Greed. It’s a dirty word (a deadly sin, even). As the story goes, only government can protect us from ourselves. But if there is one thing you ever EVER take away from this blog it is this:
You can’t assume that under certain circumstances (markets) people are greedy and other other circumstances (government) they are angels. In both circumstances, people pursue their own interests. To think otherwise is to go against the grain of human nature. But in their pursuit of self, they will respond to the incentive system they’re operating within. There is nothing that suddenly changes the human being when the system changes. Only the incentive structure changes. This is the lesson of "politics without romance."
So whenever you hear someone say something about government intervening in anything, remember the above. Tattoo it onto the front of your brain. From global warming policy to mortgage backed securities, greed goes unchecked when it is shielded by politics from the distributed forces of market rewards and punishments (+ the rule of law). Those who think that if they can just build the right government program, add enough resources, or find the right angels, government can find some optimum point in the public welfare (whatever that is). But Nobel laureates and bitter experience tell us otherwise.