24 April 2010
This pretty much sums up why I think "too big to fail" is wrong. If the Chicago School had ever considered economic models analogous to ecology (in particular, population modeling) they would have seen that there are limits to growth -- rather spectacular ones, in fact. It seems to me that there was a whole lot of productive investment in the 1980's when Glass-Stegall was intact and a whole lot of investment banks did just that -- invest capital in business, and get a reasonable return. Alas, the profits just weren't big enough for some, hence the mania for mergers and acquisition, outsourcing, and when that dried up, the development of exotic financial instruments -- also know as "three card monte for the economic elite".
The resources required to support massive consolidation and centralization of capital, as demanded by the Chicago School and their "efficient model" simulations are always greater than the resources demanded by multiple small concentrations of capital, just as massive monoculture in agriculture is unsustainable for the same reasons. The inputs always exceed the outputs; but you get a concentration of resources in one location for a period of time. However, at the end of the model, when the input resources fail, the entire system collapses.
That's the end game of the Chicago School, and the direction we've been headed as a country for the last 30 years.
We're still headed in that direction, and frankly, it's probably too late to change.
But this is a great illustration, and fantastic satire.
Posted by scory at 10:16 AM