Wonder If He’s Ever Read David Hume

by Don Boudreaux on November 5, 2011

in Data, Housing, Myths and Fallacies, Other People's Money, Scientism, Seen and Unseen

Here’s a letter to the New York Times:

Joe Nocera argues that a policy of government “helping struggling homeowners by writing down some principal on their mortgages” is justified exclusively by “the data”; it’s science and not “ideology” (“To Fix Housing, See the Data,” Nov. 5).  Therefore, save for those who are blinded by ideology, all well-meaning people must support this policy.

This Gradgrind-like argument fails.

Not only do the data that so impress Mr. Nocera speak only about existing mortgages – and, hence, say nothing about the possible altered incentives of future homebuyers to take on excessively large mortgages, or about government perhaps becoming locked in to a policy of granting mortgage relief – the very notion that certain homeowners are entitled to financial relief at the expense of taxpayers springs from an ideology.  That ideology might or might not be wise, well-grounded, and humane.  But ideology it undeniably is.

Here’s a fact: no conclusion about the proper role of government rests only ‘the facts.’  Ideology is inescapable.  And it turns most lethal when smuggled into arguments in the guise of ‘just the facts.’

Sincerely,
Donald J. Boudreaux

See this related article (available here, alas, only by subscription) by my GMU Econ colleague Dan Klein.

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vidyohs November 5, 2011 at 12:23 pm

I have never read David Hume other than the quotes you’ve posted here.

However, I think, in my street fashion, that I could make a good case for criminal charges (fraud) to be brought against all of the people who applied for loans or refinancing while knowing full well they could not repay the loans, and did so in full anticipation of a high probability that they would be forgiven, if not all of the loan, then most of the burden.

Fraud is fraud, and for people to perpetrate it and walk off scot-free chaps my Invisible Backside.

Shelby November 5, 2011 at 5:42 pm

vidyohs -

Under normal circumstances, I would totally agree that these people should NOT skate. However, in the mid-late 1990s I worked for a Mortgage Broker (I did accounting and marketing – what a combo – thank goodness I wasn’t writing those absurd loans). Along with writing large loans, this broker wrote many first-time-buyer loans. Many of these buyers (stupidly, in retrospect) believed that they could actually afford to buy their dream houses. If the banks didn’t know who’s qualified for a loan, who would? And, the banks were most often right – not too many foreclosures. The buyers could scarcely believe what fantastic credit risks they had become. The banks were the mouthpieces for that message, but the politicians were the puppeteers. Hey, these buyers were nice people, but even Jimmy Stewart didn’t give a loan to EVERYONE in town.

During my time with the mortgage broker, we visited a banks in downtown Seattle. The underwriters practically kissed the feet of my mega-producing boss. They all laughed and laughed about how truly nuts it was that loan apps were down to one page. If the borrower had proof of income, he/she could get a 0 down loan. Or, if the borrower could skip the proof of income if he/she had 20% down. (I believe things got even nuttier.)

Banks were gulping down loans as fast as the mortgage brokers could shovel them in. And, why not? They could sell them to Wall Street and eliminate future risk. And, why did Wall Street buy crap they knew was crap? Because Fannie and Freddie (controlled by the U.S. government) gave Wall Street an implicit guarantee that the U.S. taxpayers would take on the risk. (Thomas Sowell explains this simply and clearly in his book “Boom and Bust.”) And the politicians want to blame this on the banks? Wall Street? How about digging around in Barney Frank’s files? UGH.

Shelby November 5, 2011 at 5:48 pm

Clarification:
I do not think help is in order for these buyers (WE ARE OUT OF MONEY), nor do I think these buyers should be criminally prosecuted. They were eager to drink the Kool-Aid of sudden creditworthiness, but it was the government who mixed up another poison concoction. :-)

vidyohs November 5, 2011 at 6:42 pm

Sir, I can understand everything you say, and I can even understand why you say it.

