Robert Skidelsky, Baron Skidelsky Quotes
You do just have to go back to moral philosophy and you've got to say, okay, there is greed, people do want more and more, but then what restrains them and what restrained them in the past was a view of life in which one's satisfaction wasn't the most important thing, that you just, you needed enough and you could say, "Enough is enough." Maybe religion will get you there, maybe just classic moral philosophy, but you have to have some of that, or else you're always on the gravy train.
What would've happened, do you think, had the government not intervened in October 2008? The catastrophe to the economy would've been absolutely unbelievable. And yet classical economists say, "Oh, well, no, it would've adjusted perfectly happily, a few weeks of pain and then everything would've gone on as before, without a banking system left." And that's what makes it so maddening, that these bankers are back saying it was all the government's fault. The government saved their skins. It didn't want to, but it needed to save their skins in order to save the rest of us.
It's not enough say, "Look, bankers were immensely greedy and that they committed lots of frauds." I mean, that's not, they were set free, that sort of particular proclivity in human nature was set free to do its best and its worst. Politicians and regulators are consumers of ideas. They never have any ideas of their own, it would take too much like hard work to develop ideas, you get them off menus and you pick the ones that suit you. Financial services were set free to go beyond their rightful place, a place by which they have been restrained in the past.
The psychology of the saver and the psychology of the investor is very closely connected with Keynes' distinction between risk and uncertainty. When the future is uncertain, he thought that a lot of saving would be directed towards securing, securing more, getting more security in the present, rather than building wealth in the future, which was the classical view, you save in order to invest, in order to consume more later on. What he had called the propensity to hoard or liquidity preference would normally be stronger than the inducement to invest.
When you think of everything in terms of just money, then almost nothing is enough. I mean, how much money is enough? Because it's hard to translate money into goods. And I think people, once, I think there's a lot things can believe, and once they start thinking about wealth in terms of money, they lose the idea of enough-ness.
Investors are trying to work out some risk premiere that have some correspondence with actual risks. But they don't, they're not, they can't go very far that way, because the actual correspondence isn't really there in a lot of cases. So once people stop believing in these stories, and then the crash can come very, very quickly. They believe that house prices are correctly priced for some time and then suddenly they realized there's no real basis for that. But what is the correct price? We don't know that either. It's just that everything swings.
There's no automatic mechanism in a market system that reconciles the desire to save and the desire to invest. And therefore, the government has to sort of do something or the Federal Reserve, the Fed, or the Central Bank, or whatever, it has to intervene. It has to create enough investment for the economy not to suffer from a fall in aggregate demand. So, if you don't have a balance within the market system itself, then you need an external balance and that's what I think Keynes believed.
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Robert Skidelsky, Baron Skidelsky
- Born: April 25, 1939
- Occupation: Historian
- Cite this Page: Citation