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Friday, February 25, 2005

More economics 101

I read the following quote yesterday on one of these silly Internet quizzes about personal political beliefs where you select whether you agree or disagree with various statements:
"It is regrettable that many personal fortunes are made by people who simply manipulate money and contribute nothing to their society."

I really felt the need to respond to this because this isn't a statement to agree with or disagree with. It is patently false. I'm sure that there are many who would agree with the statement but only because of a lack of economic education.

This idea that some professions, paricularly financial in nature, are simply leeches on society because they don't "contribute to society" completely ignores what they do contribute to society.

Bottomline, what insurance companies, investment bankers, or commodities traders do is assume risk in society that others are either not willing to assume or unable to assume.

Take insurance agents for example. Very few people can afford to self-insure that house. However, insurance companies are willing to assume that risk on behalf of its clients. The insurance premiums that people pay for their homes is really a way of paying someone else to assume their risk of owning a home.

I would argue that people who are willing to do this are doing a great service to society.

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