Dollars and Jens
Monday, January 28, 2008
Good Capitalists and Bad Capitalists
This is unusual - Sebastian Mallaby draws a distinction between "good capitalists" and "bad capitalists", and the hedge funds are the good guys. It caught me by surprise, as I expect hedge funds to be vilified; his argument is that, unlike some players, the hedge fund managers generally have substantial wealth tied up in their own funds and therefore have better incentives to manage risk appropriately. A seven billion dollar loss won't cost the fund manager seven billion dollars, but it will cost him more than just his job, and may even cost him something comparable to what a seven billion dollar gain would gain him.

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