As Bart Simpson would have said, “Well, duhh”
In an article in today’s Financial Times, Avinash Dixit, a professor in the department of economics at Princeton University, uses game theory to show the fallacy of governments giving in to doomsday scenarios proffered by companies looking for an easy out.Major corporations and banks have ignored the realities of their actions and instead have begged to be saved, stating that the world as we know it will end if they aren’t given the bailouts that they have demanded. Yes, demanded. Although couched as “requests,” their statements about the dire situations that would occur if the money isn’t handed over is more like blackmail. But would the world really end if bailouts weren’t so freely given? Granted, things would be messy for a while, but we would survive. And the ablest companies would also, in true Darwinian fashion.
Unfortunately, governments have fallen for the horror stories. But the facts are the facts, and it can easily be seen that these badly managed enterprises aren’t willing to make the hard decisions necessary for their survival. Thus, those decision must be made by others. Let them fail. We’ll all be the better for it.
