"Death" Throws

Jacob Weisberg's death-of-libertarianism pronouncement has, not surprisingly, provoked a bit of reaction (mine's here; Jesse Walker's is here). Others include: Ilya Somin, Brink Lindsey, Will Wilkinson, Anthony Gregory, J. Peter Freire, Abhishek, Radley Balko, and Ross Douthat.

Comments

[joe]

From Wilkinson:

It remains that, on Weisberg's own accounting of things, the crisis would not now be upon us but for countless other contributing causes. So what to make of the light-years-from-libertarian ideological assumptions behind the rest of the regulatory regime? Why, nothing at all!

If the libertarian project of deregulating commerce in order to promote greater innovation and dynamism can only work when done so absolutely and in perfect coordination with political theory, while the partial implementation of such a project subject to political reality leads to disaster, is that not itself and indictment of libertarianism as a political project (as opposed to libertarian as an intellectual exercise)?

[Jake Boone]

That's a big (and unsupportable) "if", joe.

[Why Certainly]

What's wonderful about regulation: it gives people the motivation to find loopholes so that they can carry on as they always have. Regulation works for a little while, but pragmatically speaking, it won't work in the long term. Loopholes will always exist because legislators can not predict every potentential problem ,so how do you regulate intelligence combined with greed in the first place?

[Seward]

joe,

It isn't the 2% libertarianism which creeps into public policy which leads to the "disaster."

[joe]

And yet, the argument that follows the "IF" is the principle one offered to rebut Weisberg.

Oh, no, that wasn't real libertarianism. There was this other stuff, too. Get rid of that other stuff, and everything would have been fine.

You think I'm making this up? Read the quote I provided.

[brotherben]

joe, but wouldn't that "if" hold true for every human theory of operation in history. communism, christianity, and capitalism, to name a few?

[joe]

Regulation works for a little while, but pragmatically speaking, it won't work in the long term.

Particularly in an area like the financial markets, where there is a lot of innovation unconstrained by physical limits, the changing nature of the market's operations make the job of regulation more like trash collection, and less like building a bridge.

You can finish a bridge. You can design something, build it, and it will keep spanning that river for a 150 years.

But with trash collection, you have to keep coming back every week, because there will always be more trash to pick up.

[Syd]

Not only is libertarianism dead, it rises from the grave with a taste for fresh brains.

[joe]

Seward,

Let's get a little more precise that "leads to."

What caused the disaster was the millions of indpendent actions of players in the market.

Government actions allow, or forbid, certain actions.

In this case, the critique of a hands-off approach is that it allowed dangerous actions, not that it was the motive force behind them.

[joe]

brotherben,

Yes indeedy. It holds for every political theory in human history.

There will never be the perfect implementation of a political theory rigorous enough to satisfy its idealistic supporters. There will always be an admixture. Hence, my point: a working theory of politics and government needs to account for the fact the True Whateverism isn't going to be implemented.

[Guy Montag]

Great, just great. As soon as I cast my vote for Bob Barr this has to happen.

Okay, everybody just blame me for killing the party with my bad voting karmal.

[Graphite]

Here was my take on it, written in reply to an email from a friend with the link. (This was written before Welch's and many others' replies so there are some similarities.)

______________________________________________

Weisberg can hardly even be bothered to provide a decent summary of actual libertarian arguments on the financial crisis before summarily dismissing them as inadequate, and further dismissing any need to proffer any actual "rebuttals" to those arguments, save for a cursory mention of their existence. From there it's on to the name-calling and sophomoric derision.

It's especially infuriating because libertarians and in particular Austrian economists were the ones who most clearly foresaw the dangers of the bubble in real estate prices, who were screaming the loudest about the Fed's lax policy (not just in interest rates but also the practical disappearance of reserve requirements), and who most accurately predicted how the bubble's bursting process would unfold. People who read and listen to Jim Rogers, Bill Fleckenstein, Jim Grant, Marc Faber, Peter Schiff, and others like them have protected their wealth and even made money from this crisis. It is truly baffling to me that Weisberg & Co continue to turn to the people who did *not* see the crisis coming for some more bad advice on how to fix it.

One commentator in the Slate discussion discussion made a well-stated point that the essence of this debate is libertarians arguing "the government should run on a unicycle," and liberals/neoliberals/regulators/interventionists shouting back, "but look what happens if we remove just this one wheel!" *Of course* "unregulated" markets will run into problems if you suture them on top of a system of rampant moral hazard, a lax central bank empowered to fix the price of borrowing money, and systematic tax persecution of savings and equity in favor of speculation and debt. So would regulated ones.

None of which is to concede Weisberg's apparent belief that the U.S. financial markets are hardly regulated at all. The regulators pretty much had the field to themselves in 2002/2003 when Enron and WorldCom failed and Sarbanes-Oxley was passed. The U.S. financial system is actually one of the most heavily regulated in the world, and is one of the most heavily regulated industries within the U.S. Yet, they somehow failed to enact the Holy Grail of regulatory structures that would have prevented asset bubbles from forming in an environment of massive central bank liquidity injections and moral hazard. How many times do we need to fail at this before we attribute that failure to the impossibility of the task at hand rather than alleged incompetence or dereliction of duty on the part of the regulators?

Weisberg finally makes a half-decent argument when he points out the problems posed by CDS's, the issuance and trading of which was at one point proposed to be subjected to regulatory oversight. We'll be living under a boom-and-bust regime of central banking and fiat currencies for the foreseeable future, and as long as we do, I think measures like moving derivatives onto a regulated exchange, while not ideal from a libertarian perspective, are a relatively benign way of mitigating the booms and busts that will inevitably result.

But CDS's were simply a convenient tool (and only one among many) that the banks had to access the unconscionable leverage the Fed was encouraging them to take on. If they had been more strictly regulated, some other financial structure would have taken over their role in the leveraging process. There is no way of knowing whether that other structure would have created even more systemic risk than the CDS hairball we presently face. When a central bank inflates by providing credit and liquidity, the money flows into asset bubbles, period. It will flow like water around whatever regulatory breakwaters federal overseers have erected, and the *only* way to stop it is to stop the credit expansion. This is why the rejection of the proposal to regulate CDS's is not the "gotcha" moment for libertarians that Weisberg makes it out to be. I'm sure there were literally thousands of proposals to put new parts of the financial industry under regulatory control over the last 5-10 years. Should we now approve any and all new proposed regulations, on the idea that the one regulation we *don't* pass could be the one that *would have* staved off the next crisis?

