Saturday, 14 March 2009

Demonizing Bernie Madoff - just prolonging the cultural denial phase

There is a very insightful article in The Guardian (March 14, 2009) by Bethany McLean - who is fast becoming one of my preferred columnists. She also has an article in the current issue of Vanity Fair about the hubris and demise of hedge fund managers.

The context really needs to be spelled out by reading Ms. McLean's piece in the Guardian but hopefully the core idea will be conveyed in the following comment that I made regarding the piece and will encourage you to read through her argument in full.

Ms McLean's article is very well written and touches on the critical role of an act of mass collective self deception that lies at the root of the problems.

Rather than demonizing individuals like Bernie Madoff blame needs to sit firmly with a cultural groupthink which is centered on a denial of the true costs and consequences of individual and collective actions. We have failed to properly factor in the costs of ecological degradation and systemic financial failure in all of our decision making because markets do not know how to properly measure these costs. But nor do governments and bureaucrats know how to measure them either.

Of the two possibilities - markets or politicians - I would expect and hope that it is the former that will eventually figure out how to quantify the true costs and consequences of our action and to lead to a far more sustainable allocation of resources and recognition of, and insurance against, financial and ecological risks.

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