I must admit, I am a bit out of the loop when it comes to current events. For a blogger, I am not terribly news savvy. Then again, since I recognized this and changed my focus to more general topics of politics and economics, I suppose it isn't as much of a detriment to my blog, since I don't rely on being on the cutting edge and commenting on the breaking news to carry my writing.
Still, I am a bit embarrassed to admit I did not know anything about the "Occupy Wall Street" protest going on for the last 2 weeks until an old friend, of strong left wing persuasion, sent me an invitation to a "planning session" for "Occupy Baltimore", a group planning to bring the same pointless gathering and mass whinging to Charm City. Anyway, in the course of trying to figure out what this whole thing was, I read some links about the "Occupy Wall Street" protests, and found this one
. There is nothing particularly noteworthy on it, the usual propaganda, "Wall St is War St", greedy bankers, oppressed women and minorities and so on. However, reading it, I did think that I have not addressed one of the most common complaints, and one, sadly sometimes voiced by supposed right wingers as well as left. And that is the denunciation of "greedy bankers". Sadly, even supposed conservatives ("Et Tu, Town Hall?
") sometimes fall into this1
, and so I think it is time we look at banking and ask ourselves why this particular industry gets so often maligned.
Before beginning, let me address a few issues which may come up, and need to be dealt with before we can discuss this issue properly.
The first would be greed in general. Bankers are often criticized for thinking about nothing but money. And that is an absurd criticism. It is akin to accusing a cobbler of thinking about nothing but shoes. Of course, cobblers think about shoes and money, because they sell shoes, and earn money. Bankers, because they deal in nothing but money, obviously think about money. So criticizing them for doing this is nonsensical. You might as well call a gynecologist a pervert for looking at women's genitals all day, or accuse chefs of gluttony for thinking only of food. Of course bankers think about money, money is their bread and butter.
But, perhaps the charge is bankers are especially avaricious. However, a glance at the world would show that is not the case. The degree of "greed" shown is hardly out of line with the rest of the world. If you sell clothes for a living, do you just give some away to random people? Or lend them to people and then never charge them? Yet we expect bankers to just randomly forgive debts, which is the same as a tailor giving away clothes, or allowing people to wear them for free and then bring them back. Bankers make a living by connecting unused money with those who need it, and earn profit by the payment of interest. If they allow you to stop paying, they earn nothing. (It is actually worse than that as we will see shortly.) I could go on, but let me just say, bankers charge for their services as does everyone else, yet only bankers are accused of being greedy because of it. (Well, bankers and commodity dealers -- See "Authoritarian
", "Those Darn Speculators
", "Fear of the "Big"
", "In Defense of Speculators
", "Stop Big Porcelain Now!
", "Absurdities on Oil
", "Greed and the Price of Oil
" and "Misunderstanding the Market
Even were bankers somehow shown to be especially "greedy", that in itself is a rather meaningless accusation. Are those leveling this charge people who work and refuse to accept a salary? People who turn down pay raises? Who go to a store and say "$10? It is worth at least $12. Please take two more dollars!" If they don't do these things, then they are "greedy" too! ("Greed
", "Greed Part 2
") In fact, we all show signs of greed. We seek in every exchange to at least get as much as we give, and probably more. Sometimes the "pay off" is the joy we get from giving to another, or the gratitude someone shows, but we still never give away something expecting to be worse off for it. And that is good, as making losing trades on purpose is a sure way to kill one's self. As a species, seeking to improve one's lot is the route to survival, ad so greed is nothing but the only sensible path.
Which makes me wonder why we always denounce greed. Greed is nothing more than the only reasonable approach to making individual choices, especially when society has moved beyond isolated self-sufficient individuals -- or families -- and entered into an era of exchange and communal living. "Envy", on the other hand, is a very sinister emotion. (And probably plays a role in the criticism of bankers.) But that is not going to be discussed here. (See "Envy Kills
", "Envy And Analogy
" and "Brief Discussion of Envy
", if you care to hear more on the distinction between envy and greed.)
