You Go, Gordon Gekko!

30 May 2009 at 2:42 pm 9 comments

| Peter Klein |

Several folks in my part of the blogosphere have noted John Hasnas’s terrific op-ed in yesterday’s WSJ, “The ‘Unseen’ Deserve Empathy, Too.” Hasnas invokes the great Bastiat to counter President Obama’s call for judges who have compassion, empathy, and understanding of “people’s hopes and struggles.” As Hasnas points out, judges should consider the effects of legal rulings not only on the parties before the bar, but also on the “unseen” whose lives will be affected:

One can have compassion for workers who lose their jobs when a plant closes. They can be seen. One cannot have compassion for unknown persons in other industries who do not receive job offers when a compassionate government subsidizes an unprofitable plant. The potential employees not hired are unseen. . . .

The law consists of abstract rules because we know that, as human beings, judges are unable to foresee all of the long-term consequences of their decisions and may be unduly influenced by the immediate, visible effects of these decisions. The rules of law are designed in part to strike the proper balance between the interests of those who are seen and those who are not seen. The purpose of the rules is to enable judges to resist the emotionally engaging temptation to relieve the plight of those they can see and empathize with, even when doing so would be unfair to those they cannot see.

wallstreet460This was on my mind when, channel surfing last night, I came across Oliver Stone’s 1987 classic “Wall Street,” which I haven’t seen in its entirety in years. To my surprise (perhaps not yours), I found myself rooting for Michael Douglas’s Gordon Gekko, the corporate raider who serves as the movie’s arch-villain. The main sub-plot revolves around Gekko’s attempted buyout of Blue Star Airlines. Bud thinks the buyout can save the struggling airline, where his father still works, and helps convince the pilots’ and flight attendants’ unions to Gekko’s move. Later, Bud discovers Gekko is really planning to break up the company and sell off the pieces and Bud feels betrayed, leading to a climactic confrontation. (The film feels remarkably fresh, despite the glowing green CRT screens and brick-sized cellular phones, and Douglas’s performance is dazzling.)

Stone wants us to empathize with the airline employees (particularly Bud’s dad, who heads the mechanics’ union and distrusts Gekko from the start), the little guys who pay the price for Gekko’s cold, heartless machinations. But I found myself thinking about Bastiat’s unseen, the workers and consumers who are worse off because the inefficient Blue Star is consuming resources that could be used elsewhere in the economy. Keeping unprofitable firms in business may be good for the immediate stakeholders of those firms but it’s lousy for everyone else (attention George Bush, Henry Paulson, Ben Bernanke, Barack Obama, Timothy Geithner. . . .). At one point it’s mentioned that Gekko plans to sell land under Blue Star’s hangars to condominium developers. Shouldn’t we have compassion for the people who might have lived in those condos, had resources been allowed to flow to their highest-valued uses? Where’s our empathy for the small or medium-sized employers who would love to hire away Blue Star’s overpaid employees, who could make better use of its assets, and so on? I say Go, Gordon, Go!

Entry filed under: - Klein -, Bailout / Financial Crisis, Classical Liberalism.

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9 Comments Add your own

  • 1. econominx  |  30 May 2009 at 5:08 pm

    I’ll quote Gordon Gekko to describe how I feel about this article’s whole premise:

    “Mixed feelings, buddy. Like Larry Wildman going off a cliff in my Maserati.”

  • 2. Per Bylund  |  30 May 2009 at 6:01 pm

    Then I guess you should be thrilled about the planned sequel…?

  • 3. Michael E. Marotta  |  31 May 2009 at 12:02 pm

    (A) For me, one of the deepest lessons in economics — regardless of who taught the class — is the danger of unforeseen consequences, secondary effects, the unseen, as Bastiat called it. From my classroom experience, even Keynesians and Marxists admit to the reality of limited knowledge in economics. I have a graduate class this current Spring Semester and my paper cites Gunnar Myrdal, John Dunning, and Amaryta Sen, as well as Joseph Stiglitz. Everyone knows that every “doctor” need to be careful with that “prescription pad.”

    (B) Ayn Rand callled it “bootleg romanticism” when you find the best you can in whatever form it originates.

    We own _Wall Street_, of course, and also _Other People’s Money_ and _Boiler Room_. In OPM, Larry Garfield’s “Amen” speech is a classic, right up there with Gecko’s “Greed” monologue. Boiler Room is very thin, but has some gems.

  • 4. Cliff Grammich  |  1 June 2009 at 8:31 am

    “At one point it’s mentioned that Gekko plans to sell land under Blue Star’s hangars to condominium developers.”

    Trivia that doesn’t have much to do with your general point, Peter, but refresh my memory: where were those hangars? Were they on airport land? If so, would condominums really have been the highest-valued use for that land?

    I guess I’m hoping Gekko isn’t a real-estate developer in any sequel;).

  • 5. Peter Klein  |  1 June 2009 at 9:23 am

    You got me there, Cliff. Maybe it was a development for the hearing-impaired? Actually I wasn’t paying attention closely; perhaps it was some other property owned by Blue Star. . . .

  • 6. Cliff Grammich  |  1 June 2009 at 9:30 am

    Heh. Or pilot and stewardess housing?

    And it would be like Stone to make Gekko a real-estate developer (or at least speculator) in the sequel, no?

  • 7. Peter Klein  |  1 June 2009 at 10:19 am

    According to IMDB the title will be “Money Never Sleeps,” which sounds pretty dopey, anthropomorphisms aside.

  • 8. Rhys  |  2 June 2009 at 11:08 am

    The seen and unseen concept is an incredibly important one, in economics and in life, and I’m glad someone had the insight to apply it in this context. One of my biggest “aha!” moments came when I read Economics in One Lesson, with its take on the seen and unseen and the broken window fallacy. Unfortunately, most politicians are either unaware of the unseen consequences of their policies, or choose to ignore them because they don’t have the incentives to fight for the invisibles. A book called The Power of Small talks about how we are often blinded by what’s most obvious in front of us and overlook the little details. If more people thought that way, politicians wouldn’t be able to ignore the consequences of their policies any longer.

  • 9. TRUTH ON THE MARKET » Economics in one lesson  |  17 September 2009 at 2:04 pm

    […] excellent op-ed on the Sotomayor nomination in the WSJ last week.  Just in case you don’t read the same blogs I do, I thought I’d highlight it here.  It is brilliant.  Here’s a […]

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