Was I Sleeping in Econ 101?

December 20, 2011
Posted by Jay Livingston

Joe Nocera covers the business beat for the Times, and he’s now a regular on the op-ed page.  I’m sure he knows more about economics than I do.  But I was puzzled by the opening of today’s column about Fannie Ma and Freddie Mac

In their heyday, these strange hybrids — part corporation, part government agency — were the biggest bullies in Washington, quick to bludgeon critics who dared suggest that their dual missions of maximizing profits while making homeownership affordable for low- and moderate-income Americans were incompatible.

Apparently, Nocera agrees with the critics who thought those dual missions were incompatible.  Maybe I was doing my James Franco impersonation in Econ 101, but isn’t that the basic idea of free-market capitalism – that companies seeking to maximize their profits will make more stuff available at lower prices for buyers? 

If those missions are incompatible, then capitalism is a very wrong-headed idea.  But if Nocera is right, if powerful corporations pursuing profits do not always bring benefits to consumers, maybe we need to rethink anti-government, anti-regulation models and policies that treat Bank of America and Exxon-Mobil as though they were the local bodega.

(Nocera also says of the bullies, Fannie and Freddie, “they essentially wrote most of the legislation that affected them, which they larded with loopholes.”  Much the same could be said of the banking and energy behemoths, especially when Republicans are shaping the legislation.)