“Many of these buyers (stupidly, in retrospect) believed that they could actually afford to buy their dream houses. If the banks didn’t know who’s qualified for a loan, who would?”

However, you ask “who would”?

The people, Shelby. They knew. For them to believe that they could actually afford to buy their dream houses, they had to knowingly delude themselves, turn their backs on their own evidence of their financial capabilities. That makes them culpable.

I know what my income is, and what I can realistically expect it to be over the next year. I am well aware of what I have stuck away under the old mattress. If you invite me in and tell me that my worth qualifies me to borrow $500,000 on that River Oaks home, I know something has to be shady or risky about the deal, and that the risk is inevitably to fall on me. You would have to tell me something to make (rock solid) me believe I could avoid the consequences of my inability to meet the payments or I would walk out the door.

Those people knew and went with the flow anyway. You say “yeah well they had reasonable hope”. I say crap in one hand and hope in the other, see which gets full the fastest.” Sorry for the crudity, but that was country wisdom given to me when I was a sprout.

Shelby November 6, 2011 at 2:42 pm

Just for the record, I’m a “ma’am” not a “sir.” No problem!

Shelby November 5, 2011 at 8:01 pm

PS Sowell’s book is “The Housing Boom and Bust”

Ken November 5, 2011 at 9:13 pm

Shelby’s description reminds me quite a bit of conversations we had about the expansion of Chinese spinning capacity in the 1990s and early 2000s, particularly in polyesters (my work at the time involved, among other areas, the cotton industry). At one point, if memory serves, mills in China were offering polyester for about 17 cents a pound, and more capacity was coming on line all the time. The conclusion we drew about what was going on was that the mills were in a race to be the ones, when the inevitable shakeout came, “too big to fail.”

Shelby November 6, 2011 at 2:43 pm

Cool comparison – I didn’t know that!

Rugby1 November 5, 2011 at 12:41 pm

The arguments for “propping up” the housing sector are incredibly asinine. Truth be told I do have a bias, my frustration stems from the fact that I rode out the recession fairly well. I remained employed and although my income definitely dipped and I did have to pull money from my savings my family’s lifestyle remained fairly intact.

One of the things I did not do was buy a home. Having lived through the Dotcom bubble of the 90′s I could see the housing bubble on the horizon and waited for the inevitable crash. Moreover with valuations at astronomical levels I did not feel it was worth the investment.

Now after all this time I still have not purchased a home as government refuses to let the market hit the floor and keeps propping up many who made poor decisions. It makes no sense to me to continue to prop up people who made poor decisions. It is the ultimate in moral hazard and I am really tired of hearing about struggling homeowners who took out ginormous adjustable mortgages, and how they need to be “saved” from their own avarice.

Methinks1776 November 5, 2011 at 12:51 pm

Yeah, well, I agree with you, but get used to it. Until the U.S. government completely disintegrates into atoms, it will continue to distort asset prices. You and the real price of a house will never meet.

Rugby1 November 5, 2011 at 1:25 pm

Well said. At this point I think myself and the real price of any asset will never meet. I am just hoping that at some point the distortions are not nearly as bad as they are now.

Methinks1776 November 5, 2011 at 8:04 pm

Personally, I think it’s going to get much worse. You’re just going to have to decide what something is worth to you and roll with that.

Jim November 5, 2011 at 8:12 pm

But herein lies the issue with Mr. Hume’s diplomacy.

The other side is arguing morality and compassion to institute mortgage write-offs, after having shored up the other side of the mortgage with TARP.

What we know is that the government subsidy prevents the market from clearing. What we know is that a market that can not clear stagnates. To the extent that stagnated markets cause continuing unemployment and misery, it is immoral to prop them up.

I wish Mr. Hume would say that. He is too kind to his arrogant opponents, who have gone much beyond implying anything.

kyle8 November 6, 2011 at 1:11 am

I think you should buy right now, interest rates will have to go up in the next year.

