Here’s a letter that I sent last week to the Baltimore Sun:
Rena Steinzor blames today’s financial unrest on "knee-jerk opposition
to federal regulation" ("Reviving regulation," Sept. 28”). Her
solution, of course, is greater government involvement in the economy.
But
on the very same op-ed page, Cynthia Tucker put part of the blame
(rightly so) on George W. Bush: "The White House bragged on programs to
make borrowing easy, including an initiative to allow the Federal
Housing Administration to insure mortgages for first-time homebuyers
without a down payment" ("Minorities a convenient scapegoat for U.S.
financial woes").
Clearly, the only knees jerking of late are
not those of conservative politicians opposing government intrusion
into markets but, rather, of persons such as Prof. Steinzor who lazily
assume that laissez faire has been the order of the day.
Sincerely,
Donald J. Boudreaux
George Mason University
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I'm wondering how people who blame the crisis on the supposed lack of regulation explain the crisis in Europe?
I don't much believe in planning, so how does economic organization emerge? The process is more like evolution by natural selection, and (like natural selection) the process has a memory.
My daddy's daddy's daddy (or my mentor's mentor's mentor) was a gambling man. He gambled on home building. He built lots of homes, even before anyone offered to buy a home from him, and he sold most of them at a profit, so he became wealthy. Other people of his generation also built homes, and most of them didn't become so wealthy, because they built too few houses for their particular housing markets.
My daddy's daddy learned to build houses from this wealthy man, because he wanted to be wealthy too. He suceeded by building as many houses for the same market. My daddy learned to build houses from my daddy's daddy. Same story. I learned to build houses from my daddy, and I built as many houses as he did, and I got richer still, because I avoided the cost of raising children. I enjoyed the "demographic dividend".
So why isn't it this strategy working for my son? Let's see. The government's always doing stuff. Look over there. The government did something over there. It must be government's fault.
Is it always the government's fault? I suppose so. Is "the government" a better explanation that "greed". No, it isn't.
Now, the "peace dividend" might have been a real dividend, though it wasn't, but the "demographic dividend" wasn't really a dividend at all, because we weren't really consuming the yield of past investments. We were consuming our seed corn.
Am I predicting mass starvation with this metaphor? No. I'm only predicting less retirement than we expect. What's so great about retirement anyway?
The problem occurs ones step prior to issues of regulation. It ultimately lies with the libertarian mindset that suggest money is free speech and thus allows for and even defends a fatal corruption and hybridization of private and public interest. Until we reign in corporate lobbyist who can easily make the companies they represent a 1000%+ return on their investments we will live in a Plutocratic Socialist state.
I'm not sure it's universal belief of libertarians but it sure seems to be. So if we want to talk about ideological unintended consequences this would be a good place to start. If money for political favors is a supported position of the lazy fair set then it is obvious why it falls flat on its face with its very first step. And indeed the evidence is clear that it ultimately is responsible for the current market failure.
And to be clear my definition of market failure is when the richest wealthiest people on Wall Street come to the government asking for a Trillion dollars to clean up a mess of their making.
Cynthia Tucker,
"There is certainly no evidence to support this claptrap. Federal regulators have never "demanded parity between racial groups in lending." Not ever."
Cynthia Tucker does sloppy, or no, research before putting fingers in gear.
In this respect, the way to team up with those asking for better regulations, starts by standing shoulder to shoulder with those that are against insensible regulations.
Do not forget that it was the creation of minimum capital requirements for banks that are based on risk; the empowerment of some of few agencies to measure those risks; and the imposition of rules that forced banks to immediately respond and mark to market the consequences of any change in any agency’s perception of the risks, that got us into this mother of all messes.
"I don't much believe in planning, so how does economic organization emerge? The process is more like evolution by natural selection,…"
Martin
Martin we evolved intelligence because of its value in allowing us to plan and mold the future. Likewise evolution saw that we were more successful as organized societies then as hapless individuals. Planning and societal organization are our evolutionary advantage and the reason for our success.
The libertarian position is not even consistent with the very basis of our evolution.
The guys who didn't believe in planning and thought they'd be rugged individualist…. THEY GOT EATEN back in the day.
