What’s wrong with the very wealthy?

Nothin in itself.  The trick is creating laws that encourage good behaviour.  I’m not enough of an anarchist to believe that will actually happen on its own.  It’s a great idea, though.

Robert Frank reviews a book by Robert Reich called Supercapitalism.  It discusses something I talk about all the time: market limitations.

Reich, a public policy professor at the University of California, Berkeley, and formerly President Clinton’s secretary of labor, is quick to concede that rising inequality, environmental degradation and a dysfunctional health care system are problems worth worrying about. But he argues that social critics are wrong to attribute them to increased greed and corruption. Today’s corporate and political leaders are no different, he says, from their earlier counterparts. What has changed is that new technology has made the economic environment dramatically more competitive.

As Adam Smith first described clearly, individuals who pursue only their own narrow interests in a competitive system often inadvertently create widespread social gains. But not always. Unlike many of his modern disciples, Smith was keenly aware of the invisible hand’s limitations. Individual and social interests often diverge, he realized, and in such cases, greater competition makes matters worse. If a firm can cut costs by removing the filter from its smokestack, for example, it will feel greater pressure to do so when competition intensifies.

If our social ills are indeed rooted in increased competition, our only recourse, Reich argues, is to change the rules. Denouncing greed is simply wasted energy. If we want less inequality, we must make taxes more progressive. If we want cleaner air and water, we must adopt more stringent environmental laws.

 So the trick is just changing laws and allows government to be at least somewhat independent from corporations?  How?  Campaign Finance Reform. 

Indeed, the main thrust of Reich’s argument is right on target. Those who seize their opportunities in highly competitive environments tend to survive and prosper. “To confuse greed with opportunity,” he writes, “is to confound desire with availability.”

It’s often useful to get angry when things aren’t going well. But moral outrage is counterproductive unless directed at the right targets. By focusing our attention on those who continue to block effective campaign finance reform, Reich shows that he can spot a worthy target when he sees one.