Is short-termism eroding the very foundations of economic growth?
In short: We often view patience as a moral virtue, but what if it is a structural necessity for a stable economy? As financial markets lean further into myopia, we risk trading long-term stability for immediate gratification, potentially forestalling the investments required for lasting growth.
Andrew Haldane explores the tension between patience and short-termism in his Sir Thomas Gresham Docklands Lecture. He suggests that while patience has been debated by philosophers and theologians for over 700 years, it is also a fundamental concept in classical economics. The core issue is 'capital market myopia'—a mounting trend where the desire for immediate returns may undermine the stability of financial systems.
Haldane draws a provocative parallel to Gresham’s Law, which traditionally states that 'bad money drives out good.' He proposes a 21st-century update: a world where 'short finance drives out long finance.' This shift suggests that the structural mechanics of our markets might be prioritizing quick gains over the long-term investments that drive national development and sustainable progress.
The history of economic thought provides a vivid vocabulary for this struggle. Adam Smith described the virtue of patience as 'self-command,' or the ability to defer today's pleasure for tomorrow. In contrast, 19th and 20th-century economists like Jevons and Marshall characterized impatience as a primitive, almost childlike behavior—likening short-termists to children picking the plums out of their pudding to eat them instantly. Pigou further noted that our 'telescopic faculty' is naturally defective, making it difficult for humans to perceive future pleasures on the same scale as present ones.
Understanding this dynamic is crucial because short-termism doesn't just affect stock prices; it influences real-world investment decisions. If the financial architecture favors the 'short' over the 'long,' it may systematically starve the projects that require decades to mature, creating a cycle of diminished growth and increased systemic fragility.
Opens the Intellect+ feed with this card first. Swipe up for the next one.
Sources
- Summary by Intellect · source: Get Shorty: The Sir Thomas Gresham Docklands Lecture - Andy Haldane
- Also: The Sir Thomas Gresham Docklands Lecture: Get Shorty
To cite this card, link to https://intellectplus.co.uk/app/ideas-get-shorty-the-sir-thomas-gresham-docklands-lecture-andy-hal.
How we source, check and correct cards: Editorial standards.
General information, not professional advice. Spotted an error? Flag the card or see corrections and complaints.
Intellect Plus is a visual educational discovery platform for exploring fascinating facts and ideas. Brain Food, Not Brain Rot. What is Intellect Plus?