George Peacock November 5, 2011 at 12:44 pm

When people use the words “facts,” “reasonable,” “fair,” “justice,” or, the most assumptively slippery, “common sense,” buckle up!

vikingvista November 5, 2011 at 1:15 pm

Exclusively by the data? Really? Does he get that from a randomized placebo controlled double blind prospective trial of thousands of homeowners? No? His evidence is even stronger, no doubt, since real scientists still manage to find disagreement from such trials. Oh, but he has numbers written somewhere, of some sort. Therefore he has “data”. And once you have “data”, you are doing “science”, and anyone who disagrees with you is an ideologue.

Nocera and the whole field of empirical macroeconomists wouldn’t know science if it bit them on their scientistic mystical arses.

Invisible Backhand November 5, 2011 at 1:32 pm

You’re inverting Gradgrind, but whatever.

The ideological rationale for this system is unequivocal. We recall the words of Hayek in Chapter 3: ‘A free society needs morality that is ultimately reduced to the maintenance of life – not the maintenance of all life, as it could be necessary to sacrifice individual life in order to save a greater number of other lives. That is why the only rules of morality are those leading to a “calculation of life”: property and contract.’ In other words: only those who own private property and/or are capable of contract (for example, workers) have a right to life in a pure market economy. Private property and contract are the two mainstays of the market. Very few people own private property as a means of production and more and more people are being deprived of the opportunity to contract their labour in order to make a living, given the increasing role of technology. Moreover, in a neo-liberal system the state is unable to subject property to a policy of social concern in the interests of losers. For all these reasons, the system as such means more suffering, exclusion and death for more people.

Property for People, Duchrow

Methinks1776 November 5, 2011 at 1:40 pm

to employ the “if you emphasize bullshit, it’ll cease being bullshit” trick YOU HAVE TO EMPLOY ALL METHODS OF EMPHASIS SIMULTANEOUSLY!!!!!!!!!!!!!!!!!!!

See? Like that.

You’re welcome.

Invisible Backhand November 5, 2011 at 2:15 pm

My pleasure Methinkslikeits1776

Jon Murphy November 5, 2011 at 3:07 pm

I gotta admit, one of the reasons I love reading comments is watching Evel Knievel-like leaps of logic like this one.

Rasping Bard November 5, 2011 at 3:13 pm

“Very few people own private property as a means of production…”

Everyone who has a 401K plan owns the means of production. And, far more people would be owners if we didn’t have programs like social security, etc.

Shelby November 6, 2011 at 2:37 pm

Rasping Bard -
You are so right! Why does the fact get lost that Grandma and Grandpa (through their 401Ks and other securities investments) are really the owners of the evil corporations?

I_am_a_lead_pencil November 5, 2011 at 3:13 pm

“…as it could be necessary to sacrifice individual life in order to save a greater number of other lives.”

Human beings never have perfect ex-post knowledge to answer this. We can never affirm that killing any one individual directly resulted in the NET saving of a greater number of lives against many possible future outcomes. All utilitarian impulses are ultimately flawed for this reason.

vidyohs November 5, 2011 at 5:43 pm

Stupid troll,

When did the individual cease being the ultimate means of production, and rightly invested in the fruits of that production as property owners?

Did I miss an act of God, or are you drooling at the fingers again?

Invisible Backhand November 5, 2011 at 7:08 pm

“You’re inverting Gradgrind, but whatever.”

My bad. Professor Boudreaux had it right and I was the one who had it wrong. The fact is that Nocera likes to see himself as Gradgrind, and would like his audience to see him as Gradgrind, but Don clearly explained why he isn’t and why his audience shouldn’t. I humbly apologize for making a big, fat ass of myself yet again.

Mr Thomas Gradgrind is the notorious headmaster in Dickens’s novel Hard Times who is dedicated to the pursuit of profitable enterprise. His name is now used generically to refer to someone who is hard and only concerned with cold facts and numbers.

http://en.wikipedia.org/wiki/Gradgrind

LowcountryJoe November 6, 2011 at 4:50 am

Private property and contract are the two mainstays of the market.

