08 July 2012

The Wonders of Free Enterprise

Not just any old set of economic exchanges constitutes a market. As Robert Reich reminds us in this Op-Ed finagling with the available information and manipulating prices (in this instance interest rates) undermines the conditions necessary for actual market interaction. Turns out that we have pretty good reason to suspect that the big banks are doing this with some regularity. And, such behavior, as Joseph Stiglitz reminds us in this interview underwrites "rent seeking" - just the sort of wholly unproductive activity that right wingers wail about when they think government officials engage in it. The right is resoundingly silent though, when those seeking the rents are execs at companies in the finance sector. (Or did I simply miss the outrage?)

And, just to be clear, all the bluster and bullshit flowing from the culprits at the head of these financial concerns (look here and here for the must egregious, but hardly unique examples) does not alter the above diagnosis, which is basically Economics 100. These guys are hardly geniuses; they are crooks and liars. They should not just lose their jobs for running their companies into the ditch, they should be prosecuted for any provable illegalities. (The latter possibility should be investigated by systematic government inquiry.)  And, if found guilty, they should do hard time. (By 'they' I mean not only the CEOs but their myriad minions.) A reasonably well functioning set of financial markets is a public good and the guys are working as hard as they are able to subvert such markets to their own advantage.

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