But enough of greed, I have written enough on that topic that I think it is pretty clear that "greed" is only "greed" when engaged in by people we dislike, and is "just good sense" when engaged in by those we like. ("Moral For Me, But Not For Thee
and the Free Market
" , "The
Disappointment of Authoritarianism
", "The Right People, The Wrong People and "Just Plain Folks"
", "Contradictory Beliefs and Practices
") Which makes the term nothing more than a means of telling which groups a given speaker finds agreeable and which he does not. (And judging by how often bankers are smeared as "greedy", they certainly rub a number of people the wrong way.)
Having moved past greed, let us make one other distinction. And that is the distinction between an occupation as such, and the government environment which surrounds that occupation. I have no doubt when I present bankers as they would work in a free market, someone will point out all the government bailouts, pro-bank regulations and whatnot and accuse bankers of all the ills more properly laid at the feet of government. And that is unfair. Our government is involved in every business. Yet we do not criticize doctors because medical licensing laws restrict competition and allow them to charge more. ("Medical Regulations
", "Medical Regulation II
", "When Help Hurts
") Nor do we level the same accusations against hairdressers, plumbers and electricians. We don't criticize home inspection firms because FHA rules increase their business by making inspections mandatory. And so on and so on. Every business is both helped and hurt by the government ("Anti-Business Businesses
"), and because the government makes many rules which help one business at the expense of another, many businesses are forced to engage in government favor shopping in self-defense. Even when they don't, because of the environment, that is because "reality" is set up in such a way that government is often a more certain route to success than real work, or because the state can destroy success arbitrarily, many firms accept the conditions around them and become government tools. ("How the Government Corrupts Relationships
") It is a sad situation, but it is the result of big government. Blaming businesses for playing by the rules is like saying that slaves are to blame because they gave in and worked for the slave owners. So, yes, banks do benefit from government rules (and are harmed by others), but in the end, the government is to blame for those, not banks2
Which brings me to a third point, economic problems. Banks do not create our economic environment. The Federal Reserve is nominally private, but it is a creature of the government, and by its action monetary policy is set. And that means that any criticism of banking policy should be laid at the feet of the state, not banks. Banks have not been able to set their own reserve rates, for example, since sometime in the 1870's, and even then many states restricted their freedom. So any criticism of rates, inflation, or economic collapse should again be aimed at the state, not bankers. ("Inflation
", "The Gold Question, Not "Why?" But "When?"
Before someone offers up the straw man argument that I am going to paint bankers as saints, that is untrue, and absolve them of all blame, which is partly true, as I wish to stop blaming them for things that are not their fault3
. What I am about to do is explain how banks work, what they do, and show that bankers are simply one more group of people following a profession. I will show, I hope, that the profession is useful and beneficial, and that the benefit does not rely upon the bankers being saints, or sinners, but simply comes about when bankers pursue their own interest, as with any job -- "Planning For Imperfection
", "The Triumph of Good
"-- and that the ills people lay at the feet of bankers are the result of many other things, sometimes of the state, sometimes of the "victims" themselves, and sometimes aren't even problems at all. ("Two Perspectives
", "Bad Economics Part 11
", "Why"Negative" Economic Indicators Are A Good Thing
") But, we can see how that works soon enough, as I am about to begin my discussion.
I suppose the easiest explanation to offer for why bankers are so often criticized is money. Bankers have a lot of it, and it seems when times are bad the rich get an inordinate share of criticism. Of course, banks don't really have nearly as much money as many think. Much of their money is actually owned by others and only temporarily in their hands, but that doesn't stop the popular perception that banks are exceptionally rich.