If you are a liberal (in the bastardized modern use of the word), then liberalism comes first before anything else, including reality.
muirgeo
Quick question. Suppose that the California State Assmbly passed a law making it illegal for a person to pay someone to perform for an abortion.
They don't outlaw abortions, merely abortions for pay.
Now, would that be an infringement of a woman's right to choose?
The guys who didn't believe in planning and thought they'd be rugged individualist…. THEY GOT EATEN back in the day.
– Posted by: muirgeo | Oct 6, 2008 9:41:00 AM
You confuse individualism with lonerism.
Individualism recognizes the supreme importance of cooperation. So important is cooperation, in fact, that it cannot be left in the hands of a small group of self-interested individuals.
There was never any regulatory requirement for "parity" between racial groups in lending, in the sense of strict equality in the credit extended per capita to people in different racial categories.
What happened with the CRA and similar programs is interesting, but if you think it's the explanation for the housing bubble and the credit crunch, you simply refuse to see the forest, because you're obsessively focused on a particular tree.
This cracked me up. Dude, the libertarian philosophy does nto mandate rugged individualism. You are free to join or leave groups as you wish. A liebrtarian political order would dolerate kibbutzes, Huttterite communes and the like.
The one thing that seems to upset you about a libertarian political order is that if someone tries to leave the gorup, nobody shoots him, or beats him up and locks him in a cage.
Incidentally, the current 'crisis' so called is what happens when a market economy corrects malinvestment. Normally malinvestments get exposed and disposed of before they get too large, but in this case you had Federal regulators encouraging it, a central bank printing money like crazy and threatening anyone who tried to avoid using the debased currency.
Muirgeo,
Your knowledge of economics is scant. No one says that there should be no planning. Individuals should, and do, plan. The same is true for firms and other organizations. It's central planning — planning society — that is impossible to pull off successfully.
The literature on this topic is immense. If you're interested in learning, you can start with Hayek's 1945 article "The Use of Knowledge in Society," and then read an article of his from the 1970s entitled "The New Confusion about Planning."
Don Lavoie's 1985 book "Rivalry and Central Planning" (Cambridge University Press) is also very useful.
Muirgeo,
"…my definition of market failure is when the richest wealthiest people on Wall Street come to the government asking for a Trillion dollars to clean up a mess of their making."
How could you possibly see this as a market failure? It is clearly and obviously a government failure.
Muirgeo,
Is planning always good? That is, can you imagine circumstances in which planning would fail?
Let me get you started. Would it be a good idea, for example, to trust the plans of a relatively small group of self interested indivuals who possess only minimal knowledge of the highly technical areas for which they are making the plans? If you think it would be a good idea to trust such a group, are you really trusting in their plans? – or in their authority?
In reality, our vision of the future is extremely myopic. It's true that someone always "knows" the future, but it's also true that someone always knows the outcome of a particular coin toss. A stopped clock is right twice a day, even if the time it displays occurred randomly.
This metaphor can be useful, but of course, evolution doesn't "see" anything in the usual sense; however, it did "design" your eye in a meaningful sense. I might even say that Nature "planned" your eye, because it does have an algorithmic memory (the genome), and "planning" is all about modeling the future by extrapolating models of the past. That's all "planning" ever is, of course. It's an educated guess about the future, assuming that the future will be like the past.
I don't dispute this statement, but it's beside the point. We plan a lot. Most of our plans don't pan out. Some do. We remember those and forget the rest. Successful economic organization occurs this way, not by more global planning; otherwise, the Soviet Union and similar experiments in central, economic planning would have succeeded.
What "libertarian position"? You're completely ignoring my specific point. You and Sam are two sides of the same coin. Flipping this coin over and over again is not illuminating.
No. The "rugged individualists" believe in planning as much as you do. Mussolini believed in the visionary leader principle. His model was the corporate CEO. Stalin was no different. These people believed that their individual planning was the key to economic success, but they made a category error. Their categorical confusion involves a scale of organization. The utility of planning is not scale invariant.
