Here’s a letter to the Washington Free Beacon.
Editor:
Thanks for publishing Ira Stoll’s insightful criticisms of Oren Cass’s latest denigration of the financial industry (“’The Finance Industry Is a Grift,’ Oren Cass Claims in the New York Times. Look Who’s Talking.” February 10).
Mr. Cass peddles the physicalist fallacy, which is the false notion that only activities that churn out the likes of lumber, steel, automobiles, and other tangible things are truly productive – or at least are more productive than activities that produce services. That Mr. Cass’s does indeed peddle this fallacy is evident from his many denunciations of free trade, which he blames for the U.S. consistently running merchandise-trade deficits, and for the American economy generating fewer manufacturing jobs than he has somehow divined should be generated.
This physicalist fallacy naturally fuels Mr. Cass’s antipathy to finance. Finance, in his view, produces nothing – a view that Mr. Stoll explains is hopelessly distorted.
It’s interesting to note that Mr. Cass’s organization, American Compass, has among its major supporters the Omidyar Network. Pierre Omidyar earned his fortune by founding eBay and then enhancing the profitability of that e-commerce site by acquiring Paypal in 2002 for $1.5 billion. In 2015 Paypal was spun off from eBay at a price of $50 billion.
Paypal produces nothing tangible; it ‘merely’ eases the moving around of money. Paypal is a finance company.
If Mr. Cass were correct that finance is “grift,” then large swathes of the financial support for his organization are ill-gotten gains.
Mr. Cass will likely protest that Paypal differs from other financiers, but this protest will be tendentious. The fact is, Paypal’s profits are honestly earned through its success at assisting people to more easily achieve their economic goals – just as are the profits earned by other financial-market activities. These gains are in no way ill-gotten – a reality that renders highly ironic Mr. Cass’s use of financial-market profits to berate financial-market profits as ill-gotten.
Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