In addition, banks are often made the "villain" in personal dramas, since they are the collectors of many personal debts. With the growth of consumer credit, more and more people have credit cards issued by banks. And, of course, banks hold our mortgages. And with some car makers getting out of the credit business, banks have taken over a larger role in those loans as well. And since banks tend to be the ones sending late notices, sending foreclosure threats and sometimes now repossessing cars, it is easy for many to see them as the cause of these problems, even though the true cause is the borrower's lack of funds to pay these debts. (What the cause of that shortfall might be is beyond our scope.)
The one thing I cannot say is a cause of this hatred of bankers is that bankers are legitimately evil. I will grant some bankers are probably better than others, and some worse, and that thanks to current government policies, banks are partly insulated from competition4
, so they may not be the friendliest or most helpful of organizations. But the same can be said of many hospitals, most utility companies, all government bureaucracies5
and a host of others who, while criticized, do not inspire the visceral hatred banks do. Banks seem to inspire a dislike people reserve for very few professions. Lawyers sometimes seem to inspire nearly as much dislike. Speculators definitely do, though only when there are price increases. But even then, those two groups still seem to be hated not quite as much as bankers, and certainly not as consistently.
Actually, I think the best way to make clear just how angry people get about banker sis to point out that, judging from the rhetoric used, and the personal animosity directed at individual workers, IRS auditors are not treated with as much contempt as bankers are. The IRS, granted, is disliked by almost everyone, and yet, in the end, people are willing to see them as a necessary evil, and will admit that auditors, while doing a job no one likes, might be decent people. Bankers, on the other hand, are hated by a smaller group, but among those who hate them, it is not just a criticism of the banks, but almost a personal accusation, the impression is that the critics feel only a morally defective individual could lower himself to work for a bank. It is strange, but it seems bankers are held to rank below the tax man. And that should tell us something about how negative the impression held by some can be.
But why? What do banks do that makes them so hated? Where is this moral turpitude to be found in banking?
In hopes of demonstrating exactly why I think this is such a misplaced anger, I want to look at exactly what banks do, why they could do not different, either economically or ethically, and ask what would happen were banks to be dissolved. In that way, I hope to show there is no sane reason for all this anger. I doubt it will reach those on the left, and may not even convince the misguided nominal conservatives who are angered by banking, but it may help those around them to see how senseless their anger is, and may serve to make their positions a little less respectable. If I can't persuade them of the truth, at least I can help to show others that there is not a hint of truth in what they are saying, and maybe prevent others from lending their ideas a sympathetic ear.
And so, without any more introduction, let us ask what banking is, and what banks do.
Banks serve essentially two functions. At one time they had one other, even more important function that grew out of these two, but for nearly a hundred years, they have been limited to their original two tasks, and so we will discuss those now, giving a brief historical glance at other roles at the end6
Banks exist primarily to provide a store of value, and a modest return over time7
, for those who have money they do not need immediately, and to lend money to those who need more than they have available. Obviously, these are complimentary functions. Banks take in a large number of individual deposits, and then lend out a part of these reserves to borrowers, making sure to keep enough on hand to be able to cover withdrawal, but not so much that interest payments do not cover expenses and profits.
Looked at rationally, this makes banks no different than any number of other businesses. In fact, they are almost identical to a number of firms, such as property management companies. A property manager takes unneeded property, and then rents it out, to those who need property, charging fees for the use of the property, and returning part of that money to the property owner. There are some differences, as no one can withdraw part of a property, so there is no need to keep reserves8
, but in general there is very little difference between banks and property managers9
. Of course, as people have trouble understanding that money is just another commodity10
, they often have difficulty understanding banks are just another type of shop, but in truth, banks do not differ much from any number of other enterprises.
But I have a feeling I am going over the same point a bit too much, so let us just restate it one more time and move on. Banks serve to offer safe storage of money for those who do not have immediate need for their money, sometimes also paying interest. In addition, they offer the loan of money to those who need it, in return for the payment of interest.
Beyond these basic services, banks also provide some other functions, some of which are simply tasks they normally perform as part of their two main roles, and in other cases tasks which are unrelated, but which have come to banks, such as investment. So let us look at those, as, though not essential parts of banking, they do now form part of the description of what banks do, and so can help us understand why people see bankers as they do.