I eat a lot of cows, but cows are among nature's most social creatures. They're easily domesticated for precisely this reason, because they're easy to herd. Sheep are also easy to herd, and we eat them too. Try herding cats. We don't eat them. We more nearly worship them.
Again, my point concerns this chart.
I'm still waiting to see this libertarian utopia in large-scale practice. It sounds good on paper though.
Plac Ebo,
Please point me to any serious scholar who says that libertarian policies bring utopia?
The world's full of uncertainty, stupidity, duplicity, dishonesty, and downright creepiness. No set of human institutions will bring about utopia, or anything close to it.
My "utopia" comment was referring to the unbridled enthusiasm for libertarianism by the majority of this site's posters. What's interesting to me is how it is believed that the world's "uncertainty, stupidity, duplicity, dishonesty, and downright creepiness" can be harnessed for good if we just commit fully to libertarianism.
I'd settle for an example of a large-scale "successful" libertarian state.
Plac Ebo,
So what's the alternative? Concentrating more and more power in the hands of fewer and fewer self-interested individuals?
A utopian believes that some particular set of rules he'd like followed is utopia definitively. Libertarians aren't people who don't want any rules followed.
Marcus, if that is the only option then we are doomed.
Plac Ebo,
I for one don't believe that is the only option, but I do believe that is what is happening.
Think about the recent "crisis". With a few well chosen scare phrases, the US government has virtually taken over control of the housing and banking industries. Its not so much that they did it that I find frightening as the fact that they were able to do it. The American psyche has evolved so far in the direction of paternalism that we respond instantly to a few harsh words from the parent figure. You tell me, are we living in a fascist state? Cause if we're not, we're really close.
Plac Ebo,
That no "successful libertarian land" is documented in history using that term "libertarian" does not mean that such never existed. I would suggest that you study most of the North American (and many of the South American) Indian socieities as a start. Minimum to no "central government" in virtually every case. Minimum to no local "government" in virtually evry case. Most of the North American Indian societies depended upon self rule and self discipline in the mores and customs of the society to keep the peace within the society and to minimize difficulties in dealing with on another.
What guidance that was available to the North American Indian in virtually every case could hardly be called government. They didn't know what the word meant.
Recognizing that leaves us with only defining the word successful. I suggest you find and read the book "1491" by Charles C. Mann.
I would say they were immensely successful. What say you?
Plac Ebo,
So what's the alternative? Concentrating more and more power in the hands of fewer and fewer self-interested individuals?
Posted by: Marcus
That is what we are doing by letting lobbyist and plutocrats make the rules. We need to control and disperse central power by giving the power to the people and letting democracy serve their needs not just the needs of the plutocrats.
You guys don't like democracy and you always come to the defense of lobbyist so you really don't have any answers. That's why I claim it's a flawed ideology. It has no answers to real world problems and no factual evidence of success in the real world data.
muirgeo….
Your statements are full of duplicity. Show me a post where Don or Russ has defended a lobbyist?
Randy, I share many of your concerns. I don't like the direction that this country is headed. It is too large. It is too intrusive. Are we in a fascist state? I don't know. Fascism is difficult to define. Yesterday I read an article (by Ibn Warraq as he cited Scruton's Dictionary of Political Thought) that listed traits of fascist movements:
-Nationalism
-Hostility to democracy and egalitarianism
-Cult of the leader
-Respect for collective organization
-Love of symbols
-Cult of violence
-Violent anti-Semitism
It's not much of a stretch to think that we could become a fascist state with the appropriate charismatic leader, and if we substitute anti-Semitism for our anti-Muslim mindset.
Muirgeo,
You blame libertarians for the fact that you live in a fascist state – and this makes sense to you? I think you need to check with your handlers. Either they gave you some stupid talking points, or you misunderstood them.
That is what we are doing by letting lobbyist and plutocrats make the rules. We need to control and disperse central power by giving the power to the people…
– Posted by: muirgeo | Oct 6, 2008 12:32:03 PM
Muirgeo, we agree right up to this point. We disagree on the solution.
You envision that allowing individuals to vote once every other year for a total stranger who has never met them to go off to a distant city and represent their best interests in some way 'empowers people'. That is democracy (or, at least, representative democracy).