In terms of what happens next, these things tend to proceed in cycles. The free market took the fall for the 1930s (never mind that it was the greatest period of rollbacks in economic freedom in U.S. history), and then the 1970s discredited the Keynesian policies that had largely replaced it. Something similar will probably happen this time around as the latest round of government fixes eventually produces some unforeseen problem, say, a Lost Decade, farther down the road. The big X Factor this time around is how much more quickly and thoroughly Congress, the Treasury, and the Fed are mucking everything up.

But why not just turn to those who saw this crisis coming for their ideas on what may happen next? Jim Rogers points out that we've had two central banks fail in this country and may be about to witness the third. Marc Faber believes that we will see the United States of America go bankrupt and default on its sovereign debt. Peter Schiff seems to think that we're headed for a "hyperinflationary depression." I think even chowderheaded Newsweek columnists will have a hard time blaming these things on unregulated markets. But I'm sure that, whatever crisis this latest round of interventions precipitates, Weisberg and the like will be back to give it the old college try.

[Turtles]

Ahh, Anthony Gregory - the only consistently readable contributor to LewRockwell.com.

[domoarrigato]

joe - I like your point which I paraphrase as: If libertarianism must be implemented wholesale and idealistically to work, doesn't that mean it isn't a workable political view?

I agree wholeheartedly with this notion. I happen to think that it doesn't need to be implemented that way to be positive for liberty - and I also think that the few bits that creep in are not responsible for this crisis. That last is most important - unfortunatly libertarians are being branded faster than we are branding the opposition (which happens to be everybody) We are literaly a one legged man in an asskicking contest.

[Graphite]

I'll add to the above that Weisberg's "soup kitchens and bread lines" comment is a piss-poor critique of the "let it alone" arguments in terms of responses to the crisis. Massive intervention and prevention of liquidation of bad debt didn't work in 1929-1933 and it isn't going to work now either.

[Legate Damar]

We're actually fortunate that the Oil Spike preceeded, rather than followed, the Financial Trough. Had it been the other way around, imagine the shrill about oil being in the hands of nefarious Buyers and Sellers, each greedily and unregulatedly looking out for their own gain. The horror!

[PC]

It's because many libertarians don't understand that many people don't want to be libertarians. They get scared because they think we will be in the stone age. What you can sell to the people is Libertarianism on a national level. Quit talking about roads and how charities can work versus government money shredders, regardless of the high overhead that would put any charity that approaches its levels in jail, or the accounting itself would land someone in jail, and declare war on Washington.

Celebrate diversity, empower churches by easing the tax burdens, create more parity between the states, beuracrats in one city cannot successfully central plan, if you want central planners leave it to the state level. Let state governments, county governments, local school boards, PTA associations decide how your children are educated, not federal cronies in Washington. The intellect of our children has fallen for every dollar more spent at a federal level, end the insanity. People in Mississippi and Berkeley are never going to live uniform lives so end the sick experiment. Is there any question as to why the country has become more polarized? It's because every decision comes down to a federal boolean of false choices. This or that doesn't work for 300 million people.

[concerned observer]

It's fun to see libertarians jerk eacho ther off. You people have no minds. You're denying things that you're seeing happen before your eyes. Taxes and regulations were both allowed to lapse for years, a bubble builds, and then it screws up the economy. "No the fed is the problem". Have fun in irrelevance land.

[Pro Libertate]

What about libertarianism has to be implemented all at once? Pare back the government. I doubt seriously that an elected libertarian government would simply shut down everything at once or even attempt to.

No offense, but anyone who thinks the current crisis has anything to do with deregulation or even a free market is willfully ignoring the truth. Why anyone would think that political animals relying on political motivations to steer entire industries is a good thing is beyond me.

[Elitist Prick]

Taxes and regulations were both allowed to lapse for years, . . .

You are by far one of the stupidest people to come by H&R in years.

[Guy Montag]

It's because many libertarians don't understand that many people don't want to be libertarians.

You know, it would not be so frustrating if so many of the folks we speak to did not agree with almost, if not all, of the basics of personal freedom of choice, etc. only to bring up the notion that everybody else needs to be forced into choices.

The frustration above is not directed at any perticular political group of "believers" either, it includes plenty from both Left and Right.

[fyodor]

It's certainly possible that implementing some libertarain ideas without others could worsen things without that necessarily indicting libertarianism. For instance, cutting taxes without cutting spending.

That said, it's generally perceived that there was a series of deregulation measures applied to the banking industry based on libertarian/free market arguments, and that this de-regulation put us in the economic crapper we seem to be in now. If there is good reason to oppose such measures from a libertarian perspective (naturally, showing that this was recognized before the fact helps), or if it can be shown that these measures did not contribute to the current problems, then libertarianism is off the hook. Either proposition, while potentially true (I don't claim to understand all this!), is, unfortunately, a rather hard sell to the general public at the moment. I wouldn't dwell on Weisberg. He's a symptom, not a cause.

[Seer]

Libertarianism is screwed because assholes like Weisberg get a voice in Newsweek and we don't. If libertarianism falls out of favor, it's because of dumb asses attributing the failures of neo-conservatism to libertarian economic policy.

[Seward]

joe,

What caused the disaster was the millions of indpendent actions of players in the market.

In a heavily regulated market you mean. A market which was also primed with government incentives for loose money.

The same was true in the 1920s I must add. For example, the Dust Bowl was a direct consequence of government efforts to get people to settle regions which were marginal at best as farmland. A land boom occurred, the land was not fit for the sort of agricultural practices associated with that boom, and then an ecological disaster followed after some higher than average years of rainfall.

Government actions allow, or forbid, certain actions.

Sure, and they also encourage certain actions.

In this case, the critique of a hands-off approach is that it allowed dangerous actions, not that it was the motive force behind them.

There was no "hands-off" approach; for example, encouraging lending and home ownership is not "hands-off."

[brotherben]

Legate Damar, with OPEC talking about cutting production by a million barrels a day, are we in danger of investors runing headfirst to oil with their money and creating another bubble? This would put the spike smack dab in the middle of the trough.

[Guy Montag]

b,

Legate Damar, with OPEC talking about cutting production by a million barrels a day, . . .

That is one of the leakiest cartels in the history of collusion. Rest assured, any country that needs money will be busting their quota before the electrons are dry on the Word file.

[robc]

joe,

I dont think either the bridge or garbage analogy is correct. I think more of a natural structure, like the canopy in a rain forest (probably not the best example, but work with me here). It natural grows, supports all kind of life and stuff and then a hurricane blows it away one day. Then it regrows.

The blowing away isnt a failure, its a natural part of the life (and death) cycle.

[joe]

Seward,

You're hiding behind the one-drop rule. You don't need to remind me that there was government action involved, since the eternal presence of governmet action is my point.