Some bank functions are simple niceties, outgrowths of their basic roles, but still functions which many people find important, even essential. For example, cashing checks. Obviously, this is an outgrowth of providing a store for customers' money. If those customers write checks,t he banks need to convert it into cash. However, as banks are already cashing their own checks, they also began to provide a service of cashing checks from other banks for their customers. For many people, this is a very important role of banks, but from the point of view of the bank, it is a very minor part of their business.
At one time, there was a related task, which is no longer relevant, but which once was of great importance. Living now with Federal Reserve notes, which we consider "money", we often forget that they are actually "bank notes", that is a check, and at one time were defined as a fixed amount of gold11
. But, before the Federal Reserve, these notes did not exist, and what was used as money were "bank notes", that is notes written by banks. Well, to be accurate, gold coins were used as money, but as people did not like to carry gold, and as it was cumbersome for large quantities, people would exchange gold for notes, redeemable in gold. And so, individuals would exchange notes drawn on various bank's reserves, using them as if they were gold12
. And that is the third role I mentioned before, which banks once performed, they actually helped to define what we used as money, and, thanks to fractional reserve practices, also helped to establish the quantity of money in the economy13
Beyond the functions which are an outgrowth of ordinary banking, banks also involved themselves in a host of investment functions. Some, such as certificates of deposit, are closely related to traditional banking, others, such as money market funds, are simply grafts from investment firms to banks. And, as they are not truly core functions of banks, they can probably be safely ignored. Just as a bar which sells a few packs of cigarettes does not become a convenience store, just because banks essentially open a brokerage in the bank does not make stock sales part of banking.
And so, we are left where I started, with those two basic functions serving to define banks. And, having defined banks in that way, let us now look at the more important question, if the bank haters had their way, and banks vanished tomorrow, what would be the result? What would happen were there no more banks?
Let us start with one obvious consequence, though somewhat less significant than in the past, and that would be a reduction in the investment options of those with limited means. We often forget, but banks are a form of investment. By offering up their money for the bank to loan, depositors are small scale investors. of course, the bank usually pays limited returns compared to most stocks, but they also offer less risk. And, prior to small individual investment accounts, they were really the only way for people with little money to invest. Of course, even today, with investment options open to those with a few thousand dollars, the loss of banks would still end the ultra-secure investment option, as well as eliminating one of the few options where the money is always immediately available. And so, in one sense at least, eliminating those greedy bankers ends up hurting many people of limited means.
The second loss would be in capital for housing and consumer credit. Let us deal with each on its own.
First, there would be an end to housing purchases on credit. Banks are responsible for a massive percentage of mortgages. With their elimination, those wanting a house would either have to save the entire amount, or else find a builder who was willing to finance, or a seller willing to self-finance. This would obviously have a tremendous effect on housing, basically restricting house sales to those who have saved for decades, or those selling one house to buy another. Without banks to offer mortgages, housing would be restricted to those already owning a house, or those who spent decades saving. And, maybe, in a few rare cases, those buying from builders with adequate liquid funds to self-finance. It would definitely change the landscape of the housing market.
Then there is consumer credit. Many bemoan consumer credit's existence, so perhaps they would find this a good thing, but in truth it would radically limit individual purchases, by basically returning us to the days when purchases were either for cash or on lay away. It would also have quite an impact on the internet, as sales online would be almost impossible without credit cards. (Nor would debit or check cards be an option, as they too are almost universally run by banks.) In fact, without checks either, all transactions would need to be in cash or third party money orders, which would make any purchase by mail terribly inconvenient.
Before I go on, let me ask my readers to examine the list above and notice something. Every thing which would go away is a service banks provide to individuals. Despite their portrayal as villains, it seems from that list that banks are a business, providing things people need. And that were they to vanish, it would not mean the loss of some evil empire, but the destruction of an essential piece of the economy.
