Why blaming the current financial turmoil on “greed” doesn’t work

Once again, Don Boudreaux, a George Mason University economics professor, cuts to the chase:

…[the] explanation of the current financial turmoil — as being caused by “greed” — is inadequate…Saying that “greed” caused today’s problems is like saying that gravity caused the death of someone pushed from the top floor of the Empire State building. Some things are sufficiently constant in human affairs – and self-interest, even greed, is among them – that they explain nothing.
“Greed” certainly can be unleashed to do harm, but it can also be harnessed to do good. Any compelling explanation of any observed economic reality must take “greed” as a given while identifying the specific incentives provided by prevailing social institutions. If these institutions make serving the needs of others the best path to personal gain, then “greed” is harnessed for human betterment. But if these institutions make predating on others – either through force or fraud, or either intentionally or unintentionally – the best path to personal gain, then “greed” will indeed lead people to act destructively. In either case, though, it is the institutions and their accompanying incentives, rather than “greed,” that explain economic reality.

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