An Unreliable Interest

The trouble with governance by markets is that self-interest is highly unreliable. The theory is that a firm’s owner will optimize management of the firm because it is in the financial self-interest of the owner to do so. But here we have Eddie Lampert, owner of Sears, phoning it in to Indiana from his home in Miami, and predictably driving the firm into the ground, losing himself billions.

If Sears were a government agency, and Lampert an appointee, he would have been fired, or reassigned, long ago, not least for failing to come to work. But because in the free market we bet everything on self-interest, when that fails we must watch paralyzed as an immense organization collapses, shedding jobs and undermaintained infrastructure as it goes down.

Yes, the market is disciplining Lampert in a sense, but at extraordinary cost in waste of assets, and disruption to workers’ lives, when the problem could be solved in a heartbeat for the price of a pink slip.