And so how does this fit in with people who want to duck out [not fulfill the terms] of their contracts, Genius?

Invisible Backhand November 6, 2011 at 4:45 pm

And so how does this fit in with people who want to duck out [not fulfill the terms] of their contracts, Genius?

I believe Shakespeare addressed this issue in The Merchant of Venice

Jon Murphy November 6, 2011 at 4:50 pm

A pound of flesh? Man, murder is your solution for everything, isn’t it?

vikingvista November 6, 2011 at 8:37 pm

Typical frustrated leftist.

Randy November 6, 2011 at 4:51 am

IB: “In other words: only those who own private property and/or are capable of contract (for example, workers) have a right to life in a pure market economy.”

Not true. Everyone has a right to life. The market economy has nothing to do with the right to life. The market economy is a cooperative system of production that works very well to create wealth for those who participate in it, but it doesn’t involve everyone and not everyone is needed or wanted by it.

In addition to the market system there are also social and political orders. The market system has rules based on production requirements. The social and political orders have rules based on their chosen requirements. The social and political orders seek to exploit the wealth created within the market system, and by extension the people who work within the market system, because small tenant farming or hunting and gathering just don’t create anywhere near the wealth that can be created in a productive market system.

The problems begin when those who wish to exploit the market system think they know better than those who work within the market system how it should be organized. The market system has its own rules and these are nearly always local and specific. The social and political orders, though, prefer centralized hierarchical structures which they can control. A hierarchy cannot effectively and efficiently control a system that requires rules that are local and specific. Attempts to do so result in less total wealth. Many in the social and political orders are willing to live with less total wealth because their requirements are unconcerned with total wealth. As the leaders of these orders are at the top of the hierarchy they are always assured of access to resources anyway, so if there is “order” in the lower elements of the hierarchy they are satisfied.

A few hundred years ago social and political orders ruled. But the wealth creation made possible since has given those who work within the productive order much greater control of their own destinies. They will never allow the level of exploitation that the socialists and politicians imagine in their fondest dreams. They will shutdown the productive system before they will let that happen again.

Jon Murphy November 6, 2011 at 11:59 am

Don didn’t use “Gradgrind” wrong. Ironically, perhaps, but not incorrect. “Gradgrind” is just someone who only looks at facts and figures. It’s not limited to a business person.

Invisible Backhand November 5, 2011 at 4:05 pm

This technological utopianism can even take the form of utility calculation, as is the case with Hayek: ‘A free society needs morality that is ultimately reduced to the maintenance of life – not the maintenance of all life, as it could be necessary to sacrifice individual life in order to save a greater number of other lives. That is why the only rules of morality are those leading to a “calculation of life”: property and contract’ (Hayek 1981).
This calculation is hypocritical and deceptive as it presupposes knowledge of the future. But apart from Hayek no one can know about the future. Nevertheless, such an argumentation is an efficient way of disputing all human rights.

ibid

ArrowSmith November 5, 2011 at 5:07 pm

Why must a free society support deadbeats? Let ‘em starve, die, whatever. Turn ‘em into hamburger for all I care.

Invisible Backhand November 5, 2011 at 8:56 pm

Why must a free society support deadbeats? Let ‘em starve, die, whatever. Turn ‘em into hamburger for all I care.

They have guns.

Invisible Backhand November 5, 2011 at 9:24 pm

They have guns.

But no ammo. The producers have both guns and ammo.

Invisible Backhand November 6, 2011 at 12:47 am

http://www.foxnews.com/us/2011/11/05/occupy-wall-street-protester-throws-violent-fit-in-mcdonalds-when-denied-free/?test=latestnews

NEW YORK — An “Occupy Wall Street” protester threw a violent fit in a McDonald’s after employees refused to give him free food.
Fisika Bezabeh, 27, ripped a credit-card reader from a counter and threw it at workers at about 2:30am local time Friday at the downtown Manhattan restaurant, which has become a bathroom spot for protesters.

