Wednesday, July 11, 2012

When We're All Assholes

I tend to think there is a complex set of reasons we aren't all frauds and thieves. For whatever reason a lot of us like to think of ourselves as good people who wouldn't do "bad things." Fear of social disapproval. Fear of getting thrown in the pokey. I'm not sure - and don't even really care - what the dominant reason is, but I think it's reasonable to imagine they reinforce each other. Decrease the the chances of getting thrown in the pokey or minimize the likelihood of or consequences of social disapproval and we're more likely to do bad things.

And then we get to a bad equilibrium, one where it always pays to cheat, one where all transactions - personal, commercial, whatever - have an extra friction due to heightened "ripping me off" probability.

The Law and Economics Chicago crowd told us that companies were supposed to break the law if it benefited shareholders. Congrats, guys, we're living in the world you created.