03
Dec
09

Quote of the day, dubious incentives edition

Russ Roberts nails it:

The people who allegedly made those rookie mistakes made enormous amounts of money. My questions: is it a mistake if the result is making an enormous amount of money?

My view is that they weren’t making a mistake. They did precisely what the incentives told them to do–take lots of risks with borrowed money. In the worse case scenario, you’ll get fabulously rich–the execs at Lehman and Bear. In the best case scenario, you get even more money than that–the execs at Goldman and JP Morgan. So what do mistakes have to do with the crisis?

The taxpayers ended up paying the price, not the risk-takers. Our mistake was not paying attention. But we usually don’t. We don’t have time or much of an incentive.

If we give people powerful incentives to do something abusive, and then complain when they do it… who’s at fault, precisely?

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1 Response to “Quote of the day, dubious incentives edition”


  1. 1 Not Sure
    December 3, 2009 at 17:58

    “If we give people powerful incentives to do something abusive, and then complain when they do it… who’s at fault, precisely?”

    Capitalism? The free market? Walmart?

    It sure couldn’t be the government, because everybody knows that those selfless and incredibly smart public servants have only our best interests at heart and the only reason we’re not experiencing heaven on earth today is because the proles keep screwing up their Grand Plans.


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anarchocapitalist agitprop

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