But, then again, that is the problem with those bemoaning banks. They tend to do so for two reasons. One, some form of envy, they see rich people and either envy them, or have been trained to see the rich as evil. Or else they owe banks money for some service they received, and now that they have already enjoyed the benefits, they hate having to pay. In other words, their complaints are juvenile unwillingness to shoulder the burden of past enjoyment once the fun has passed. Well, that is life, and they need to accept that you pay for what you take. And that is not the fault of bankers, that is a reality. Someone created whatever you bought, and you must pay them. if the bank pays for you, you must pay the bank. Otherwise, it is not the banker who loses, but the investors, mostly little people like you, who see their life savings lost.
And that is the true evil of all this anti-banking rhetoric. As we have seen in every financial crisis, when people or government try to "soak the rich" or harm the "fat cats", they forget that the money these people control, and the services they provide, benefits everyone, not just the bankers. And so destroying the banks doesn't hurt the rich, it hurts everyday people with money in the bank, or ordinary people who want a loan or credit card. And so, for the benefit of a few academic socialists who can't stand "income inequality" and a bunch of people who overspent and now are upset that they still must pay for what they bought, protestors are asking the government to harm everyone else, just so they can get what they want, either the enforcement of their political dogma or the ability to enjoy something without paying for it.
And people wonder why I claim we live in a perpetually juvenile society? ( "Juvenile
", "Catastrophic Thinking, The Political, Economic and Social Impact of Seeing History in the Superlative
1. It seems especially common among those who are also ardent
"anti-Zionists", which makes me worry there may be some hidden agenda
there, but the right's excessive tolerance for borderline -- or some not
so borderline -- antisemitics under the pretense of being "anti-Israel"
-- or sometimes just very zealous Christians, which is even more
frightening, and damaging to the right -- is a topic for another time. (Just to be clear, I do not object to Christian conservative, but tot hose who say things along the lines of "only Christians can be conservative, which is a ludicrous statement. But, as I said, that is a topic for another time. Perhaps soon I will write a little on how bad choices in inclusion and exclusion have harmed conservatives, allowing the left to caricature the right, while also keeping what would otherwise be natural allies at arm's length. For an earlier look at this topic, see "Those
Darn Jews Part 2
" as well as "Why Is He Surprised?
2. A peculiar example can be found in my post "The Free Market?
". In that post, I show how even small things, like customer unfriendly practices, such as the order in which they clear credits and debits,a re the result of limited competition brought about by government policies. And if you doubt it, ask yourself where there is more emphasis on customer service, at a hotel or the DMV? At a shop or a hospital? In every case, a business insulated from competition has no interest in pleasing customers. (The one exception being when an excessive reputation for surliness upsets a politician and the bureaucratic enterprises driven to act by fear -- See "Fear Driven Enterprises
3. As the previous footnote shows, I am aware of the shortcomings of banks, from the great to small. And I am also aware they are human enterprises, not given to perfection, with some better and some worse. However, I also know they are just businesses, and without the government in the picture, they would run like other businesses, depending on customers for their success, and this driven to balance customer satisfaction against cost, with those doing the best job surviving. Any shortcomings in a free market would tend to be driven out of business, unless balanced by a commensurate benefit. But with the state involved, that rule no longer applies, and businesses can persist despite customer dissatisfaction. ("The Difference Between Public and Private, Or, The Real Monopolies and Cartels
", "With Good Intentions
", "In The Most Favorable Light
4. All those who wail about the harms of "deregulation", and mistake the cause of the S&L problems ("Our Financial Problems
", "How Protection Makes Us Less Safe
", "How To Blame the Free Market
") must forget that, for a time, banks were actually fighting over customers and trying to be much more service oriented when entry into the market appeared to be on the verge of being relaxed. (Which repeated about a decade later when other regulatory changes made it appear some banking services might be opened to more competition.) Of course, there was also a flurry of mergers and buyouts, which the same people also bewailed, but which was also a sign of a strong market, or at least an active one. But as it became clear no additional deregulation would come after the Reagan era (at least until the aforementioned rules changes appeared on the horizon, though, once again, amounting to less than expected), banks have happily returned to behaving as if they exist as a cartel, which they do. Again, I would remind readers, that is not a criticism of banks, everyone behaves in a reasonable way, and if customer service doesn't matter wastes no money on it. Banks are only able to act this way because of government. So it is pointless to blame banks.
