Thursday, November 10, 2011

"The Financial Folly of Fairness"

Megan McCardle fears governments often can't reconcile what is necessary to solvle an economic problem with what people will tolerate. She writes in her Atlantic blog:

We feel, very deeply, that financial and economic efficiency should mirror our intuitive sense of justice. And probably it does, mostly, when you're living in a hunter gatherer tribe. But in a complex world where mistakes are easy and detecting them is not, I just don't think this holds true. [..]

As anyone who has ever spoken to a five year old knows, the sense of fairness is one of the most primal and intractable cognitive instincts we have. In the best of times, it takes years to change public opinion about what is fair. These are not the best of times, and we do not have years.

Once again, so many of our difficulties come from the fact we no longer have a common sense of what is fair, or a common set of values which can call for working for the common good.
We have often have minutes instead of years to make key decisions. Especially when financial crises decisions have to be made under stress and mmense time pressure, when you are exhausted and running out of time on a crisis weekend before the Asian markets open on Sunday evening.

It gets even harder when you have to transfer resources to other countries. I was watching CNBC out of the corner of my eye yesterday afternoon, and saw Rick Santelli warning that any increase in US commitments to the IMF to help Europe would ignite a political firestorm at home.

Fed help for European banks could also be very difficult.

This is really not good.

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