You're telling me that the decision not to impose stricter regulation on innovative financial instruments didn't happen in Libertopia. I'm telling you that we don't live in Libertopia, we will never live in Libertopia, and if a program requires us to live in Libertopia to work, it's doomed to failure.

Can you see how pointing out to me that we don't live in Libertopia isn't much of a rebuttal?

[joe]

robc,

The analogies I made compared bridge-building and trash collection to the regulatory regime, not to the functioning of the underlying market.

[sage]

That is one of the leakiest cartels in the history of collusion. Rest assured, any country that needs money will be busting their quota before the electrons are dry on the Word file.

I read last week that Chavez is hurting any time oil goes below $80/barrel. I also read that we buy something like 3 million barrels a day from Venezuela, and we are the only customer of theirs that pays full price, and in cash.

I'd love to see oil drop another 10-15 bucks. Hopefully there will be blood in the streets.

[kinnath]

I think more of a natural structure, like the canopy in a rain forest (probably not the best example, but work with me here). It natural grows, supports all kind of life and stuff and then a hurricane blows it away one day.

I used the forest fire analogy the other day. Fire is a critical step in releasing trapped nutrients from downed trees and brush. Fire is essential to the health of the forest.

But fires are bad for people, so we try to control them. And the consequence is that so much dead wood accumulates that people cannot no longer keep a fire from getting out of control. Then when it does, you get one really big fucking fire.

[Neu Mejican]

My 2 cents.

Libertarianism is a principle that needs to be considered in crafting policy, but it is not a workable system any more than socialism, mutualism, or whatever.

Policies are always, in the end, pragmatic and utilitarian. The community has a problem/goal and policy is designed to remediate the problem or reach the goal.

The various "isms" help to evaluate that plan.

Libertarianism helps to remind us that the plan should be as non-intrusive as possible.

Other "isms" highlight other factors that need to be considered.

As such, Libertarianism is a pillar in the foundation of a moral and practical process of government, but one pillar does not provide a stable foundation.

[joe]

FWIW, kinnath, I think the argument about cheap money sparking bubbles - cheap money resulting from efforts to prevent recessions - has a lot more going for it than the assertion that people bought a few trillion dollars worth of MBSs because they expected them to collapse in value and create a bailout.

[joe]

Well put, NM.

Policies are always, in the end, pragmatic and utilitarian. The community has a problem/goal and policy is designed to remediate the problem or reach the goal.

BTW, you don't have to think this is a good thing to recognize it's true. It's sort of like the argument for why communism can't work - Human nature means people will look out for their own interests first. Wishing away this fact won't make it go away, so any political program you create which doesn't account for that eternal reality of human existence is going to fail.

[R C Dean]

If libertarianism must be implemented wholesale and idealistically to work, doesn't that mean it isn't a workable political view?

There's no reason at all why libertarianism can't be a beneficial political project on an incremental basis. Why, joe himself has called for incremental libertarian reforms on occasion, specifically in the area of reigning back the Bush administrations power grabs. How are those not incremental libertarian reforms that will be beneficial, without relying on Libertopia descending from the skies on wings of glory?

The financial sector is a "mixed economy" - heavily regulated, with distortions of varying degrees flowing from both the regulations and the 800-lb gorillas of quasi-public entities like Fannie and Freddie.

I think its hard to attribute the meltdown to the free market part of the mixed financial sector when you realize that:

Every economy and economic sector is a mixed economy. I think that, if you look across countries and sectors, the ones that are most economically successful are the ones where the free market side tends to dominate.

[Astro.mathman]

The bottom line is that the quote attributed to Jefferson: "That governs best which governs least" is a core belief that is re-inforced by world events more often than it is shaken by them.
So okay, the government screwed around (once again) in the financial markets and lots of banks took the fall. Damn them for not being resilient enough to be perpetually screwed.

You want perfection? You want an economic system that is both free and safe? Try a different universe.

[fresno dan]

I would turn the arguement around. FDIC, securities and exchange commision, regulator of Fannie and Freddie (should we have 1 regulator per Fannie and Freddie???)
So why didn't the thousands of laws and millions of regulations work? Because regulations and laws (except for the 10 commandments0 don't come from an all wise and all knowing God - they are made by bureacrats. We don't know whats gonna happen any more than you do. When secruitization of home mortgages there were plenty of arguements that this would improve access of credit to the pore, reduce risk (these wall street sharpies were suppose to know how to price risk) etcetera.

You can right regulations for eligibility for a home loan that assure the borrower won't default - of course, you only make about 30 loans.

[Neu Mejican]

Astromathman,

Of course, you can weigh the importance of free against the importance of safe and find a middle ground.

Constant tweaking will be necessary in a dynamic system.

[Brandybuck]

I continue to be amazed at the people that attribute this financial crisis to libertarianism, the free market or "unregulated" capitalism. Complete balderdash! The crisis is the result of a confluence of government micro-managing monetary policy and government subsidies and guarantees to lenders, liberally sprinkled with regulations and special privilege. Blaming this on libertarianism is like blaming the Iraq war on pacifism.

[joe]

There's no reason at all why libertarianism can't be a beneficial political project on an incremental basis.

I was restating the arguments of others, you might have noticed.

Certainly, it can be implemented incrementally in a way that brings benefits, in my opinion. But like everything else, it can also be implemented incrementally in a manner that produces harms.

The devil is in the details.

I think its hard to attribute the meltdown to the free market part of the mixed financial sector... Good thing I didn't do that, then, but to a specific strategy of targetted deregulation.

I think that, if you look across countries and sectors, the ones that are most economically successful are the ones where the free market side tends to dominate. Laissez-faire politics are a consequence of wealth. If bad economic times means the average joe drives his car for eight years instead of six, it doesn't matter much you take a hands-off approach.

[joe]

So why didn't the thousands of laws and millions of regulations work?

Because the effect of regulation on activity is not the same as the effect of flour in a cake recipe.

"How much" is not the only, or even the most important, question.

[Astro.mathman]

"Constant tweaking will be necessary in a dynamic system."

Oh, of course. Just hire that guy who knows exactly what knob to tweak.

[Seward]

joe,

Can you see how pointing out to me that we don't live in Libertopia isn't much of a rebuttal?

It doesn't take living in libertopia to avoid the problems associated with government inspired loose money (which would have created dramatic problems down the line no matter how the government was regulating these "innovative financial instruments"). In other words, I'm just not very interested in premise or presupposition nor do I think that it is a very useful means to understand the current problem. Any system of regulation or deregulation or government would have run into problems due to the various programs we have in place which encourage home ownership. As far as I know the rest of the world generally doesn't run its ship this way (at least with regard to the housing market) and thus it hasn't run into this problem in their various domestic markets.

