Economic View - Pursuit of an Edge, in Steroids or Stocks - NYTimes.com - The Diigo Meta page

• 06 Oct 08
  

  Bill H

  Post

  • the cherished belief of free-market enthusiasts everywhere that unbridled pursuit of self-interest promotes the common good.
  • “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
  • The invisible hand breaks down, however, when rewards depend heavily on relative performance. A high proportion of investors are simply unable to stand idly by while others who appear no more talented than them earn conspicuously higher returns. This fact of human nature makes the invisible hand an unreliable shield against excessive financial risk.
  • The only effective remedy is to change people’s incentives

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