5. Bureaucracies provide an interesting contrast to profit making firms, and show very well how the state can shape the behavior of companies. While not precisely on point, it may be interesting for readers to refer to my posts "The Bureaucratic Mind
", "Bureaucratic Management
Inevitability of Bureaucratic Management in Government Enterprises
", "Bureaucracy and Arbitrary Power
", "Somewhat Off-Topic Rants
", "Bureaucracy Revisited
", "Bureaucratic Management and Self-Policing
", "Inflexibility and Bureaucracy
", "In The Most Favorable Light
", "With Good Intentions
", "Grow or Die, The Inevitable Expansion of Everything
", "Fear Driven Enterprises
", "Adaptability and Government
" and "The Wrong Solution to Bureaucracy
6. I wrote much more about the historical changes in banking, and the various functions of banks in my posts "The Inflation Engine
", "A Thought on the Clinton Surpluses
", "The Endless Cycle of Intervention
", "Not Entirely to Blame
", "The Forgotten Fact
", "Derivatives and Other Investments
", "History Repeating Itself
", "Explaining Past Crashes
" and "Inflation and Uncertainty
". I also discussed the shifting role government and banks have played in monetary matters in my posts "Why Gold?
", "Proof Keynes (and Krugman) Are Insane
", "CNN's Keynesian Nonsense
", and "The Gold Question, Not "Why?" But "When?"
". Finally, I started a series of posts explaining monetary theory in relatively simple terms at one time. Though I only wrote two installments, they may help explain any points in these essays that are difficult to understand, in which my logic is hard to follow, or where the justification for my position is not obvious, so I suggest reading "Monetary Issues Made Simple Part I
" and "Monetary Issues Made Simple Part II
7. This is not always the case. Banks were once forbidden to pay interest on demand deposits, as there was a strange fear competition for interest rates would bankrupt them. (This is one of those cases where the government imagines competition drives individuals to suicidal actions, akin to the argument for hospital regulation -- see "Government Efficiency
" [referrenced in "How Government Creates Crime
"], "Two Examples of "Inefficiency" in Capitalism
", "High Cost of Medical Care
", "Free Market?
", "Bad Economics Part 2
", "The Free Market?
" and a footnote to ""...Then Who Would Do it?"
".) Banks found ways around this, such as offering check writing on money market accounts, and so it is not uncommon for accounts to have both interest and check writing today, but since there were many historical cases, and a considerable number even today, where interest was not paid, I felt I had to mention that only the store of value part was constant, interest was not always part of the banks' role.
8. Time shares offer something a little more similar, as a "reserve" of time during desirable periods must be kept for existing owners when selling off shares to others, but as these weeks are sold, not borrowed or rented, there are many larger differences that make the comparison weaker. But, then again, it is always difficult to find a perfect fit when making analogies. That is why they are only analogies.
9. There are other examples that could be given of firms analogous to banks, but in every case there are obvious differences. And, because banks deal in money, none have precisely the same considerations. But that is true when trying to make an analogy from any business to another. Still, banks are not that different from many other types of enterprise, yet they are much less respected and loved than those similar companies. Which is my main point here.
