I’m bemused at the way we’re perpetually told the fundamental cause of the ongoing meltdown is Wall Street “greed,” as though that somehow counted as an explanation. How, pray, would we describe it if mortgage lenders had rejected many more applications from lower-income folks, on the grounds that they were poor risks? Well, greed, of course. Pretty much whatever they did, they’d be doing because they expected it to maximize their profit; the issue is their judgement, not their motives. Or put another way: The problem isn’t that people were greedy, it’s that they weren’t very good at being greedy.
Update: Let me clarify a little. Look, I’m not denying that in telling the causal story of this meltdown, “greed” will come into it—because greed will come into every causal story you tell about markets. The point is that invoking a constant is an unhelpful way to account for a specific event. Yes, people running investment banks are greedy. They were greedy five years ago, and ten, and they’ll be greedy in another five or ten. Unless someone wants to speculate that somehow the current crop of folks are all just naturally more avaricious than their predecessors, either as a massive coincidence or for some occult sociological reason, this is not a good candidate for helping us suss out what’s going wrong right now.