What If It's Not Greed?

With the sharpish global downturn in the financial sector, all parties look for someone to blame. It is not enough to see those accused as merely wrong, foolish, misinformed, or the like. We have to see them as evil. Like those urban legends where the misbehavers get their just desserts, we construct a sin-narrative about these people. This reassures us that we, the good people, are far less susceptible to such things. We might get damaged in the spillage, but it wasn't our fault. If we don't have full immunity against such things, we at least have improved chances.

Christians love this - okay, some Christians love this. The wages of sin? Why - that's our specialty. This is our hour. We are called forth to preach to a wicked world. Greed, greed. Bad greed. Bad, bad greed. We always told you, but you wouldn't listen. Repent sinners! This nation and all its greedy, materialistic values must mend its ways!

The Religious Left loves this stuff. Their progressive politics, which in some cases is their real religion, coincides with a biblical theme. Oh frabjous day. Calloo, Callay. We don't get front page articles quoting us that often and have to let go with both barrels.

Not that the Religious Right can keep their hands off the topic. Greed may not be their #1 sin to preach about, but it's well up there. And if we can just get your attention on that one, maybe we can work some others in. It's an easy segue to "mindless pursuit of pleasure," and the liberals will nod along with that for quite awhile, too.

Yep, it's greed that caused all this financial crisis. Everyone knows that.

I am reflexively suspicious of what "everyone knows" so I wonder: what if it's not true? What if it's not greed?

Greed can cause people to underestimate risk, but that doesn't mean that everyone who underestimates risk is greedy. Some got bad information, or bad education. Some are congenitally overconfident, or arrogant. Some love the excitement. Some aren't that smart. Some were suspicious of this right along but were persuaded against their better judgment. Some were in businesses where the margins are so slim that you pretty much have to stay within range of the risks everyone else is taking, or you go out of business long before a crash.

Efficiency is essentially fragile, Nicholas Taleb tells us. If your company perfects its just-in-time delivery so that you don't need a lot of warehouse space, you can sell for a lower price for years until something gums up the system. You're screwed then, but several of your competitors went out of business before you even got that far. People take out adjustable-rate mortgages because the rate is cheaper now. You're making a bet - that your income will increase faster than the mortgage payment. Sometimes that's a good bet. There are folks out there now who are still hanging on, paying that mortgage, even though they took out one of those loans we now call risky and unwarranted. Are they greedy? Some of them aren't even imprudent. They're going to make those payments, buy that small house, and have a moderate prosperity because of their perseverance and hard work. In fact, the majority of those people we are calling poor risks are going to make it through to the end. They aren't all defaulting, it's just that a greater percentage of them are defaulting than the banks bargained for.

What about those evil lenders and mortgage repackagers, then? Aren't they greedy? Some. But when you consider, as above, that most of those loans are going to pan out they have actually provided a service to some less-prosperous people that they couldn't get elsewhere. They underestimated the risk. Is that evil? There are those who in their arrogance kept assuring others that they had accurately estimated the risk and kept this house of cards building higher, but that may be more conceit than greed.

Yes, that may be a worse sin. But not the same sin. And how culpable are those who believed them? Those risk management experts have degrees and charts and enormous confidence in their tools. Any of you who think it is evil to be persuaded by such people should review the candidates you've voted for over the last two decades. Or the cars you've bought.

It just torques us off when the Wrong People make money in this world that we rejoice in their misery, calling them greedy and evil. Put crudely, that's sort of a spiritual masturbation on our part.

Now that - that really is a sin.