This is a legal maxim:

No-one gives what he does not have.

The basic idea is that if you do now own eg a car but you pretend you do and sell it to someone else, that person can not acquire ownership of the car through that transaction.

OK, there are exceptions (of course). But the core idea is sound.

Anyway, here is Toronto lawyer Murray Teitel busy in the Guardian selling something he admits he does not have, namely insight on economic issues.

I can not follow his deft analogy with sardines at all. But this is at least clear:

That, in a nutshell, is why we are experiencing a global economic meltdown. Our economy was based not on producing goods and services people would pay for, but on producing financial transactions.

The purpose of financial transactions should be to enable the creation of goods and services. When financial transactions become an end in themselves, and goods and services exist only to enable financial transactions (rather than the other way around), as sure as night follows day you are headed towards an economic catastrophe.

His is a teleological ignorance:

The purpose of financial transactions should be to enable the creation of goods and services.

No. No.

The ‘purpose’ of such transactions as with any other transactions is to enable the people concerned to do deals they all think are beneficial. That’s it.

And from that simple pursuit of self-interest emerges a wider order coming from spontaneous human creativity which may or may not give us goods and services.

Once we start thinking that the system has a Purpose, it is a simple step to asserting that it is not fulfilling that Purpose and needs to be steered or even compelled to do so.

And wrecking the whole thing.

So we turn to Tim Worstall:

I see, you don’t understand what the financial system exists to do.

It’s really about two things.

Firstly, the moving of risk from those who don’t want it to those who do. For example, farmers selling wheat futures moves risk from the farmer to the speculator. The existence of a bank moves risk from the depositor (well, almost all of it anyway) to the bank shareholders. Pension companies, annuities and the like from the long term saver to the shareholders of the pension company.

Secondly, about intermediating in the time preference differences between depositors and borrowers. Banks, by definition, borrow short and lend long (I think it was Brad DeLong who said that if you borrow short and lend long then you’re a bank, if you don’t, you’re not).

From those two basic ideas you can build pretty much the entire financial sector. And you have to be very careful indeed about insisting that this or that not be allowed in the financial sector for you’re at risk, high risk, of stopping people being able to do these two highly desirable things.

A rather more persuasive analysis than those sardines, I think.