Getting Angry While Reading the New York Times

In general, I try to be dispassionate when thinking about economics or reading people with whom I disagree.  However, I failed a couple of times over the weekend.  An opinon piece in Sunday's NY Times written by William Deresiewicz, "Capitalists and Other Psychopaths," began my anger.  He refers to a recent (unnamed) study that found that 10% of the people who work on Wall Street are "clinical psychopaths." He then goes on to say that he cannot understand why anyone would find this puzzling. He writes, "Wall Street is capitalism in its purest form, and capitalism is predicated on bad behavior." He cites Mandeville's, "The Fable of the Bees" to support his claim. He pokes fun at business colleges, asking if they have courses called "Robbing Widows and Orphans" and the like.

To this point I could have just ignored the piece, but he continues by denigrating entrepreneurship, and then to claim that ethics in capitalism is purely optional.  He states that capitalis values our antithetical to Christian ones and that capitalist values are antithetical to democratic ones.

Mr. Deresiewicz has a simplistic version of capitalism, Christianity and democracy.  It is worth noting that he begins with Mandeville rather than Adam Smith.  Smith did not like Mandeville's work.  Smith's first great work was The Theory of Moral Sentiments, in which he provided an examination of morality in a commercial society.  Most scholars today think the book underpins The Wealth of Nations.  Capitalism relies on people honoring contracts even when it isn't in their short-term interest.  Reputation is important for most firms, and people work hard and take losses rather than allow their reputation to be tarnished.  Of course examples can be found of people who fail to live up to these minimal standards, but such people can be found in any line of work, including politicians who lie, writers who plagarize, atheletes who cheat, and teachers who are lazy.

Since Mr. Deresiewicz believes that profit-seeking implies bad behavior, he sees capitalism as inconsistent with Christianity. Given his assumption, he would be correct. But capitalism does not imply or depend on bad behavior.  Self-interest is not selfishness.  People work together in teams, people are employed with jobs that can support their families, and goods and services are produced that have enriched many, as well as lead to longer and healthier lives.

It is also noteworthy that Mr. Deresiewicz offers no alternative model.  The socialist model of the Soviet Union failed.  Some kind of third way has been offered by many, but failed to be implemented or to succeed when an attempt at implementation has been made.

On another, though not totally unrelated, note--I was thinking about JP Morgan's $2 billion loss that came out before the weekend.  It is being used to increase demands for regulations on banking and a strong version of the Volker rule.  The idea is that people in some industries cannot be trusted to reduce risk and government regulators need to be involved to prevent systemic problems.  I thought also of Solyndra and the loss of taxpayer money it signified. I turns out I was not alone. So did Paul Krugman (in his blog), although we came to different conclusions. He argued that he loss at Solyndra is no big deal since such losses happen in the private sector also.  He also used his blog to denigrate Jamie Dimon in an ad hominum way as is his want.  The example of Solyndra is important in my view because of the presumption that mistakes that can be costly to the taxpayer should be monitored by the government in some way. But, who monitors the monitor?  Firms try to influence regulators, but when subsidies are offered by the government, it is likely that efforts to use personal relationships or other methods to win the subsidy will be used.  If banks need regulation, might not government agencies need regulation when awarding subsidies? But, how effective is one agency monitoring another? 

Finally, on a totally different note, the "news" that Mitt Romney may have bullied someone in high school.  Many have raised the question of how far back in a candidate's life can the press go to look for potentially damaging events.  As a Viet Nam veteran who lived through the tumult of the 60s and early 70s, I long ago decided that a candidate's behavior during those times is not relevant in my decision making about the candidate. They were difficult times and young men often made difficult choices.  I don't presume that the decision an 18-year-old makes is necessarily a good predictor of decisions he or she will make at 48.  This goes in spades for someone who is 16 years old.  Yet, two of the op-ed pieces in Saturday's NY Times discussed the story about Romney and tried to make him look bad while still making token statements about how we shouldn't look at cadidiates' lives at such a young age. How hypocritical.  (I don't think either writer claims to be a capitalist either.)