…Perhaps They Need To Get Out More…

One of my “guilty pleasure” movies is the James Caviezel version of ‘The Count of Monte Christo.’ There are a few great scenes in it; in one Caviezel, having gathered the wealth left at Monte Christo by Abbé Faria, sits morose in a carriage with Jacopo (played to perfection by Luis Guzmán). When asked why, with his newly wealth, he isn’t happier, Caviezel explains that he wants vengeance. Jacopo answers

“Why not just kill them? I’ll do it! I’ll run up to Paris – bam, bam, bam, bam. I’m back before week’s end. We spend the treasure. How is this a bad plan?”

How is this a bad plan?” is now a standard phrase in our house…

There’s another line which was pretty sharp as well.
Caviezel has just swum from the Chateau d’If, and washed ashore on an island beach were a group of pirates is camped.

The leader of the pirates explains that he must fight and kill one of the pirate group or be killed himself. And then explains that: “Oh, and by the way, Jacopo is the best knife fighter I have ever seen.”

Caviezel replies, with a perfect deadpan – “Perhaps you should get out more…

I had exactly that thought – perhaps they should get out more – reading Yglesias and Will Wilkinson writing about the problem of income inequality today.

Yglesias realizes that we can’t raise enough money via taxing the rich to really balance income inequality. His response?

The most important thing is to just have lots of tax revenue. Public expenditures are pretty progressive in their impact everywhere, and the difference between a very progressive and a not-so-progressive system is mostly that the more progressive ones are bigger. So while liberals have no reason to give in to conservative demands to make the existing revenue scheme less progressive – by adopting a flat tax, say, or replacing the income tax with a consumption tax – there’s very good reason to basically be looking for revenue by any means necessary. If it’s easier, politically, to get some center-right politicians on board for new consumption taxes than for higher income taxes, then it’s incumbent on progressives to walk through that door and take the revenue.

Wilkinson amplifies the point, in a post delightfully called…wait for it…’Will Coddling the Middle Class Kill Obama’s Plans?‘ Here’s the key graf:

So Yglesias is right (though he doesn’t quite put it this way). Democratic strategists need to be looking at clever ways for the government to take a lot more money away from middle-class families without thereby making the GOP look golden again. Obama’s been behaving as though he’s much less fiscally constrained than he really is. But by catering to the idea that middle-class taxes shouldn’t ever go up, he’s making it even tougher on himself. Unless he’s in the middle of some kind of ten-steps-ahead rope-a-dope wherein reaffirming the middle class’ right to not pay taxes is a way of softening them up to accept huge tax increases, he may be making a mistake.

Now I don’t begin to have an idea of when Yglesias is being serious or not, and Wilkinson is someone I’ve read a few times – not enough to make any judgment about whether the colossally lame post above is a brain fart or a core belief.

But I have one comment to both of these fine gentlemen – perhaps you should get out more

Look, I’ve written a bunch about inequality – most centrally in 2002 in a post Google archived here (right now www.armedliberal.com exists only as a tar file, sadly – I’ll get it reposted sometime soon)

Look, you can’t have enough traffic police to enforce the laws everywhere. So obedience to traffic rules comes from two sources: First, a sense of “correctness”; a belief that the rules make sense, that we all benefit from the rule being followed, and that others will also follow the rule; Second, fear of punishment, either through direct consequences (an accident) or through the actions of other citizens or agents of the state (being threatened by someone you cut off, or being cited and fined by a police officer).

It ought to be obvious that the first source works better than the second. It works all the time, regardless of the state of enforcement; it is internalized so that each driver can freely respond to current situations. I’ll argue that it is morally better, as well, because it treats each driver as a responsible actor, rather than just a subject for enforcement.

But the first source depends on something which is in ever-shorter supply; a sense of the legitimacy of the rules, and a sense that one is connected to the others who are also bound by those rules. So why not run red lights?

Habra and Schaar each have a different vision of why legitimacy is in short supply; they are rich and difficult to summarize, so I won’t right now. To those, I will add the simple fact of inequality as it exists today (and here I’ll poach from Montesquieu as noted by Bertram, above).

I’m talking about a level of ‘Gilded Age’ inequality that gives us Lizzie Grubman and all she represents, a sense of separation, entitlement, and inheritance which is mirrored by the people who read about her and are convinced that modern American society is structured for people like her, and not people like them.

The kind of separation between people in the SkyBoxes and the rest in the cheap seats.

And the consequence isn’t just bad views or a mild sense of disengagement between classes. It is a profound corrosion of the relations that tie society together, as those in the SkyBox decide that they are above the law, and those in the nosebleed section see no reason to obey, as the law does nothing for them.

So as the light turns yellow, they just gun it, and the rest of us just have to be very, very careful because we are the ones they hit.

I believe passionately that we have to reduce the level of inequality – in wealth, income, and power – in this country.

But to me that means we grow the middle class, not try and hammer it with taxes just as the global hand is wiping it flat into Neal Stephenson’s Pakistani mud.

How do we do that, if we’re not going to follow the suggestion above and just have everyone work directly or indirectly for the state?

