Dear Mr. Economy,
I have a confession to make. There are many things I don't understand about you, especially now that you're in such poor health. I was thinking that maybe if you helped me a little, we could both get better.
First, businesses like airlines, big banks, car makers and insurance companies. If these companies are all the first domino to fall in taking down a national or global economy (which is impossible by definition), and they truly do need government intervention to prop them up when they get into trouble, then why aren't they nationalized to begin with?
A follow-up question: If I'm the CEO, president or CFO at--or on the board of--one of these organizations, and I always know in the back of my head that if things get really bad in the future I'll probably get government help, then doesn't that affect my decision-making today, even in good times? In risk terms, doesn't it give me an incentive to take more risk than I should?
Next, AIG. If a single company like this is too big to fail (or more accurately, for us to let it fail), then doesn't it have a natural monopoly by definition? Isn't the competitive-rich capitalist system supposed to prevent monopoly power, and thus eliminate the "too big to fail" issue in the first place? I'm confused.
And finally, on a more philosophical note, let's be honest: Economics isn't a science; it's psychology. And value isn't real; it's a fiction. I don't care if we go back to the gold standard. Even gold has no intrinsic value. We assign it. We say "this looks beautiful and it's relatively rare and you can do things with it, therefore it has value." So if our entire economic system is based on psychological fiction, how can we go from producing and buying a ton of stuff one day to producing and buying nothing the next?
It's all just a story we've made up over time. Let's rewrite it!
Thank you for your time. I hope you get better. (Not just look better, but actually GET better.)
Mr. Liberal Arts Major
Friday, April 3, 2009
Dear Mr. Economy,
Posted by Marc Conklin at 10:39 AM