A close friend recently sent me this WSJ oped:
John Steele Gordon: Incentives vs. Government Waste - WSJ.com
The analogy with Goldman Sachs is an appropriate one, and he hit the nail on the head by following immediately with the example of 18th century marauding (the man is clearly a rhetorical genius). The restrictions of the op ed page obviously prevented a discourse on the subject of how jews were subject to vigorous dental examinations by the guards before entering camps. I understand they (the guards) were "incentivized" to find gold fillings. Look how Krupps (now famously making coffee machines) had a knack for producing machinery to move large quantities of dead bodies. Amazing what can be achieved when humans are properly "incentivized!"
But despite his compelling case for unfettered capitalism, I would rather trust the DMV than Goldman Sachs to regulate driving privileges in my state. The GS eggheads would be up all night figuring out how to screw me, selling me a fake license designed to disintegrate in my wallet, or otherwise conducting outright fraud. The approach is similar to that employed in Sub-Saharan Africa: when the government puts up telephone lines "entrepreneurial" types tear them down and melt down the copper, which commanded a premium at the time but did little to advance societal well-being in the long run (or short run for that matter).
In holding up Goldman Sachs as a model of innovation, Mr Gordon clearly likes to swing his brass balls, but he seems to overlook the fact that there is only one thing only insulating GS from the pitchforks and torches, and that is the government. As far as I know, not even the higher ups have established their own personal armies yet. Which is why I welcome the return to the libertarian laws of the jungle. The financially ignorant, subject to endlessly clever predations, should occasionally also have a turn at the wheel.
Volker -- no pussy by any stretch, the man who broke inflation, something Herr Greenspan was more than happy to undo in a state of Objectivist orgiastic glee – doesn't mince words, admonishing his grandson, when he was studying financial engineering, that he might as well join the mafia, since he was studying to be a white collar criminal. Incidentally, that grandson now works at Google – he interviewed Wei last year. Incidentally as well, Google is a sweat shop. I much prefer being another maggot on the bloated corpse that is our financial system which, at around 15% of GDP, was previously only matched just before the Great Depression. Now I have time for important things, like just yesterday: re-reading the Unabomber manifesto, a couple hours of foosball and ping pong, some emails, out for lunch (great ahi burgers across the street), dabbled with my projects and home by 5. Not to mention reading the op-eds you send me, and writing lengthy replies!.
Because of my "innovation," our stock keeps climbing, our client pipeline grows, someone is making money, the market has spoken! I am an innovative entrepreneur! A captain of industry! Because when CEOs need to back date-options or otherwise cook their books, today's skein of financial entanglements requires they turn to us! More regulation? That means we can "produce" more "offerings." We can't lose! And because we bore into the heart of their systems, no one ever leaves us unless they go bankrupt. The vendor lock-in in this industry is unprecedented. More generally, I think what Mr Gordon means by "innovation" is "externalizing costs" and in that regard we really are Number One.
Yet in the end, I think Herr Gordon completely misses the point. Open any piece of junk mail that regularly floods your mailbox. You will find annuities for pets, diesel powered alarm clocks, sweaters for your parakeet, a barrage of hopelessly useless crap. We are not suffering for lack of innovation; after all, the marketing machine has been in overdrive for decades, goosing the lumpenprole appetite for plastic shit. The bottleneck is not our ingenuity, but the coils of fat surrounding the necks of the masses: you just can't force feed them fast enough to keep up with the "innovation" coming down the pipe. It's a real pickle, one that our greatest minds at Goldman Sachs will no doubt figure out.
Mr Gordon also seems to assume that incurable gluttony is universal:
A million dollars in "prize money" would certainly be an incentive to motivate even the most slothful government office to find new ways to do things.
Boy, does he reveal his naivete. Ignoring for a moment the dubious merit conferred by a "new way to do things" (see my earlier example innovation at Krupps, or Zyklon B), the fact is that the more I get paid, the less inclined I am to work. After all, it's the rational thing to do: the more money I have, the less I need it, and the less I will exert myself to secure it -- unless I was an utterly deranged piece of shit consumed by delusions of grandeur and avarice. There are such cases. A wise man dies poor.
But still, I like Mr Gordon's basic idea. Even the Somali pirates see the genius in it. But, in the final analysis, he is, as Rahm Emanual would probably say, still "fucking retarded."
