Desire and Greed: Contemplating the Need for a New Financial Markets Regulatory Regime

If desire is the emotional exponent of a human being's drive to have, then greed is the drive to have more and better. As such, it is both natural and, arguably, productive in the context of ambition or even as a component thereof. The desire to eat led early man to hunt small animals and eat whatever grew wild. The desire to eat more and better food led to spears and agriculture. The desire to illuminate dark quarters led to candles; the desire to illuminate better led to light bulbs. But, as is true for all human characteristics and emotions, the lines between a lot, too much, and excessive grow blurry as we achieve a modicum of success at each level. Light and light bulbs are great; large concentrations of unnecessary giant video screens and illumination are light pollution. Agriculture is good; a sense of entitlement to have grapes and peaches year round leads to large carbon footprints for produce. Greed is not sui generis an evil inclination; it merely carries within itself the intrinsic need for external controls where internal regulation (e.g. self control) fails.

You can see where this is leading. Credit is good and drives healthy economic growth. Excessively loose credit leads to huge losses by both lenders and borrowers. But the greed per se of both borrowers and lenders initially drove a desirable expansion of the credit markets and admirable economic growth that sustained the longest expansive business cycle in history. Greed in some form is a component of most every advancement, both technologically and socially, ever attained by the human race. The inability to set boundaries, however, at some point has its own law of diminishing returns and finally leads to undesirable outcomes. It has traditionally been the role of government to set and enforce boundaries our natural inclinations might otherwise ignore - hence, regulation of the marketplace. This regulation can be more or less heavy-handed, depending on the prevalent political philosophy. But regulation is a natural systemic societal response to human self awareness: we know that we tend to break through the boundaries between healthy greed and unhealthy excess. It's where can do becomes must have. We are only human, after all. We live in a society where worth is measured by the size of your balance sheet. Regulation is necessary; however the form and substance of regulation needs to reflect market reality going forward, rather than being a legislated response to the crises of the past.