How could economics not be behavioral? If it isn't behavioral, what the hell is it?
Charlie MungerRead
A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it.
Interpretation
What this quote means
Bankers will exploit the opportunity to lend money irresponsibly if not regulated.
Charlie Munger highlights the potential dangers of unregulated banking practices. He suggests that without appropriate rules in place, bankers, incentivized by the difference between borrowing and lending rates, may overextend themselves, leading to financial instability and negative consequences for society at large.
Themes
BankingRegulationFinancial StabilityLoansEconomics
In practice
Example use cases
This quote could be used in a lecture about the importance of banking regulations in an economics class.
More from Charlie Munger
All quotes →The world of derivatives is full of holes that very few people are really aware of. It's like hydrogen and oxygen sitting on the corner waiting for a little flame.
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I believe in the discipline of mastering the best that other people have ever figured out. I don't believe in just sitting down and trying to dream it all up yourself. Nobody's that smart.
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Economics is in many respects the queen of the soft sciences. It's expected to be better than the rest. It's my view that economics is better at the multi-disciplinary stuff than the rest of the soft science. And it's also my view that it's still lousy.
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Look at this generation, with all of its electronic devices and multitasking. I will confidently predict less success than Warren, who just focused on reading.
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Economics profession, they've been - they've been confident in various formulas, but economics is not physics. The same formula that works in one decade doesn't work in the next. Economics is a difficult subject.
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