Opher BanarieHow Bad Is Greed?
May 19th 2009 21:42
Recently President Obama has blamed much of what lead to the economic meltdown to "greed" by various parties: Investors, bankers, mortgage companies, insurance companies, overpaid executives, etc. The media and the public lap this up, since we all disapprove of "greed". But what is greed and how bad is it? Of course, no one ever points into the mirror and accuses himself of being greedy - it's always the other guy. And what does those greedy persons do that is so bad? Aren't we supposed to be making as much money as possible - didn't Vice President Biden recently point out that it is patriotic to pay taxes? But the public clamours for laws that control what some might label as greed, and the legislative class (and the executive class as well, if Obama is a good example) are willing to pass all the expected regulations.
George F. Will, in his column of May 17th, gives a wonderful overview of just how greed works in an unregulated market.
Using a study of ticket sales for a college football game, Will points out that "greedy" ticket sellers will over-price their tickets, expecting to maximize their profits:
But when government interrupts this punishment by the marketplace, prices are lower, the chance for reward is lower and there are fewer participants overall. (Of course, regulation that makes re-sale of tickets illegal means there will be no participants - at least not in the open marketplace.) This may mean that events would not sell out, that sales of programs and food would be lessened and that such events scale back over time. It is hard to predict the outcome of specific laws, but history shows that government intervention makes markets less efficient and less transparent.
George F. Will, in his column of May 17th, gives a wonderful overview of just how greed works in an unregulated market.
Using a study of ticket sales for a college football game, Will points out that "greedy" ticket sellers will over-price their tickets, expecting to maximize their profits:
A greedy seller -- one who priced his tickets too high -- was less likely than other sellers were to sell them two weeks before the game. Hence he had to resort to much deeper discounts than others did as game day, and the potential worthlessness of his assets, drew near. The larger the number of seats available in the secondary market, and the more transparent that market is, thanks to the Internet, the more likely it is that greed will be punished.
To give the greedy their due, they perform a service: By overpricing, they preserve an eve-of-game supply of tickets for persons willing to pay a premium for last-minute impulse purchases.
To give the greedy their due, they perform a service: By overpricing, they preserve an eve-of-game supply of tickets for persons willing to pay a premium for last-minute impulse purchases.
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Comment by aminoff
Milton Friedman on Greed