FacebookTwitterRedditEmail

The Myths of the Market

“Greed is good,” said Gordon Geko played by Michael Douglas in his academy award-winning performance in the Oliver Stone movie Wall Street.  “Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.”

“Not so!” say the hodgepodge of individuals occupying Wall Street.  Indeed, if there is one single issue they agree upon it is that greed is responsible for our current economic morass.   And they are right.   Greed led Wall Street traders to mislead their customers about the risk of the assets they sold them and that in turn led to the 2008 market crash and the worse economic crisis since the Great Depression.

Nevertheless, the view that greed is good continues to resonate with many because it is consistent with Adam Smith’s observation in the Wealth of Nationsthat in a market economy individuals are “led by an invisible hand” to promote the interests of society.  The baker, for instance, doesn’t bake bread to mitigate hunger. She bakes bread in order to exchange it for money she needs to purchase other goods.  Yet hunger is eliminated just the same.

But because their goal like Smith’s before them is to make the case for fewer government regulations what Gordon Geko and other miracles of the market mythmakers fail to point out is that the invisible hand is also responsible for the kind of malfeasance that led to the Great Recession.   And to further their case they have a mantra that along with the invisible hand includes the myth of consumer sovereignty, the myth that an individual’s income is a measure of her contribution to society, the myth that market economies breed democracy, and the myth that markets when left to themselves lead, in the words of one economic textbook, to “the particular mix of goods and services most highly valued by society.”

Consumer sovereignty is the idea that in market economies consumers determine what gets produced.  Hence we should not blame the bankers and Wall Street traders for selling us a bill of goods and walking away with our money while we lost our homes and our savings went up in smoke.  They were just giving us the loans and mortgaged backed securities we asked for.   But of course that is not true if they were lying about the risk embodied in the assets they were selling.

The myth that an individual’s income is a measure of her contribution to society, furthermore, is belied by the fact that a world-class athlete like Serena Williams earns many millions while a world-class high school science teacher earns a tiny fraction of that amount.  And the myth that markets breed democracies is belied by the fact that the highly unequal distribution of income and wealth that results when markets are left alone to allocate resources undermines democracy.

The democratic ideal, after all, is one-person one vote.  But in the market it is one dollar one vote.   Hence those who have the most dollars have the greatest say in determining what gets produced and the greatest ability to bankroll the campaigns of favored politicians and pay lobbyists.

Finally, what about the myth that markets lead to the production of those goods society values most?  Just ask yourself whether people would mind if we traded some of the automobiles we produce for better public transportation systems.

“These kids just don’t understand how the world works,” said the Wall Street Journal columnist Stephen Moore on Fox News, referring to the Occupy Wall Street protesters.  But in fact the protesters understand the question Geko was addressing when he made his greed is good speech better than he, Moore and others for whom the myths of the markets are gospel.  Economists call it the principal/agent problem.

Think of our country as USA Inc.   We are the owners or principals.  Our elected representatives are our agents.   We want to design an incentive compatible set of rules to ensure our agents act in our interests and not just the interests of a small group of Wall Street traders and wealthy benefactors who have made out like bandits while we have lost jobs and homes.  That is the message, pure and simple, that the Occupy Wall Street protesters are sending the rest of the world.

Paul Cantor teaches economics at Norwalk Community College in Norwalk, Connecticut.

More articles by:
bernie-the-sandernistas-cover-344x550
December 09, 2019
Jefferson Morley
Trump’s Hand-Picked Prosecutor John Durham Cleared the CIA Once, Will He Again?
Kirkpatrick Sale
Political Collapse: The Center Cannot Hold
Ishmael Reed
Bloomberg Condoned Sexual Assault by NYPD 
W. T. Whitney
Hitting at Cuban Doctors and at Human Solidarity
Louisa Willcox
The Grizzly Cost of Coexistence
Thomas Knapp
Meet Virgil Griffith: America’s Newest Political Prisoner
John Feffer
How the New Right Went Global — and How to Stop It
Ralph Nader
Why Not Also Go With “The Kitchen Table” Impeachable Offenses for Removal?
M. K. Bhadrakumar
Sri Lanka Continues Its Delicate Dance With India
Robert Fisk
Meet the Controversial Actor and Businessman Standing Up Against Egypt’s el-Sisi
Dahr Jamail
Savoring What Remains: Dealing With Climate PTSD
George Wuerthner
Bison Slaughter in Yellowstone…Again
Scott Tucker
Premature Democratic Socialists: Reasons for Hope and Change
Julian Rose
Polish Minister of Health Proposes Carcinogenic 5G Emission Levels as National Norm
Dean Baker
Coal and the Regions Left Behind
Robert Koehler
Envisioning a United World
Weekend Edition
December 06, 2019
Friday - Sunday
Jeffrey St. Clair
Eat an Impeachment
Matthew Hoh
Authorizations for Madness; The Effects and Consequences of Congress’ Endless Permissions for War
Jefferson Morley
Why the Douma Chemical Attack Wasn’t a ‘Managed Massacre’
Andrew Levine
Whatever Happened to the Obama Coalition?
Paul Street
The Dismal Dollar Dems and the Subversion of Democracy
Dave Lindorff
Conviction and Removal Aren’t the Issue; It’s Impeachment of Trump That is Essential
Ron Jacobs
Law Seminar in the Hearing Room: Impeachment Day Six
Linda Pentz Gunter
Why Do We Punish the Peacemakers?
Louis Proyect
Michael Bloomberg and Me
Robert Hunziker
Permafrost Hits a Grim Threshold
Joseph Natoli
What We Must Do
Evaggelos Vallianatos
Global Poison Spring
Robert Fantina
Is Kashmir India’s Palestine?
Charles McKelvey
A Theory of Truth From the South
Walden Bello
How the Battle of Seattle Made the Truth About Globalization True
Evan Jones
BNP Before a French Court
Norman Solomon
Kerry’s Endorsement of Biden Fits: Two Deceptive Supporters of the Iraq War
Torsten Bewernitz – Gabriel Kuhn
Syndicalism for the Twenty-First Century: From Unionism to Class-Struggle Militancy
Matthew Stevenson
Across the Balkans: From Banja Luka to Sarajevo
Thomas Knapp
NATO is a Brain Dead, Obsolete, Rabid Dog. Euthanize It.
Forrest Hylton
Bolivia’s Coup Government: a Far-Right Horror Show
M. G. Piety
A Lesson From the Danes on Immigration
Ellen Isaacs
The Audacity of Hypocrisy
Monika Zgustova
Chernobyl, Lies and Messianism in Russia
Manuel García, Jr.
From Caesar’s Last Breath to Ours
Binoy Kampmark
Going to the ICJ: Myanmar, Genocide and Aung San Suu Kyi’s Gamble
Jill Richardson
Marijuana and the Myth of the “Gateway Drug”
Muzamil Bhat
Srinagar’s Shikaras: Still Waters Run Deep Losses
Gaither Stewart
War and Betrayal: Change and Transformation
FacebookTwitterRedditEmail