My investment of 25 cents for a used copy of The Worldly Philosophers at a Friends of the Glendale Public Library book sale was an excellent and well-timed hedge against the risks of today’s public offering at Sunroom Desk: this collection of links and commentary on financial reform legislation.
First, Define the Problem – The Economist; Back to Basics on Financial Reform – Wall Street Journal; and Senate probe: Goldman planned to profit from housing bust, made billions at clients’ expense – LA Times.
Within The Economist’s link, but also in other articles over the past months, “innovation” is defended in either a neutral or positive sense with respect to financial instruments that contributed to this Great Recession. What is innovative about hedging a bet, or devising clever ways to con others into losing bets? Could Goldman Sachs and other investment houses have lost as much money, and caused as much economic pain, if they had made big bets in real innovations, such as research and technology leading to clean, cheap, renewable energy?
In the book just purchased, author Robert Heilbroner explains the observations of the great economists he profiles. Thorstein Veblen posited that exploiting breakdowns in information, and creating what sounds like bubbles, were the main ways to make profits. Veblen’s main examples were 19th century robber barons, who competed with each other to maximize profits at the expense of the public. John Maynard Keynes showed that in an economy that separates savings from investment, there is “nothing automatic” that channels savings toward productive investment. Has anything changed?
Revised several times, the author concludes in the 1980s edition I purchased with a list of basic questions economic thinkers posed about society, politics, and economics, that are unresolved to this day. Resolved in my mind, though: the Friends of the Library book sale purchase was a good investment.