Over at EconLog , Arnold Kling comments on my essay on the crisis . Arnold has an unusual way of categorizing opinion and viewpoints that often helps me organize my thinking. In hs comment he talks about insiders vs. outsiders as a more useful way to categorize different views on financial reform than left vs. right. Then he writes:
My conclusion is that the goal of the Insiders is to preserve the status quo as much as possible, and the “financial reform” is a thinly-disguised effort to accomplish that objective. The more radical reforms come from Outsiders, including Johnson and Kwak, and Roberts and myself.
He’s right and I wonder why. An economist’s answer is that the insiders have something to lose by radical reform. They are already captured by the system. Do you think Ben Bernanke is giving a lot of thought to a radical re-organization of the Fed? I don’t think so. Conversely, we outsiders have little at stake, so it is easy for us to propose breaking with the status quo. It’s cheap talk.
Or maybe we outsiders are smarter than the insiders.
That was a joke. It is interesting though to think about how hard it is to make a radical change even in the face of a catastophe. Lots of inertia. So given how much so many of us have learned about what went wrong and what went right, the reforms that seriously on the table are doing what we did before but “better.”
Radical change (ending the draft or ending communism) takes a lot of outsiders hammering relentlessly and eloquently on the status quo and offering an alternative that is at least plausible. Then every once in a while circumstances create the opportunity for change.