Where as I believe 'empowering people' means letting people vote every single day, multiple times a day on precisely their own best interest. That is the market.
Plac Ebo,
I'd eliminate some items that are simply consequenses and leave the following core item that results in a wide variety of disorders;
-Respect for collective organization (More precisely, the subordination of the individual to the state).
If you follow the propaganda from our political class for any length of time you will hear the following repeatedly. You are not an individual, you are not free, you are just one of the people, the people are the state, and the will of the state is the will of the people.
We should resist this attribute of "fascism". Mussolini's Fascism wasn't particularly anti-Semitic, unless we count the period after the Nazis invaded Italy to restore his Visionary Leadership. Nowadays, people will emulate Mussolini left and right while loudly protesting an accusation of "fascism" on the grounds that some of their best friends are Jewish (or even that they're Jewish themselves).
The closest thing we have to a "Jewish problem" in the U.S. today is not a "Muslim problem". It's an "immigrant problem".
I usually adhere to common usage, but I refuse to call that "democracy".
vidyohs, I've got to be honest with you. If your best example is the American Indian, that is going to be a tough sell in modern times. Hell, most people don't even enjoy camping at a campground with showers and electricity, let alone spend their entire life on a rugged backcountry camping trip.
It's central planning — planning society — that is impossible to pull off successfully.
Posted by: Don Bordereaux
I just don't get on what basis such a claim is made. I
've read and re-read the first reference and I'll follow through with the others you suggest. But I'm truthfully not interested in pontification and thought experiments. I want facts and real-world evidence.
The most successful societies in the world are the social democracies. There seems a shortage of evidence to suggest that if they planned less they would be doing better.
And through time policy changes with in any of these countries doesn't seem to support the claim nor do head to head contemporaneous comparisons.
The mere fact that no unplanned societies exist (outside of those like Somalia) suggest there is a logical fallacy here.
I may be an amateur on the issues of economics but there are no shortage of experts to convincingly counter the positions you hold as apparently self-evident.
muirgeo said:
Hmm, so how do we decentralize power so that one person can't compell another to do stuff against their will. I guess it would be soem sort of society where people do stuff because they choose to, not becasue someone is forcing them to do things at gunpoint, where if they make somethign they are free to keep it, or trade it or give it away as they see fit.
Hmm, I wonder what we would call such a matrix of freely entered transactions?
That's actually quite false. click on the link here for just the stuff on Cafe Hayek.
Actually we do have historical example. Pennsylvania in the late 1600's early 1700's whose government refused to pass laws and collect taxes for the crown (libertarian society brought down by the interstate hostilities between France and England), medieval Iceland (libertarian society brought down by the by the introduction of compuleory tithing which acted like a land tax and concentrated power in the hands of a few families).
Libertarainism is not a utopia. however, when societies experiemnt with freedom, invariably things improve. They may not improve to the point where things are perfect, or even very nice (as in teh case of Somalia) but you see a definite improvement. Look at North Korea vs South Korea, East Germany vs West Germany, Hong Kong vs. Shanghai. In all those places, one place was far more free than the other. In all those places, one place was far more pleasant a place to live than the other. It does not mean that injustice was eliminated. There are people held in de facto bondage in Hong Kong, for example, but they numebred far fewer than the people effectively held in bondage in Shanghai before it was granted its special status as an Economic zone.
What's interesting to me is how it is believed that the world's "uncertainty, stupidity, duplicity, dishonesty, and downright creepiness" can be harnessed for good if we just commit fully to libertarianism.
The whole point of libertarianism is that none of these things are harnessed by a central authority. To deal with duplicity and dishonesty we have Rule of Law. Creepiness, uncertainty and stupidity are harnessed only by a central authority and are used to cow everyone else. If you're not convinced, read some Soviet history.
You envision that allowing individuals to vote once every other year for a total stranger who has never met them to go off to a distant city and represent their best interests in some way 'empowers people'. That is democracy (or, at least, representative democracy).
Where as I believe 'empowering people' means letting people vote every single day, multiple times a day on precisely their own best interest. That is the market.