Neu Mejican,

Policies are always, in the end, pragmatic and utilitarian.

That likely depends on what views as pragmatic and utilitarian, since government policy as often as not arises from what some might describe as panic and hysteria.

[joe]

So, the argument from the free-marketeers is "Your proposal won't guarantee good outcomes in all cases. Sometimes, something will go wrong."

There's a bit of a problem with that.

[Neu Mejican]

Astromathman,

Trial and error dude.
Trial and error.

[Guy Montag]

I read last week that Chavez is hurting any time oil goes below $80/barrel. I also read that we buy something like 3 million barrels a day from Venezuela, and we are the only customer of theirs that pays full price, and in cash.

Well, more accuratly, "we" are paying market price for that grade of crude. Chavez is shipping crude and products at a discount to some of his friends.

It does not matter if we are buying those barrels from Chavez or a Mexican producer, it all goes into the same pool, stratified by grade of course.

[Neu Mejican]

That likely depends on what views as pragmatic and utilitarian, since government policy as often as not arises from what some might describe as panic and hysteria.

Those both fall under the umbrella of pragmatic.
No?

there is no question of theory versus practice but rather of intelligent practice versus uninformed, stupid practice
Dewey

[Jeff S.]

Joe,

I know this was covered somewhat yesterday but maybe I missed it. Do you think there was specific deregulation, or failure to establish new regulations, which contributed substantially to this mess, and, if so, which/what?

Thanks.

[robc]

joe,

The analogies I made compared bridge-building and trash collection to the regulatory regime, not to the functioning of the underlying market.

I was making a regulatory regime analogy to. The canopy isnt the regime, the regulation of the canopy is the regime. Just let it be. Let it grow. Let if fail.

I do agree with you that if you were to have one, it would have to be like the trash pickup. Only a hypercomplicated trash pickup that involved the garbage man solving a high n traveling salesman problem in his head while driving.

[Seward]

Neu Mejican,

How can one assess the future "real world" effects of a policy during a period of public hysteria?

...there is no question of theory versus practice but rather of intelligent practice versus uninformed, stupid practice...

Yes, and Dewey was trapped in a relativistic doctrine which couldn't point out which was which.

[robc]

For the pro-regulation crowd:

Do you really believe that we have people who are smart enough to figure out the right regulations at the right time and apply them in the right way, despite the political pressure that will often be going against them?

Really? Seriously?

I think the economy is too adaptive to keep up. From a pure pragmatic outlook, I dont think it is possible.

I really think that getting the fuck out of the way and letting what happens happen is the most pragmatic solution, because the systems are just too complicated. Unless you are going to regulate so tightly that creative, new, and possibly dangerous ideas can never be tried.

I guess it comes down to "Do you have more faith in a handful of 'experts' or the combined interactions of 6 billion people". People are stupid. Large groups of people are amazingly stupid. Experts are even worse.

[joe]

Jeff S.,

Well, there was the easing of regulations on Freddie and Fannie, obviously.

But beyond that, I think that the elimination of certain regulations, such as those allowing different types of financial institutions to have common ownership, helped create a situation where more mortgages were bundled into MBSs, which created a moral hazard for mortgage originators to be less careful. Also, such mergers and created a situation where the companies - the divisions of companies, actually - which rated securities had an incentive to overrate them.

But more important than that is the dog that didn't bark. The Commodity Futures Modernization Act of 2000, for example, forbade new regulations on the insurance policies for MBSs. Once these MBSs went south, it turned out that the companies insuring them didn't have anything to back up their promises. The expectation of this insurance was one of the reaons why the MBSs' security was so over-rated.

In a field with as much innovation, and as few physical and technological constraints, as the financial sector, there are always going to be whiz kids coming up with something new. Regulating a market like that requires constant efforts to keep up, and the government dropped the ball on that.

[domoarrigato]

"It does not matter if we are buying those barrels from Chavez or a Mexican producer, it all goes into the same pool, stratified by grade of course."

It doesn't matter to us. It matters a great deal to his financial situation.

[joe]

Do you really believe that we have people who are smart enough to figure out the right regulations at the right time and apply them in the right way, despite the political pressure that will often be going against them?

Really? Seriously?

Yup. We didn't have any depressions, or even any recessions, caused by - caused by - financial-sector collapses for 70 years under the New Deal regulatory regime. They did a find job keeping up. And then the decision was made to stop trying to keep up, on purpose, on the theory that the whiz kids could keep their own house in order. And then, the thing that was a regular feature of the American economy - the economic collapse brought about by cascading failures in the financial sector - but which had ceased to exist for 70 years, suddenly appears again.

Unless you are going to regulate so tightly that creative, new, and possibly dangerous ideas can never be tried. Oh, yeah, thank fucking God no one interfered with the creation of balloon ARMs, MBSs, or MBSs consisting of balloon ARMs. That would have been a real tragedy.

I guess it comes down to "Do you have more faith in a handful of 'experts' or the combined interactions of 6 billion people".

6 billion people didn't invent MBSs. Six billion people didn't rate them.

You have this faith that regulation can't keep the economy from imploding, and history suggests otherwise. And your answer? A cliche.

[jon]

"If the libertarian project of deregulating commerce in order to promote greater innovation and dynamism ..."

that's funny. i thought the whole point of this exercise was pointing out that your assumption here is completely and utterly wrong?

did you read the articles, joe?

[The Angry Optimist]

We didn't have any depressions, or even any recessions, caused by - caused by - financial-sector collapses for 70 years under the New Deal regulatory regime.

post hoc, ergo propter hoc. Of course, it would be a helluva hurdle to produce some form of counterfactual.

[kinnath]

FWIW, kinnath, I think the argument about cheap money sparking bubbles - cheap money resulting from efforts to prevent recessions

After a hundred years of so, the forest service came to the conclusion that they need to let forest fires burn, then try to limit the damage suffered by man-made structures.

We have yet to come to terms with the fact that failing businesses need to fail.

There are strong arguments to be made for a safety net to help the people that suffer the consequences of a business failure.

But trying to prop up failing businesses just leads to greater suffering when the inevitable finally happens.

[Seward]

joe,

...helped create a situation where more mortgages were bundled into MBSs...

Which likely wouldn't have been a problem sans the housing bubble; a bubble which was the consquent of various loose money policies.

[joe]

It's only post-hoc if you can't describe the causality.

I did describe the causality. So, no.

[joe]

kinnath, businesses fail all the time.

BTW, the Forest Service didn't draw the conclusion that that letting modern superfires rage will restore the natural fire regime. Quite the opposite, it would do so much damage that the landscape might never recover.

They also didn't conclude that fires which threaten homes should be left untouched.

