Friday, March 14, 2008

New York Times Financial Columnist Explains Why Runs are Impossible

Says Steven Weisman in today’s NYT: “The fear of some economists is that, as the dollar declines, there could be a panic sell-off. But most experts doubt such a panic would occur, because it would be in nobody’s interest, least of all investors who are holding dollar-based investments.” Someone should tell him that it is never in the interest of investors or depositors for there to be a run on a currency or a bank. But it is in their individual interest to get out ahead of everyone else. This is not to say that there will be a run on the dollar, but you might want to find a better reason than the notion that bad things cannot happen in capitalism because capitalists don’t want them to happen.

1 comment:

Kaleberg said...

A lot of people have trouble with this aggregation of behavior. Each individual decision has to be aggregated with those of the other players, and with possible future games. This argument aggregates the future games, but not the other players. You have to take into account both.

Wasn't there a recent discussion of this from the taxation angle? Sure, it might not make sense for me to pay $50 for xxx research, but if everyone has to pay $50, I don't mind chipping in with 100,000,000 others.

You learn a lot by how people pick their blind spots.