Iniquity, Irresponsibility, and/or Incentives?
November 3, 2011
Crises breed witch hunts. Ongoing economic and political malaise has spawned a lot of different theories for how we got into this mess, and different groups have their preferred bad guys. Stories involving clear heroes and villains make for animated talk shows, but they provide poor descriptions of what is actually going on. Reality is more subtle.
Perhaps unsurprisingly, the Occupy Wall Street movement is blaming Wall Street. The Occupiers are urging us to “stop Wall Street greed” and “stop corporate greed,” but as many commentators have pointed out, blaming “greed” misses the point. People generally pursue their own interests, however they choose to define it, and one of the virtues of free market institutions is that they generally channel that pursuit of self-interest toward socially beneficial ends. One of the blessings of the last few centuries has been that we have adopted economic, political, and social institutions that have channeled the pursuit of self-interest away from predation and toward production.
Broadly speaking, the way to accomplish your goals in a free market is to find ways to help others accomplish theirs. For too much of history, the way to accomplish your goals was to find ways to prevent others from accomplishing theirs (like taking their stuff). Even if we redistributed all the wealth today, the distribution would be unequal again tomorrow. Some would be successful entrepreneurs. Some would be unsuccessful. Some would be lucky. Some would be unlucky. Some would be responsible. Others wouldn’t. Perhaps we could redistribute wealth again, but this would eliminate incentives to produce anything to redistribute.
