While I'm not an expert on the subject, I imagine that one could counter that today we have analysis tools and financial reporting that give potential investors much more informational leverage than a purchaser might have had in Italy in 1200, and that this information battle is the natural balance for equity exchanges.
But regardless, the observation that parties involved must have a "diffuse sense of honesty" in order for a system to function is definitely at play on, for example, ebay, craigslist, private auto sales, yard sales, and the like -- systems where buyers have very little information about the product or reputation of the seller, other than what the seller provides them, to decide whether or not to enter into a transaction. There is a social expectation that people should be honest, I think, and while we would not be surprised to hear of people getting ripped off on craigslist or ebay, and while we encourage others to take the possibility into consideration when making purchases, we (or at least I) nonetheless place the bulk of the blame for fraud on the malicious seller, not the hapless buyer.
> we (or at least I) nonetheless place the bulk of the blame for fraud on the malicious seller, not the hapless buyer.
I agree, and find the tone of this thread interesting because it is very much reversed. In that blame seems to be falling on the buyer for not knowing better. Yet, it was the seller that seemed to manipulate the business to inflate standard business metrics at the expense of sustainability. Further, the investment banks then turned a blind eye to the state of the business and facilitated the sale.
This reminds me of the sub-prime fiasco. Ie. we had a a system where everyone optimized their own position, but overall those optimizations led to net losses. Same seems to apply here--Private equity optimized their own position, Fund managers likewise, yet the company itself is no longer viable. The long term outcome of this is a failed economy unless systemic corrections are made before that happens.
But regardless, the observation that parties involved must have a "diffuse sense of honesty" in order for a system to function is definitely at play on, for example, ebay, craigslist, private auto sales, yard sales, and the like -- systems where buyers have very little information about the product or reputation of the seller, other than what the seller provides them, to decide whether or not to enter into a transaction. There is a social expectation that people should be honest, I think, and while we would not be surprised to hear of people getting ripped off on craigslist or ebay, and while we encourage others to take the possibility into consideration when making purchases, we (or at least I) nonetheless place the bulk of the blame for fraud on the malicious seller, not the hapless buyer.