[Seward]

joe,

We didn't have any depressions, or even any recessions, caused by - caused by - financial-sector collapses for 70 years under the New Deal regulatory regime.

If I recall correctly, various defenders of the Bush administration have used a similar argument to defend the Bush record regarding the WoT.

[joe]

Seward,

Which likely wouldn't have been a problem sans the housing bubble; a bubble which was the consquent of various loose money policies.

Back atcha: the housing bubble wouldn't have been a problem absent the proliferation of MBSs and such. The popping of the stock market bubble in the much-more-regulated stock sector in 2001 didn't ruin the credit markets.

[joe]

If I recall correctly, various defenders of the Bush administration have used a similar argument to defend the Bush record regarding the WoT.

Yes, but they've never been able to describe a plausible causality for that theory.

As opposed to, for example, the FDIC and laws against banks over-leveraging. We don't have bank runs anymore becasue everyone knows their bank deposits are safe.

Do I have to explain that every attribution of causality is NOT a post-hoc fallacy?

[Jeff S.]

Joe,

I'm not as convinced as perhaps you are of the role of securitization. As I'm sure you know, securitization of mortgage debt has been around way longer than this mess, with few problems. A lender that sold all the loans it originated is today a healthy lender, provided it didn't purchase the mortage backed securities issued by someone else. My local lender kept a substantial percentage of its Option ARM loans and will soon be toast as a result.

The incentive for a lender to cut underwriting corners because it knows it can sell the loan anyway is clear, but imagine the lender's surprise upon first learning that there was a deep pool of willing sophisticated buyers despite the low credit quality.

[joe]

If I recall correctly, various defenders of the Bush administration have used a similar argument to defend the Bush record regarding the WoT.

The other problem with this theory is that major terror attacks have happened at virtually the exact same frequency since the WoT began as before. The time frame between the first and 2nd WTC attacks is just about the same as the time from 9/11 to today.

As opposed to the frequency of financial-system-fueled depressions, which happened just about every 20 years before the New Deal. This year's crisis is happening just a hair under 80 years since the last one.

[joe]

Jeff S,

But looking at the system as a whole, a lender that sold crappy mortgages did just as much damage as one that held them. They just passed the buck to someone else.

[R C Dean]

Laissez-faire politics are a consequence of wealth.

And here I was thinking wealth was a consequence of liberty. Because of, you know, the history of (relatively) laissez-faire countries/territories significantly outperforming their neighbors economically.

Actually, joe, the modern regulatory and welfare states are a consequence of wealth, not the other way around. They are luxuries that can be afforded only by wealthy societies.

[Seward]

joe,

The level of MBSs wouldn't have been there in the first place sans the loose money policies of the government. The most important factor in all of this remains government efforts to get more and more people into homes because the government thought that was a good public policy goal. Social engineering in other words.

The popping of the stock market bubble in the much-more-regulated stock sector in 2001 didn't ruin the credit markets.

Could that be because there was actual value in the firms associated with the bubble? Most of the tech companies did actually survive the deluge after all. If so, it wasn't a function of the regulation, it was a function of the underlying fundamentals of the market. Which forces one to ask two questions that I think are interesting to chew on in their implications: was the dot com bubble a result of government policy? Probably not. Was the housing bubble? Probably yes.

[Seward]

joe,

As opposed to the frequency of financial-system-fueled depressions, which happened just about every 20 years before the New Deal.

Most the "panics" of the 19th century were a direct result of government policies which fueled speculation in "hot" industries. The "panics" associated with the railroad industry and western land speculation are a good example of this. Much of the government policy in those instances were driven by the states.

[joe]

RC Dean,

Why is there not a single example of a country that became an industrial power without a protectionist system for its early industry?

Actually, joe, the modern regulatory and welfare states are a consequence of wealth, not the other way around. They are luxuries that can be afforded only by wealthy societies.

The modern welfare state, yes, but that is, of course, not the entirety of economic or political history.

You have these nice little myths about history, but they don't hold up to inspection.

[Seward]

joe,

We don't have bank runs anymore becasue everyone knows their bank deposits are safe.

We have bank runs all the time. A few major ones have happened this year. What do you think was happening to WaMu before the OTS shut it down?

[ed]

while the partial implementation of such a project subject to political reality leads to disaster, is that not itself and indictment of libertarianism as a political project

I dunno, joe. Would the building of a bridge partially over the Hudson River--and a few hundred cars plunging into the water below--be an indictment of the concept of bridge-building?

[Ravac]

joe @ 1:11:
So, the argument from the free-marketeers is "Your proposal won't guarantee good outcomes in all cases. Sometimes, something will go wrong."

I think you have that backwards. Free-marketeers recognize the market doesn't guarantee good outcomes. Creative destruction and all that. It's generally those in favor of social engineering that try to craft policy & regulations that guarantee success in all cases. If not guarantee it, at least sell it that way.

Neu Mexican @ 1:12:
Trial and error dude.
Trial and error.

If that's the way to craft policy & regulation, why isn't it the way the market should work?

[joe]

The level of MBSs wouldn't have been there in the first place sans the loose money policies of the government.

Nor would they have been there in the presence of adequate regulations on mortgages and securities.

The most important factor in all of this remains government efforts to get more and more people into homes because the government thought that was a good public policy goal. That is far from the most important factor.

Could that be because there was actual value in the firms associated with the bubble? You mean like Pets.com?

No, that is not why. There was real value - probably more real value - to the firms that got wiped out when the bubble popped in 1929. The difference is, this time, there was much less leveraging, so the entire financial sector wasn't depending on ever-rising stock prices to keep the cupboards full, as it was in 1929.

[Guy Montag]

Will the government be handing out free tulips with every pony too?

[joe]

Most the "panics" of the 19th century were a direct result of government policies which fueled speculation in "hot" industries.

Yes, yes, yes, the one drop rule. If you can find a government policy that played a role in a chain of events, you can stop thinking.

We've had government policies that fueled speculation in hot industries between the 1930s and the Bush administration, too. However - and this was the point of my comment - when those investments didn't pan out, the banks didn't fail, the depositors didn't lose their money, and the mortgage and credit market didn't hibernate for years in the 20th century, because the banks didn't get wiped out by bank runs.

No one ever addresses this point, they just change the subject. You tell me that bank runs ultimately had their cause in something you don't like the government doing? OK, whatever. Even when the government does stuff you don't like, the FDIC and regulations on bank capitalization prevent bank runs.

[joe]

Seward,

We have bank runs all the time. A few major ones have happened this year. What do you think was happening to WaMu before the OTS shut it down?

We do now. I agree.

