"Mr Grant (Jim Grant – WSJ 16 July, Newsletter columnist) is also a critic—albeit with caveats—of today's great bankers, whom he says in one respect don't hold a candle to their gilded forebears. "When you take away the downside, you take away the virtue. You take away the moral foundation of markets. You always have envy but now the envy is a little better grounded in objective facts. Taxpayers get the downside. Modern-day Wall Street gets the upside."
What I like about this is that it provides a sound economic explanation for behaviour which is usually explained with a whole lot of “moral stuff” about bankers or whoever being “bad people” – as many a decent economist has pointed out – there are no good or bad people – just human beings responding to incentives.
The regulator, the politician, the media, and indeed those who support all of these have constructed a regulatory structure which transfers risk to the population at large – all in the fond belief that they can banish risk and penalise those of whom they are envious. In doing so what they have banished is the one mechanism which might deliver their dreams – the market.