Peter Pays Paul

Inside commercial hard money lending.

12 Nov

Human Frailty Caused This Crisis

Category: Credit Crisis, Life-in-General

One of the major reasons that capitalism is successful and socialism or communism fails is that it takes into account human selfishness (sinfulness).

Each individual, barring some major spiritual catharsis, is going to do what is in their own best interest. The economic theory of capitalism takes this into consideration. Socialism denies this and believes that those in the central government WILL not act selfishly or shortsightedly.

Richard Thaler and Cass Sunstein argue that one of the major causes of this catastrophe was a failure to consider human weakness.

We think their mistake was to neglect the role of human nature. To prevent future catastrophes, regulators should focus explicitly on how to provide safeguards against two all-too-human frailties explored by decades of work in behavioural economics: bounded rationality and limited self-control.

Read the article..

Tags: Capitalism, Credit Crisis, Government


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Posted Wednesday, November 12th, 2008 at 5:25 pm
Filed Under Category: Credit Crisis, Life-in-General
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