Friday, October 31, 2008
Without getting into Elizabeth's main point about behavioral economics, let me say how I read her quotation from Greenspan: "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms.”
It seems to me that Greenspan is pointing out that businesses have not acted in their long-term corporate self-interests. This does not mean that the individiuals within them have not been maximizing their individual self interests. Witness the incredible golden parachute for the CEO of bankrupt Lehman.
The fundamental problem here (it seems to me) is that businesses may be immortal, while those who run them plan for a shorter lifespan.