Posted by: Marcus
Marcus,
These are not mutually exclusive. I believe both should happen. The problem is when the corporations over-ride democracy and get more representation in government then the people. That's the current problem and the solution in my opinion is to crack down on lobbying and keep money out of politics as much as possible.
Plac: "vidyohs, I've got to be honest with you. If your best example is the American Indian, that is going to be a tough sell in modern times. Hell, most people don't even enjoy camping at a campground with showers and electricity, let alone spend their entire life on a rugged backcountry camping trip."
I would like to be charitable with my interpretation of your remarks, but your comment seems fully disingenuous.
Vidyohs was not holding up American Indian culture as an example of "libertarian" technological achievement. Clearly, Vidyohs was referring to social organization.
The American Indian, as far as I know, did not purposely limit their exposure to state-of-the-art technology, nor were they technologically backward as a result of the social organization. They may have been technologically backward (post 1492), but not for that reason.
I just don't get on what basis such a claim is made. – Village idiot
Why am I not surprised?
I've read and re-read the first reference and I'll follow through with the others you suggest. But I'm truthfully not interested in pontification and thought experiments. I want facts and real-world evidence. – Village Idiot
My first instinct is to say that sending you to live in Soviet Russia would be the only education and real world evidence you would need. On second thought, idiots like you were very useful because the central authority could harness your stupidity for their own purposes. So, likely, you would have ended up the mayor of your rural, illiterate village. Not a surprise since 92% of the Soviet Nomenklatura were either completely illiterate or functionally illiterate. As an example from my lifetime – Brezhnev couldn't pronounce the word "systematic". The word that tumbled out of his mouth was pretty close to "boobs" in Russian. You'd fit right in, Muirpid. Of course, you would have probably accidentally wrapped your sandwich in the section of newspaper with Stalin's mug on it (try finding a page without it during his reign) and you would have been executed for your transgression as an enemy of the people. You're not afraid of the central authorities carrying out the will of the people, Muirdiot….are you?
Oh, and….we had elections in the Soviet Union. So, it was a " socialist democracy".
I've never been clear on how violence & theft & anything else bad becomes good so long as The People vote for it.
muirgeo,
Most libertarians are enthusiastic democrats, that is, they agree that democracy is the best method of selecting political representatives. However, libertarians tend to favour a constrained democracy, that is, an arrangement which places some laws beyond the scope of democratic reform. Unfortunately, since its inception, the US has been moving toward an unconstrained democracy.
The owners and officers of organizations that I choose in the marketplace (including my own employer) are among my political representatives. I usually prefer their rules, because I may choose them without imposing the same rules on you, and I don't want to impose many rules on you, just as I don't want you imposing many rules on me.
I do want the power of these politicians checked, just as I want the power of more central authorities checked.
I don't want any laws beyond reproach, but some laws certainly seem less reproachable than others.
Hitler's national SOCIALISTS were DEMOCRATICALLY elected to power with 43.9% of the votes, march of 1933.
I can see Cafe Hayek is increasing in relevancy as we are being inundated with trolls. One after another accusing us of being "libertarian Utopians".
Methinks – that was a slam dunk on muirduck! He's speechless.
Martin – what I think many people are missing is what makes America more "unique" compared to other nations is our system of checks and balances. No we aren't even close to perfect, but with our combination of House, Senate, Judiciary, Executive, 2/4/6 year election cycles basically prevent any one ideology from gaining too much power. The few times in history that it happened(1930s) were a total disaster for the nation. Divided government is best.
Difference between absolute central planning and less central planning. I
USB Interface, in my case more curiosity than relevancy.
Placebo – if we weren't relevant you'd not be in here.
you always come to the defense of lobbyist
Please show where ANYONE has done so.
Martin, you showed your graph again and so far, mine is the only response.
Yes, SS and Medicare are untenable. Yes, the demographic trends indicate impending, uh, difficulties.
I agree, it is a big problem chasing down the current problem(s), and I think they are all part of the same problem.
Now what?
I'll take the insult with a grain of salt, must have pissed you off.
But again, now what?
What do you plan to do about it?
What do you think we should do about it?
What do you want to discuss about it here at Cafe Hayek?