No one was hurt by Bezabeh, who has been seen hanging out with protesters in the occupied park, police sources said.

He was charged with criminal mischief.

Cheryll Forsatz, a McDonald’s spokeswoman, said, “It’s still an ongoing police investigation, and we’re cooperating with the police.”

* * * * * * * * * * * * * * * * * * * *

[Personally, I approve of this sort of "Direct Action" behavior. It's obvious to me, my handlers at Anonymous, my fellow goons at MoveOn.org, and everyone involved in Occupy Wall Street that McDonald's owes this person free food. It's his place in the world to make demands, and it's McDonald's place in the world to give. I refuse to consider any opinion to the contrary as anything other than right-wing-libertarian, Koch-funded propaganda.

But that's only because I'm open-minded and fair.]

Invisible Backhand November 6, 2011 at 12:52 am

Give my Regards to Ken.

Invisible Backhand November 6, 2011 at 5:10 am

My handlers at Anonymous and MoveOn.org have instructed me to give their regards to everyone on this board, including the trolls.

W.E.Heasley November 5, 2011 at 5:13 pm

‘Enter Laurie Goodman. One of the country’s foremost authorities on mortgage-backed securities, she is also one of the most data-driven people I’ve ever met; at breakfast, she was constantly pointing me to one chart or another that backed up her claims. “She’s not into politics,” says my friend, and her client, Daniel Alpert of Westwood Capital. “She is using data to tell us the truth.” ‘

– Joe Nocera

Uncle Joe purposely frames the argument as non-political and free of political ideology. If one needs to remind the reader that that politics are straight out and ideology is straight out, then the reader needs to immediately beware. Why? Because the author of the article wants to frame the argument for the reader rather than allowing the reader to come to his/her own conclusions.

Uncle Joe’s framed argument is based on “data-driven”. Which begs a few questions: (a) is the data correct and could other data be available that draws another conclusion, (b) what about all the data that shows that the stage was set for mortgage shenanigans and the eventual busting bubble by none other than the very government he promotes to save the homeowner [by the use of coercive powers no less], (c) why is the data-driven bail out/principle write down better data than that data that shows the entire bubble, shenanigans, and consequential burst bubble was driven by politicos through the mechanism of government?

Maybe Uncle Joe has merely written, to his chagrin, an essay on “the ideology of data”.

Darren November 6, 2011 at 3:36 pm

Data-driven by itself doesn’t mean that much. What matters is the interpretation of that data and as most people know, most data is open to multiple interpretations. Data can be cherry-picked so only data that supports one’s particular position is examined. Data has differing levels of reliability and accuracy.

jorod November 5, 2011 at 5:54 pm

Dogma presented as science… the Marxist fantasy.

Josh S November 5, 2011 at 7:22 pm

I didn’t know the government held all those mortgages…or does he mean that the government should force the banks to write down mortgages?

lammert November 5, 2011 at 7:24 pm

How can the government fairly undo what the financial servive itself industry has done….. (it can’t)

How it all ends ….. quantitatively ….

The Debt-Money-Asset System Macroeconomic Quantum Collapse: The Wilshire’s 8 August 2011 3/7/5 of 6/4 Weeks :: x/2.5x/2x/1.6x Collapse. As Ford Motor Company goes, so goes the Global Macroeconomic debt-money-asset system. [Edit or Delete]0 comments
Nov 5, 2011 1:19 PM

November 2011… Ford points the way….as Ford Motor company goes… so goes …..

October 2006: The last posting in the Economic Fractalist: As GM goes so goes …. Is Saturation Macroeconomics a patterned science…?

Yes …… to both the statement and the query ….

In 2009, GM, wirh 250 billion dollars of debt, ceased to exist – as a derivative asset known as an equity- and as a real company. GM declared bankruptcy with resultant complete losses to stock holder speculators and reduced benefits to 35 year GM employees. This is what happens when bad debt is viewed as a performing asset and thereafter suddenly disapears from the ledgers of those owning the bad debt asset.