As certain banks leveraged themselves, and used crappy MBSs to meet their capitalization requirements, they got into trouble as the failures of mortgages harmed both their income stream and their value of their security.

Good thing there weren't regulations put on MBSs to keep that from happening.

[joe]

ed,

If political reality and human nature made it impossible to build a whole bridge, yes, the damage done by building half bridges would undermine the case for bridge-building.

This is my point - if your political theory relies on building a whole bridge, and you can't build a whole bridge, and building anything but a whole bridge will cause disasters, it's not a good idea to build bridges.

[joe]

Ravac,

Free-marketeers recognize the market doesn't guarantee good outcomes.

...and since that doesn't stop them from advocating for free markets, then they can't credibly turn around and criticize anyone else's idea on the grounds that they also don't guarantee good outcomes.

[The Angry Optimist]

I did describe the causality. So, no.

No, you asserted it. There's no way to prove that assertion.

[Jeff S.]

Joe,

I suspect that it's better to spread $1-2T of mortgage losses far and wide than to concentrate them in the commercial banks. The losses don't go away but maybe the credit crisis doesn't happen.

The fact that lenders have held on to some number of their subprime loans and purchased the subprime mortgage securities of others diminishes the argument that an originator's ability to offload crappy loans increases the chances he makes crappy loans in the first place.

Oh well, I'm not sure I can convince myself at this point, much less you. The data is all out there and I do think we'll know eventually.

[Seward]

joe,

Nor would they have been there in the presence of adequate regulations on mortgages and securities.

Why have the regulations when one can simply do away with the primary progenitor of the problem in the first place?

That is far from the most important factor.

Actually, it is the most important factor. In a market absent such incentives the desire to create exotic lending devices would have been very limited or non-existant.

You mean like Pets.com?

What's the ratio of Pets.com to a surviving dot com business? I suspect that the far fewer failed than is generally appreciated in the general public's view of the matter. The bust was survivable for most dot com companies because most were actually going concerns.

The difference is, this time, there was much less leveraging, so the entire financial sector wasn't depending on ever-rising stock prices to keep the cupboards full, as it was in 1929.

Well, the stock market panic of 1929 had little to do with the state of the overall economy in the 1930s. The same is the case today. We need to decouple that from the start.

[ed]

firms that got wiped out when the bubble popped in 1929

It was cheap money pushed by government-created entitites (re: the Glass-Owen Bill) which nourished that particular speculative bubble. The Federal Reserve has been called the penny in the fusebox of the economy. Look what happens when artificial stimuli is injected into what its detractors laughably refer to as a "free" economy. Government intrusion corrupts absolutely.
And don't even get me started on that stem-gobbler Barney Frank!
Not that's there's anything wrong with buggery.

[Ravac]

joe,

Nobody can guarantee good outcomes in regards to the size & scope of our markets.

At least the free-marketeers say that up front.

[ed]

I would like to add, in closing, that Seward has appointed himself admirably in this thread.
Well done, sir! That is all.

[Neu Mejican]

Neu Mexican @ 1:12:
Trial and error dude.
Trial and error.

If that's the way to craft policy & regulation, why isn't it the way the market should work?

It is how the market works.
One of the things that markets try is regulation.

All complex adaptive systems spontaneously develop top-down regulatory forces.

The markets create regulations through their action, or did you think that the people who advocate regulation are not players in the market?

[Neu Mejican]

The false dichotomy duo

Goverment agencies/market, since governments are (large) players in the market.

Regulation/market, since rules/regulations are part of the workings of the market...even, in a sense, defining the market.

[joe]

I trust, Angry Optimist, that there is no way to prove to your satisfaction that people knowing they won't lose their bank deposits dissuades bank runs.

Somehow, I'm going to have to learn to live with your ongoing skepticism on that front.

[Neu Mejican]

BTW,

I think the fire management analogy is an excellent one if taken seriously.

No fire suppression leads to many bad and avoidable consequences.

Too much fire suppression leads to many bad and avoidable consequences.

Appropriately targeted fire suppression can minimize damage and allow the forest to benefit from the creative destruction that fires provide.

[Neu Mejican]

Seward,

How can one assess the future "real world" effects of a policy during a period of public hysteria?

Wait until the hysteria dies down, perhaps.

Carefully measure the outcome of interest, perhaps.

Measurement of outcomes is the primary challenge for crafting evidence-based policies.

[joe]

Jeff S.,

I suspect that it's better to spread $1-2T of mortgage losses far and wide than to concentrate them in the commercial banks. The losses don't go away but maybe the credit crisis doesn't happen.

Well, we've seen what happens when the losses are spread far and wide. Looks like a credit crisis. Ankd in this case, banks that were making sound loans ended up with securities from unsound loans, while also being pressured to lower their own lending standards to keep up with their competitors.

But more important, I think, is that the MBSs, wherever they ended up, were overvalued owing to a false understanding of their risk.

[Seward]

joe,

Yes, yes, yes, the one drop rule. If you can find a government policy that played a role in a chain of events, you can stop thinking.

Actually, it is the standard historical explanation for many "panics" of the 19th century. Now, I'm more familiar with the post-Civil War "panics" than those preceding that war, but I suspect that "panics" preceding that war were largely rooted in government actions. It was certainly that case in the economic downturn in the first two decades of the 19th century, which was rooted in Jefferson's moronic embargo. If you can come up with an alternative explanation besides the influence of government policies which encouraged railroad and land speculation I'd be happy to see it.

...when those investments didn't pan out, the banks didn't fail...

Actually, they did. We've had a couple periods of bank and thrift failures since the 1930s. What that speaks to is less of a need to regulate the futures, etc. markets and more of a need to support the lending institutions when there are runs on those institutions.

...the depositors didn't lose their money...

That depends on how much they had in the institution at the time of its failure.

No one ever addresses this point, they just change the subject.

[joe]

Seward,

Why have the regulations when one can simply do away with the primary progenitor of the problem in the first place? To avoid throwing the baby out with the bathwater. The ideal situation would be to enjoy all of the benefits of the modern economy, without the hazards. If achieving those benefits also produces risks that can be attenuated through regulation, why not?

In a market absent such incentives the desire to create exotic lending devices would have been very limited or non-existant. Really? The desire to enjoy greater profits while reducing risks - the reason MBSs were invented, MBSs created according to a risk-managing equation that won a Nobel Prize - was specific to the recent real estate bubble? I respectfully dissent.

Well, the stock market panic of 1929 had little to do with the state of the overall economy in the 1930s. The same is the case today. In both cases, the decline in the stock market/popping of the housing bubble caused massive damage to the economy through the mechanism of massive leveraging by financial institutions in the bubble market.

We need to decouple that from the start. Darn tootin.

