Item — HN Reader

And more: you talk about markets as if they're wise and efficient. I think you know better than that. Goldman Sachs takes huge risks, gets compensated, fails, gets bailed out by the working class citizens, goes on to pay an average salary of $700,000[1]. Is that what these people are worth? Yes, if the market says so? Do the tax-payers have a say? They should, if they're the ones "insuring" them.

New methods and technology in fishing have meant that we've been (nearly quite literally) sweeping the ocean. No one disputes that we're down below 10% of large fish stocks. The question is, if we stop now, will the fish be able to get back up again to self-sustaining levels? It's unkown. But we haven't stopped fishing/sweeping. Why? Because it's not a 100%, and as long as that's the case, the fishing industry is loathe to lose its income on a mere 'speculation'.

The free market is sometimes a bright child, and other times a petulant, special-needs brat. It is often shortsighted and cliquish. John Nash discovered this and corrected it, but we still are operating in the old mode of Smith thinking. You say that a CEO is worth 200-times an average worker because the markets say so, but that's not a Nash equilibrium. You can have it for a while but it won't hold for that very reason. Extreme wealth distribution in either direction (very equal or very unequal) is not a Nash equilibrium and, until it become one, the center won't hold.

It's you, Paul, not these children/students you chide in your essay, who's operating under a poor model.

[1] http://www.msnbc.msn.com/id/32809328/ns/business-the_new_yor...

1 comments

Goldman Sachs takes huge risks, gets compensated, fails, gets bailed out by the working class citizens, goes on to pay an average salary of $700,000[1]. Is that what these people are worth? Yes, if the market says so? Do the tax-payers have a say? They should, if they're the ones "insuring" them.

While I don't disagree that this is disturbing... it's not really a failure of markets so much as it's a failure of government.

I'm not one to bash on 'big business' and I understand the need to bail out the banking system to prevent cascading failures, but you have to admit things like this show a remarkable level of regulatory and legislative 'capture' on the part of certain business interests.

But back to the essay... when I read it, my overall take was that he was trying to point out that wealth is not a zero sum game. (Sometimes money can be a zero sum game, but wealth is not merely money.) I'd have to agree that too many people see everything as zero sum.

As an example, look at a hot button issue like immigration in the US. Many people see that in zero sum terms... the more immigrants that come, the more jobs they take from the natives. But that fails to see the other side of the equation. Immigrant labor is why you can buy cheap vegetables from California, it's why you can build a house cheaply and in only a couple months. Yes, this is detrimental to the former producers of those goods/services, but it's also beneficial to the consumers of those goods and services.

Anyway, I'm not advocating unrestricted immigration or even trying to make that the topic of this discussion. I was just trying to point out how a zero sum viewpoint doesn't tell the whole story.