The Limits of Self Interest

Alan Greenspan testified today about the credit crises. From the Reuters story there is one telling quote:

"Those of us who have looked to the self-interest of lending institutions to protect shareholder's equity (myself especially) are in a state of shocked disbelief."

So, the next time a policy maker chides you with the "let the market decide" mantra, take a deep breath, remember that self-interest and markets are super effective for determining some things, but they are not always right. Even Greenspan admits that.