something to do with free markets based on voluntary exchange.

So people who are understandably annoyed that Wall Streeters make millions without contributing very much, if anything, are unnecessarily encouraged to support state socialist policies. In reality, it is the lack of free markets which caused such problems in the first place.

The Capitalist Manifesto: Greed Is Good (To a point)

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