[Fluffy]

If the libertarian project of deregulating commerce in order to promote greater innovation and dynamism can only work when done so absolutely and in perfect coordination with political theory, while the partial implementation of such a project subject to political reality leads to disaster, is that not itself and indictment of libertarianism as a political project (as opposed to libertarian as an intellectual exercise

I'm a little bit late to this discussion, but this question would be more compelling, joe, if the Bush administration had pursued policies that were 50% or more libertarian.

There is no reasonable analysis - none - that can conclude that the Bush administration has been a libertarian one.

So if the crisis is correlated with a highly-unlibertarian period of governance, you need to convince me that minor instances of libertarianism embedded in the Bush administration's policies somehow were the sole cause of the crisis.

[joe]

ed,

It was cheap money pushed by government-created entitites (re: the Glass-Owen Bill) which nourished that particular speculative bubble. Eh, maybe. But so what?

What caused the popping of the stock market bubble in 1987? You know what? I don't care, because the popping of that particular bubble didn't send the economy into a depression. Just as the popping of the real estate bubble last year wouldn't have smashed the financial sector if there were regulations of the sort that prevented them from leveraging themselves to ride that bubble, as there were i/r/t stocks in 1987. As an added bonus, keeping the financial sector from pumping speculative money into a bubble is also a good way to keep it from getting too big.

[Nick Wilson]

While the article by Weisberg was completely absurd to link libertarianism with the current crisis, I do think libertarians need to see some writing on the wall: we never should have affiliated with the Right-wing, we should be as critical of corporations as the Left, and we should have put the LP out of its misery a long time ago and tried something different.

First of all, attaching ourselves with the Right wing has left us with people like Neal Boortz (and even at times Rush Limbaugh or Michelle Malkin) as the most public figures to represent what we believe. In addition, libertarians are seen as economically and socially Darwinistic, when most voters are not. This is absolutely the wrong way for us to win elections or advance policy.

There is an alternative however: out-progressive the Left with libertarian ideas. This doesn't mean supporting redistributionism but instead redefining the bureaucracy and the establishment politicians as diametrically opposed to the interests of the poor, small businesses, minorities and the environment. The bigger and more powerful the government gets, the more powerful corporations and special interests become as well. Most national politicians are members of the upper class, and both sides have demonstrated a thorough misunderstanding of economics, leading the parties to craft policies that are counterproductive to the interests of those in most need of progress. The more centralized and distant the government gets, the more disenfranchised the lower and middle classes become as control over their political destinies slips away.

Like our intellectual forerunners, the classical liberals, we should have always been attacking corporations and monopolies as perversions of free markets. Corporations are government-created statuses that prevent the owners and managers from being liable and financially accountable for actions taken on behalf of the corportion. Adam Smith hated corporations as unaccountable and inefficient, and saw them as government market distortions. We should too.

While corporations are here to stay, we need to provide incentives for businesses NOT to incorporate, such as zero taxes for proprietorships and partnerships (beyond maybe land value taxes) and replacing corporate income and capital gains taxes with corporate value taxes. Corporations should pay for the legal protection the government structure is providing them. We also need to quit pushing corporations to merge and consolidate due to the excessive regulatory regime, where combining actually increases efficiency per market share. And we need to hold corporate criminals accountable who commit fraud and violate property and rights, instead of allowing them to hide behind the corporate veil.

Even more importantly, libertarians need to develop their sense of social justice as the argument for freedom. The more poverty we have, the more the electorate will rely on the government to fix that poverty. Supporting creative solutions like preventive care-based health cooperatives on the local level and a zero-tolerance policy on polluters are better alternatives to either excessive regulatory bureaucracies or to no structures at all.

For another example, fighting public schools is completely counterproductive - libertarians should instead be pushing competitive and successful public schools because of the return on investment. School choice is a great start; another would be to encourage school boards to push consumer finance and economics as mandatory high school courses. The better educated people are, the less they will rely on government to guide them through life. That's a fact proven by history.

The LP has actually destroyed the libertarian movement because its fringe radicalism and flirtation with anarchism over the course of its history has forced moderate or progressive libertarians to distance themselves from the party. Since the coup by radicals led by Murray Rothbard in the mid-1980s until the reform in 2006, the LP was been counterproductive to its stated goals, as proven by the continued growth of government and the continued distancing of both parties from libertarian thought. As a co-founder of the Libertarian Reform Caucus, I think even the reforms we passed, while helpful, will never be enough to change the party's image which is permanently ingrained among the political observers in the media and the electorate who are needed to give the party credibility.

The fact is we need a new third party that replaces the old, stale Libertarian Party with something new and different. I'm in the process of drafting the structure, strategy and platform for that new party. It needs to be a party that combines both liberty and progress, that doesn't follow the zeitgeist of Darwinism or Objectivism, that pushes localism as government structure and moves society towards a true meritocracy. Also, one that thoroughly learns from the lessons of the other failed third parties and doesn't waste all of its resources on races it can't win or put candidates on the ballot who are unfit for office.

I'll keep Reason updated on any developments.

[joe]

Seward, perhaps I wasn't clear. I'm not disputing your assertion that many of the panics in the 19th century were caused or partially caused by government policies that encouraged speculation.

My point is that the collapse of those bubbles wiped out banks, which wiped out depositors' wealth, which caused panics and runs on other, banks, and froze lending. We've seen plenty of bubbles come and go since the New Deal, but they haven't wiped up banks, wiped out their depositors, and set off bank runs that wiped out other banks, and generally set off cascades of failures. Until now.

[Seward]

Neu Mejican,

Wait until the hysteria dies down, perhaps.

Good luck. 🙂

Goverment agencies/market, since governments are (large) players in the market.

Regulation/market, since rules/regulations are part of the workings of the market...even, in a sense, defining the market.

These statements assume though that regulations/rules must come from the government, correct? Any market, whether the government is involved in it or not, is going to have rules associated with it (if human experience with the organic arrival of rules in human interaction is any kind of appropriate predictor).

Anyway, it isn't a false dichotomy to ask what the proper role of government and markets are and where those roles intersect? Libertarians ask that question all the time and they use our current experiences to elucidate what they think those roles should be for optimal outcomes, or based on some theory of rights, etc.

[joe]

Actually, they did. We've had a couple periods of bank and thrift failures since the 1930s.

None of which wiped out the savings of the depositors, none of which set off bank runs that wiped out other banks. This is the point I'm trying to make - the regulations contained the damage, and kept a few companies' poor borrowing and investing choices from tanking the whole economy.

[Ignoramus]

the regulations contained the damage

Hooray for Big Government! More, please!

[joe]

Seward, did you mean to quote my sentence about changing the subject then end your comment?

