When it comes to the financial crisis, one of the most difficult issues to get straight is whether it was caused by bad people knowingly doing bad things, or by a skewed system that turned the actions of normally self-interested individuals into collectively destructive behaviour. In a recent interview, Francis Fukuyama, author of The End of History (that was a long time ago), offers a convincing synthesis of these two positions:
Lloyd Blankfein doesn’t get up in the morning and say, “OK. How are we going to defraud people today?” but I do think the relationship of these banks to social rules is fairly dodgy. Rules are viewed as potential obstacles that you try to get around if that maximises your profit. This is a deeper social issue that I think has to do with the economisation of a lot of thinking. Economists have this model of rational utility maximisation – that social benefit comes out of everybody pursuing their private rational self-interest. This has shaded over – imperceptibly over the past couple of generations – to a downplaying of social norms as constraints on behaviour. You see this in a number of places. In business schools, for example. Back in the 1960s and 70s, business schools regarded themselves as professional schools along the lines of law schools or architecture schools. They were meant to inculcate a certain sense of professional responsibility, that you have obligations to society at large. But as a result of the economisation of a lot of what was taught in these schools, individual profit maximisation began to displace this normative sense, and this spilled over into the behaviour of the people who went on from these programmes into the financial sector. In their minds, they weren’t deliberately trying to defraud people, but if they saw an opportunity to take advantage of less sophisticated buyers of subprime mortgages, they would go ahead and do it.
Full interview at The Browser.