People may recall the quotation from Dickens’s novel from which it draws its name:
Now, I return to this young fellow. And the communication I have got to make is, that he has great expectations.
but they are probably less familiar with this one from later on in the work:
All other swindlers upon earth are nothing to the self-swindlers, and with such pretenses did I cheat myself. Surely a curious thing. That I should innocently take a bad half-crown of somebody else’s manufacture, is reasonable enough; but that I should knowingly reckon the spurious coin of my own make, as good money!
Yesterday I heard a number of news stories, e.g. Bernie Madoff’s being sentenced to 150 years in prison, the roadblocks that Treasury Secretary Tim Geithner’s attempt to get “toxic assets” off banks’ books, PPIP, has run into, and I was struck by the realization that the unifying thread was great expectations. In Madoff’s case there is no doubt that the man is a villain although I suspect that his motivation was more than simple greed. I think he was seeking adulation and it’s a lot easier to appear consistently praiseworthy through fraud than it is by consistently successful investing.
However, I can’t help but wonder if many of his victims weren’t driven by high returns that were just too good to question. I don’t believe that’s simple stupidity. I think it requires that special streak of larceny that can turn one into a mark for a swindler. They were at least to some small extent self-swindlers.
As I understand the shoals onto which PPIP is in danger of running aground, bankers are unwilling to sell the so-called “toxic assets” because they’re sitting on their books at some value and if they’re sold for significantly less than that, their great expectations will be substantially diminished. I’m not sure there’s any solution to that problem. Perhaps there’s some way to make those assets even more toxic so that they’re too hot to hold on to. Or maybe there’s some greater inducement. I’m open to suggestions.
I think we may need to open a new can of bankers.
There are also probably hundreds of thousands or millions of people who’ve bargained for higher wages at least partially to keep up with the Joneses and the Joneses were investment bankers whose earnings have proved illusory. Those expectations are looking substantially diminished, too.
I believe that unrealistically great expectations have driven Waxman-Markey, the global warming bill, for which I see little evidence of any beneficial effect whatever. My colleague at OTB, Alex Knapp, assures me that its benefits can be realized at some point in the future by prudent stewardship on the part of the bureaucrats who will administer the plan. He has more confidence in them than do I.
Great expectations seem to mark the views of those who favor the healthcare reform bill that’s making its way through the Congress. I see no way by which the plan will reduce costs unless the “public option” is a stalking horse for a single payer system (in which case that’s the plan that should be making its way through the Congress) and I see no way that a single payer system, chaffering down prices through monopsony power, will actually reduce prices while maintaining quality unless you assume we have enormously too much capacity for which I see no evidence. Healthcare costs are rising in every OECD country, not just ours.
I see no way that healthcare can elude the forces of supply and demand.
I also think that the economic planners in the Obama Administration are expecting things get back to normal, hopefully in time for the midterm elections. I’m beginning to think that this is the new normal.
The picture above is from David Lean’s marvelous screen adaptation of Dickens’s Great Expectations
Update
I see that David Brooks has some of the same misgivings I do about Waxman-Markey and the healthcare reform bills:
The bill passed the House, but would it actually reduce emissions? It’s impossible to know. It contains so many complex market interventions that only a fantasist could confidently predict its effects. A few years ago the European Union passed a cap-and-trade system, but because it was so shot through with special interest caveats, emissions actually rose.
On health care, too, the complicated job of getting a bill that can pass is taking priority over the complicated task of creating a program that can work. Dozens of different ideas are being added, watered down or merged together in order to cobble together a majority. But will the logrolling produce a sustainable health system that controls costs and actually hangs together?