In early 2009 the growth of the equity valuation of Ford emerged before the composite Wilshire. Ford’s valuation nadir occurred on 20 February 2009, 11 trading days before the Wilshire’s nadir on 6 March 2009. Because weekly time units are broader 5 day strokes, Ford nadir occurred 2 trading weeks before the composite general market reached its defining final fractal unit low.

Ford’s four phase fractal series from its 20 February 2009 low of x/2.5x/2x/1.5-1.6x was 21/52/2x/1.5-1.6x weeks. This represent the classical quantum 1st/2nd/3rd/4th fractal series: three fractal phases of growth and one phase of decay. The debt-money-asset macroeconomic system has integrated and self organized Ford’s 3rd and 4th fractals into yet another x’/2.5x’.2x’/1.5-1.6x’ 4 phase fractal series with a base fractal of 11 weeks starting on 29 June 2010 for 11/28/22/13 of 17 weeks, The last 17 weeks is again self assembled into another classical Lammert saturation macroeconomic quantum four phase fractal series.

Within the next four weeks, there will be a historical nonlinear Global Stock Market Crash representing very large time scale second fractal nonlinearity. This is the terminal portion of the 85th quarter of a 34/85 quarter first and second fractal series for the Wilshire and the global interconnected money-debt system system dating to the Wilshire’s 1982 nadir low and yo the US thirty year bond’s low in 1982.

This historical crash will forever change the debt-money-asset system and the system’s present bad rules favoring speculation of trading derivative assets such as equity and commodity futures over savings and promoting unregulated defacto virtual money expansion via financially engineered and highly leveraged derivative exchanges.

The present rules created by the financial industry’s CEOs take unfair advantages with first use and special privileged elite use of the monetary system. It has led to tremendous macroeconomic system debt-money-asset dysequilibrium.

Uncontrolled debt and money derivative creation and defacto money expansion has resulted in both oversupply and overpricing Housing supply and prices have been falsely elevated by the financial industry Elite’s special use and defacto systematic manipulation resulting in the enserfment of world citizens to debt obligations that are disconnected from wages and available jobs.

The rules have resulted in an enormous of unrepayable bad dedt.

The creation of the Euro monetary system for 500 million people is linked to the dollar and US debt system and to all major sovereign central banks. A shell game of monetary expansion has been colaboratively concocted by the Euro zone, London, Japanese, and US central banks. Large too big too fail banks and financial corporations have made tens of trillions of dollars of derivative bets on the continuation of sovereign debt repayment.

It is the system’s valuation asset patterns that are self organized by the ongoing dynamics of the macroeconomic system’s bounded debt-money-asset interactive and countervailing elements. Default on debt will inevitably occur and in a time based, predictable, and highly quantitative pattern … Following the above 29 June 2010 11/28/22 week fractal, Ford’s final 4th fractal began.

The 4th decay fractal of 17 weeks started on 8 August 2011 and is also composed of a x/2.5x/2x/1.5-1.6x series of 3/7/5 of 6/4 weeks which will complete the fourth fractal’s 17 weeks and the 29 June 2010 four phase 11/28/22/17 week fractal series.

From the 8 August 2011 low, Ford is following a 12/30/24 of 24-30/18-19 day :: x/2.5x/2x-2,5x/1.6x ideal Lammert four phase quantum Fractal Series.

The DAX and CAC followed a 9 August 2011 (3)7/17/17 day :: y/2.5y/2.5y decay fractal with the last 9 days of the 17 day third decay fractal forming an 8-9/21/4 of 22-23 day :: y/2.5y/2.5y decay fractal whose end low day matches Ford’s and the Wilshire’s low in 17-18 trading days.

Assets other than debt and money are valued over a denominator of debt and money. When debt undergoes default, assets have a smaller denominator of money and residual debt.