If so, hat tip.

[joe]

Ignoramus | October 21, 2008, 3:05pm | #

the regulations contained the damage

Hooray for Big Government! More, please!

Thanks, Guy. I thought this thread had gone on too long with evidence- and logic-based arguments, and was wondering when someone was going to point out that I'm writing politically-incorrect things.

Wow, now that I discover that my ideas don't mesh well with your ideological reflexes, I'll have to revisit them.

Not.

[Wise Ass]

the regulations contained the damage

General Custer: I'll save you!
Private: We're down to just three men, sir.
General Custer: I have contained the damage!

[Neu Mejican]

Seward,

These statements assume though that regulations/rules must come from the government, correct?

Not exactly.
They assume that government is a process...those rules and regulations are called "government."

[Seward]

joe,

The ideal situation would be to enjoy all of the benefits of the modern economy, without the hazards.

My counter would be that one cannot. The hazards provide significant benefits in fact and any system which attempts to do away with them is built on feet of clay. I guess we'll see if I am right in a few years time.

The desire to enjoy greater profits while reducing risks - the reason MBSs were invented, MBSs created according to a risk-managing equation that won a Nobel Prize - was specific to the recent real estate bubble? I respectfully dissent.

As I understand it, MBSs were invented in the 1930s by Fannie Mae as a means by which to sell the mortgages they had bought and pooled together. So they are creature of the government originally.

In both cases, the decline in the stock market/popping of the housing bubble caused massive damage to the economy through the mechanism of massive leveraging by financial institutions in the bubble market.

The failure of the banks had little or nothing to do with the stock market crash of 1929. As I understand it, that is pretty much of the standard conclusion these days. Maybe an economist can clarify how correct my statement is.

[Wise Ass]

Wow, now that I discover that my ideas don't mesh well with your ideological reflexes

You're just discovering that after five years, joe?

[Neu Mejican]

Seward,

Anyway, it isn't a false dichotomy to ask what the proper role of government and markets are and where those roles intersect?

It is, from my perspective the wrong question.

It is like the grounding problem in neurology. Scientists ask "how do patterns of neural firing lead to subjective experience" without recognizing that "patterns of neural firing" are equivalent to "subjective experience."

The question isn't what role should government play, since that give government the status of agent. The question is how do we govern our markets for optimal results?

[Seward]

Neu Mejican,

Some of those rules and regulations are called government. Others arise from the market itself. Indeed, there is no way that the government could create all the rules and regulations that occur in a marketplace, a marketplace must be to a great extent self-regulating to work effectively.

joe,

Seward, did you mean to quote my sentence about changing the subject then end your comment?

No.

...the regulations contained the damage...

No, what contained the damage was basically a liberal application of credit by the federal government. I'm not all that opposed to that (though I think a similar function could be undertaken by a private entity mandated by the government).

[C-Span Observer]

I suggest we regulate joe. Maybe Barney Frank can take that up at his next sham hearing.

[Seward]

Neu Mejican,

The question is how do we govern our markets for optimal results?

How is that question any different than what I stated above?

[Seward]

Anyway, I think I've run out of things to write. See ya.

[Neu Mejican]

Seward,

How is that question any different than what I stated above?

How do we govern the market, rather than what is their role.

[Seward]

Neu Mejican,

PS:

Those are IMHO two sides of the same coin.

Nice chatting.

[Neu Mejican]

Seward,

Some of those rules and regulations are called government. Others arise from the market itself. Indeed, there is no way that the government could create all the rules and regulations that occur in a marketplace, a marketplace must be to a great extent self-regulating to work effectively.

You are placing government outside of the market again, as an outside agent. Government is a process that helps to constitute the market. It is part of the market. You last clause begins to get the idea...just take it the next step.

[Neu Mejican]

Tah,
NM

[R C Dean]

The question isn't what role should government play, since that give government the status of agent. The question is how do we govern our markets for optimal results?

I have to dissent here, NM. "We" are not the government, and government is not merely a process. Government is an agent. It is a corporate entity, with just a much agency as any other corporate entity.

We do not say that a corporation is process, or that the shareholders of a corporation are buying a company when the corporation acquires that company, so there is no reason to say that the government is a process or that "we" are buying preferred shares in banks when the government acquires those shares.

[Neu Mejican]

RC Dean,

Corporations are explicitly not processes, but abstracted legal persons.

I am trying to make clear the distinction between the process of governance and the agents which implement that process.

We are a nation of laws.
We hire agents to enforce those laws, but the government is the laws, not the men.

A matter of emphasis.

"The United States is a nation of laws: badly written and randomly enforced."
Frank Zappa

[mediageek]

Human nature means people will look out for their own interests first. Wishing away this fact won't make it go away, so any political program you create which doesn't account for that eternal reality of human existence is going to fail.

Uh...isn't this kind of the point of libertarianism and free market thought?

[Mike Laursen]

If the libertarian project of deregulating commerce in order to promote greater innovation and dynamism can only work when done so absolutely and in perfect coordination with political theory...

I understand that some libertarians have that mindset, so you are not just making up a strawman. However, I would make a different argument that there is a minimal, coordinated sets of libertarian ideas about the free market that have to be implemented together.

To make an analogy, to implement a computer operating system you have to have certain modules in place that work together: a file system, a user interface shell, a math library, etc. And you definitely wouldn't stick a module in there that intentionally bypasses all the security and memory management rules that you enforce in the other modules.

To get away from the analogy, the current financial crisis might not have occurred if there was deregulation of mortgage-backed securities AND there was no government-sponsored buying up of mortgage risk by Fannie Mae and Freddie Mac.

[R C Dean]

We hire agents to enforce those laws, but the government is the laws, not the men.

A corporate entity is a conglomeration of contracts, analogous to the laws. Both have agents that carry out their purposes.

Corporations are explicitly not processes, but abstracted legal persons.

I kind of see your point, NM, I just don't think its particularly helpful or entirely accurate. I would point out that the government is, in fact, a legal person for some purposes (it can be a party to a lawsuit and contracts, just as a corporation can).

However possible it might be to conceptualize the government as a process, it acts very much like a corporate entity, especially in its modern, ubiquitous, bureaucratized form.

Sure, there are processes within and without the corporate government entity, but I don't think you can reduce the modern state to mere process, any more than you can reduce a corporation to mere process, at least not without losing a lot of what is really going on.

[Neu Mejican]

RC Dean,

Don't reduce, reframe.

Put emphasis on government as process rather than as government as group of regulators and, imho, you will end up with better results.

It takes us away from trusting the right people and focuses us on crafting the right rules.

[Deus X. Nihilo]

Who the fuck is Jacob Weisberg?