Alexander Cohen’s paean to greed (“The G Word,” Oct. 2) asserts: “The only way to determine what money a person deserves is to let him prove it in a free market.” As a professional economist, I have two observations.
First: Presumably by “free” you mean “competitive.” I agree. Were all markets competitive (free entry, no concentration of market power), earnings would conform to my own idea of fairness. But consider the Wall Street earnings against which McCain and Obama have been fulminating. Did every citizen have free access to jobs in the (recently deceased) investment banking wealth machine? Only if every child had equal access to a nurturing home, good pre-school care, and adequate schools. Would that we lived in such a world! Is the banking sector perfectly competitive? Nonsense. Banks create money, a vital public good, and regularly generate financial crises, and for these reasons are rightly licensed and regulated by government. The Fed just midwifed a gargantuan increase in market power, as Citigroup gobbled up Wachovia. When government creates the preconditions for persistent monopoly profits, government (on our behalf) should ensure that those returns are not excessive.
Second: Mr. Cohen seems to believe that amassing more wealth, beyond what one needs to marry, raise a family and retire with dignity, will bring him happiness. Startling research in economics has established that on the contrary, it’s hard to find a correlation between income levels and self-reported levels of happiness. Mr. Cohen: As you seek self-actualization through accumulating wealth, you may feel happy about the process, but you won’t feel that much happier when you’re done.
Bruce L. Reynolds
Department of Economics
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