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Question: Is there tension between the community and self-interest?

Paul Krugman:Oh sure there’s an enormous tension.  And in fact, look.  All of us in our daily lives, even if you’re a big liberal like me, I don’t like paying taxes.  I’m all in favor of a system in which people who are pretty affluent pay high taxes to support a strong social safety net; but you know when I . . .  When I get my bill – especially when I get my bill from the state of New Jersey – I get . . . I get pretty upset.  And we all . . .  And I try to … my tax bill in ways that are legal.  But you know I’m not voluntarily contributing extra to the … in Trenton.  So the . . . This is . . .  You know those conflicts are not everything.  There are some things.  Self-interest works in our favor when it comes to making sure that there’s actually sliced bread in the supermarkets.  This is Adam Smith’s invisible hand.  Individual self-interest assures us that people will supply us with most of the necessities of life.  But when it comes to paying for war, or paying for health insurance for the elderly, individual interest is to try to avoid paying.  Collective interest, since all of us might actually need that help, says that we do need to pay.  So it’s . . . it’s consistent.  It’s throughout our lives.  This is why we have governments.

Question: Has American taken self-interest too far?

Paul Krugman: I’m not sure that we’re any more self-interested than anybody else.  We have gone too far in the belief that self-interest is always gonna work in the right direction.  So you look at something like the . . . the subprime crisis in the mortgage market.  That was in large part the result of an ideological predisposition to think that an unregulated financial market which relies entirely on self-interest is gonna work out just fine.  And that tossed aside the lessons of actually generations, which is that financial markets do need some regulation.  There are too many ways in which it can go wrong.


Paul Krugman on the Virtues...

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