The March 2009 Wilshire’s empirical second fractal from nadir valuation points was 52 weeks in length and precisely matches Ford Motor Company. The Wilshire’s third and fourth fractal summation ideal length should be 74-76 weeks (3.5-6x of the ideal base of 21 weeks)

For the Wilshire 6 November 2011 represents the 72nd week of a possible 3rd and 4th fractal sum of 74 to 76 weeks

A macroeconomic system and asset valuations of that macroeconomic system have been massively leveraged by bad rules and unsound debt creation orchestrated by a defacto political-financialindustry-centralbank collaborative group into a very unstable position. A historical decay nonlinearity of equities and commodities will occur within the next 4-6 weeks following one of the two ideal Lammert quantum pathways.

What is needed now and after the deluge is massive leverage at the real economic end: the people wage earner end – rather than the financial industry end, using sovereign currency for the purpose of citizen wage and job creation at the societally useful and stabilizing level.

PrometheeFeu November 6, 2011 at 12:01 am

From the article: “The implication is almost too awful to contemplate. As Goodman put it in testimony she recently gave before Congress, the supply/demand imbalance means that housing prices “are likely to decline further. This may recreate the housing death spiral — as lower housing prices mean more borrowers become underwater.” Which makes them more likely to default, which lowers prices further, and on and on.”

I currently rent and would like to buy in a couple years. I would very much like to see housing prices plummet as low as possible. That would in fact be very very nice.

That said, I think it’s fair to say that while one cannot substitute ideology for facts, politicians on both sides of the aisle have gotten very good at substituting facts for ideology. Perhaps things would improve somewhat if they stopped ignoring facts when facts are present.

Harold Cockerill November 6, 2011 at 8:02 am

Nocera hit the nail with his comment on the lending institutions not wanting to take the hit on the underwater mortgages. The question to ask is what are the loans really worth. The institutions that hold the paper and are in fact insolvent should be liquidated and the loans sold at auction. At that point you find out what they’re worth. Whoever buys the loans has an incentive to negotiate with the resident of the property. This will not happen in all instances but most likely in many.

This process would probably result in more people keeping their homes than the mess the government has created by trying to shield the investors from losses. This points to who the government is really working to help and it ain’t the poor.

Per Kurowski November 6, 2011 at 8:27 am

If the market had been on its own I would 100 percent agree with this post… but since I know that it was the distortions produced by bank regulators who wanted to play the risk-managers of the world and authorized the banks to leverage their capital more than 60 times when investing in triple-A rated securities, such as those collateralized with mortgages to the sub-prime sector I am not that sure.

If someone because of blatant negligence caused you harm… would you not sue him?

Karl Smith November 6, 2011 at 2:42 pm

“Here’s a fact: no conclusion about the proper role of government rests only ‘the facts.’ Ideology is inescapable. And it turns most lethal when smuggled into arguments in the guise of ‘just the facts.”

As a technical matter I am pretty sure this is false. We could work through it but if you are claiming that for all people in existence there exists no set of facts such that all people in existence would agree on the role of government then this is almost certainly false.

Obviously this is trivially false if we allow facts over beliefs.

But, even excluding that we could simply take the example “government should not exist” and then generate a personalized set of consequences for the condition that government does exists which drives each individual to arbitrarily low utility.

Then they will all agree that government should not exist.

As a practical matter, this claim is true but trivially so. There exists some set of facts that make a role for government a Pareto superior move in unless you allow for utility over beliefs about the role of government.

But, then you are simply saying that your belief about the role of government matters because you care about your belief about the role of government. This is, of course true but trivially so. That is it doesn’t really tell us anything about the world.

vikingvista November 6, 2011 at 8:28 pm

As a technical matter, no conclusion rests only on facts.

Jon Murphy November 6, 2011 at 8:30 pm

Right, ’cause facts must be interpreted.

Example: US Trade Deficit is $45.6B. What does that mean?

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