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Brooks Wilson's Economics Blog: Reid on Greed

Tuesday, May 18, 2010

Reid on Greed

Senator Harry Reid showed a fundamental lack of understanding of economics or enormous contempt for voters when he said of the British Petroleum (Real Clear Politics Videos, "Reid: BP's "Greed" Caused Gulf Oil Spill, 11 Deaths"),
Their greed led to 11 horrific and unnecessary deaths. It has harmed an enormous tourism industry, threatened business at countless fisheries and disrupted life for many along the Gulf Coast. As the pollution grows worse, those consequences will only compound.
A fundamental insight of Adam Smith, the father of economics, that is accepted almost universally among economists was that self interest through the working of markets works for society's well being.  In "The Wealth of Nations" he wrote,
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. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

Greed is best thought of as a constant.  Does he really believe that prior to the spill BP was not greedy?  Does he believe that they were public interested agents devoid of greed during the long decades without spills?  While it is possible that BP is guilty of neglect, it is probable that the spill was an accident caused by unforeseeable circumstances. 

Senator Reid might have observed that BP has promised to pay all legitimate damages from the spill which are estimated between several hundred million and seventeen billion dollars.  It has lost thirty billion in market value.  A greedy firm would certainly act to limit spills and the damages they cause to avoid the heavy cost of cleanup.  Greed may well explain the lack of spills in the past. 

If Senator Reid has evidence that greed induced neglect led the death of eleven employees, he should present it to police for investigation.  If he does not have evidence, he is engaged in calumny.  Bryan Caplan, author of "The Myth of the Rational Voter," sagaciously observes, 

Merriam-Webster's Collegiate Dictionary defines a demagogue as "a leader who makes use of popular prejudices and false claims and promises in order to gain power."  Put bluntly, rule by demagogues is not an aberration.  It is the natural condition of democracy.  Demagoguery is the winning strategy as long as the electorate is prejudiced and credulous.
If Reid's economic understanding is so weak that he does not understand basic economic motives, he should not be reelected.  If he engages in demagogic rhetoric, even with a soft voice, he should not be reelected. 

1 comment:

  1. I wonder how Reid was hired in the first place. I understand that in the US, BP is pretty much a Monopoly, controlling too much of the oil % for anyone to take a bite at them. So they raise the prices and forget about the damage and neglect to society. They are in a sense a greedy monopoly. All of this aside, BP just sounds like a few of those firms...uhhhmmm GM, who we had to pull out of debt and have the government stimulate. If BP is owing 17 biillion dollars, how are they going to pay that off, when there money is going down the drain, literally. You have to spend money to make money, but hopefully this time, we will not spend the money bailing out the economically greedy, but instead spend and invest on a new venture, that could excelerate the US past energy competition, and stabalize our economy with new jobs and a new vision for the World. The economy is an every changing thrill ride roller coaster, we just have the ride the waves, and trust that God has entrusted the right group of people economically intelligent enough to handle our affairs