10. This is made especially difficult because money is seen in two roles, as the commodity being bought and sold, or rented, and as the medium used to pay for that commodity. If we rent a car, we have no problem seeing the car as a commodity and the money are the price paid, but when we borrow money, we have problems seeing our payment as being both a return of the commodity (the principal part of the payment) and money paid as the price of rental (the interest part of our payment, along with some fees and other non-principal payments). As it all looks the same (because ti is), we see money transactions as something different from simple rental or purchase, even though they are effectively identical.
11. Though, at times, there were efforts to define dollars in silver, or to create a bimetallic standard.
12. Actually bank notes traded at a discount based upon the public confidence in their solvency, and, in the earliest eras, based upon the difficulty of cashing the checks, as, before the days of clearing houses, many "wildcat" banks would establish in remote areas, issue absurd quantities of notes backed by very small reserves, and rely upon the difficulty of cashing such notes to keep them from going bankrupt. Clearinghouses helped resolve this in many areas, but for banks outside the clearinghouse system, notes still traded at a discount based upon the difficulty of cashing a check, and the probability the check would be honored.
13. Actually, that is a bit too loose a statement. Fractional reserve was still controlled by economic forces, as banks over-drafting would tend to go bankrupt, or at least see their notes lose value, and would tighten up their practices or lose their deposits. So, the amount of money in the economy was determined by the market forces, banks simply were the agents of those market forces. (again, not completely precise, as they could choose to ignore the market for a time, but close enough for now.)
None of this has anything to do with government bailouts or excessive regulations or the like. Those issues obviously need to be addressed independently. On the other hand, as I said at the beginning, it is absurd to blame bankers for those government actions. Recall how the state forced bailout money onto some automakers, whether they wanted it or not. Banking regulations were largely done int he same way, but it was a century ago and so we do not recall. After a century, of course, banks have come to terms with government involvement, but that does not mean banking is to blame for bad government policy. And that is why I find it absurd for supposed conservatives to jump on the "greedy banker" bandwagon, just as I loathe when conservatives call for government oversight of Wall Street. When we do that, we simply give credence to the worst arguments of the left, and we definitely do not need to concede that much power to them, they already have far too much as it is. ("How Conservatives Defeat Themselves
Above I discussed the fact that all exchanges are "greedy", an argument I often make, and which draws many improper criticisms. All trades we make in life, whatever their purpose, are driven by the concept that doing so will give us some benefit greater than what we lose. The problem with this argument is that many of those who denounce "greed" and say "life isn't all about money" have a paradoxical tendency to think only in terms of money, and so argue many people engage in losing trades. ("Bad
Economics Part 16
") But the truth is, we do not base trades on monetary values, but on personal satisfaction. In many cases the two match, but in many others they don't, that is why we buy and sell, because we believe the satisfaction we will get from a purchase is greater than the monetary cost, or the money gained in a sale is greater than the lost satisfaction. In every exchange we do not maximize cash returns, but satisfaction. And that is true whether giving to charity or buying gifts for friends. We do so because we expect some personal satisfaction greater than the money expended. And so, I argue all trades are inherently greedy. Yet, that is a good thing, as to behave otherwise would be to engage in self-destruction.
One final note, some may accept this definition, then argue that bankers are different because they DO
think entirely in terms of money, seeing all exchanges as monetary. This is both true and false. Yes, in their business, they probably do just that, but in personal life, they probably exchange based on personal enjoyment, just like the rest of us, and both make sense. I need not explain why their personal life works, but, though it should be self-evident, perhaps their job choices needs a bit of explanation. On the job they base choices entirely on monetary values for the simple reason that they have no other guide. They are given money and asked to get a certain return. Or several returns, one for depositors, or several different levels for different types of depositors, and another return to pay off investors, and a final one to cover operating costs and creditors. They cannot make choices based on anything but those purely monetary demands. To do otherwise would be to fail in their obligations to depositors, creditors and investors, and would be unethical. And so, since they have committed themselves to responsibly managing these funds, they must think in purely monetary terms, as that is the way success is measured by those entrusting funds to them. Which means thinking entirely in terms of money is not only practical, but the only ethical behavior given the context.