Well, for one, we can sit down and look hard at the rules which we’ve allowed to be continually rewritten from the late 60’s through today to advantage capital and disadvantage labor, to advantage investment income over earned income, to tilt the tables away from the working middle class and toward the politically wired wealthy and powerful.

I’m sensitive to the need to make investment more attractive than consumption; neither am I insensitive to the need to make investment more attractive than speculation.

‘Cause we’ve seen how well we do in an economy built on speculation, rather than investment.

Government doesn’t need to put men on the field to play the game; it just needs to take it’s role as a ref seriously.

That’s “smart power,” paid for with “smart taxation.”

44 thoughts on “…Perhaps They Need To Get Out More…”

  1. I have nothing to add except to say that this is a very well put and well thought out article which I agree with almost entirely.

    I’ve said before that the wonderful thing about the last fifty years or so is that, regardless of what’s happened to the gap between the rich and the poor, everyone has in real terms gotten a lot richer. The important question is how to continue that trend. I agree that having a level playing field is a good start, and that government intervention (except in the sense of removing existing barriers to progress) is not a always going to make things better.

    Capitalism has been pretty good to us on the whole – we all know that it has cycles – why abandon it now just because we’re at the bad end of one of those cycles?

  2. A real problem with trying to use any sort of government program to tax the rich or otherwise redistribute wealth is that the rich will eventually find some way to buy off the government program.

    I don’t think it’s important to eliminate wealth inequality – no sane person resents Michael Jordan; it’s pretty clear that he deserves what he’s gotten. What is important is eliminating a wealthy class whose greatest merit is their ability to game the system.

    Maybe you could find a cadre of lunatics, willing to work against their own best interests, to run a very small government that protects people from violence. Attempt anything more and you’ve created a system for sale to the highest bidder.

  3. Liberty and equality are fundamentally incompatible. To the degree that you desire equality, you desire to limit liberty. The reason for this has four parts: people are not identical in their abilities; all wealth comes from human labor; labor specialization means that some people’s skills will be in more demand or less supply than other people’s skills; people are willing to exchange more value to get that which is in higher demand in relation to supply. (Because I don’t want to go too wide of the central point, my explanation for each of these parts comes after the point I want to make. For now, let’s just assume each of these four parts is true.)

    So the only way to ensure equality is to break at least one of the four parts: either you must make all people identical in their abilities, which is impossible without killing people or entering Harrison Bergeron territory; you must enslave people so that all people have no wealth (except, of course, for the slaveowners); you must eliminate labor specialization, impoverishing everyone, or enslave people to manage their choices of consumption or production or the value of their labor irrespective of people’s choices; or you must override people’s self-interest to prevent them from exchanging more of value for what they value more. OK, so in one case you can take the option of reducing everyone to equal poverty, and in another you can simply kill people, but absent those choices, any attempt to achieve equality must necessarily reduce individual liberty.

    The only degree to which you seem to differ from Yglesias and Wilkinson is that you seem to prefer indentured servitude while they seem to prefer outright slavery. No thanks.


    OK, and now for the the justification for the four parts of why creating equality limits liberty.

    1) People are not identical in their abilities. If I need to defend this, then I have to start by borrowing a line from our illustrious host: you need to get out more.

    2) All wealth comes from human labor. This is a natural consequence of the idea that people own their own bodies. If people do not own their own bodies, they are enslaved. If people do own their own bodies, then they own the results of the use of their bodies. Performing labor changes (at least potentially) something of a certain value into something of a higher value; for example, changing a tree into lumber. So performing labor creates wealth, and that wealth is the property of the person that did the labor. Or, alternately, it might be more profitable to a person to sell their labor, rather than the product of their labor, in which case the result of their labor is the property of the person who bought the laborer’s time. In either case, it is the labor that creates the wealth, and the wealth created is the increase in value created by the labor, not what was paid for the labor itself. (The payment for the labor is not the creation of wealth, but the expenditure of wealth previously created in order to create more.)

    3) Labor specialization means that some people’s skills will be in more demand or less supply than other people’s skills. Labor specialization enhances everyone’s wealth. Let’s say that I am better at working with computers than making shoes (which happens to be true). In that case, I can make more wealth by working with computers than by making shoes. But somewhere out there, there is a person who is better at making shoes than at making electricity, and there is someone out there who is better at making electricity than using computers. So the person who makes shoes well pays the person who makes electricity for the electricity they need, and the person who makes electricity well needs my skills to work their computers, and the selling of my labor gives me a store of value that I can exchange for shoes. Each of us has created more wealth than we would have done had we each had to make our own electricity and shoes and operate our own computers.

    But at any given time, the demand for electricity, computer work and shoes are not all at the same levels. Let us say that there is only one supplier of electricity. In that case, that supplier can charge whatever they want, provided that they do not charge enough to make it more economical for other people to generate their own electricity than to buy it from the supplier of electricity. The demand for electricity is much larger, in that case, than the supply of it, so the amount of value that people are willing to exchange for electricity goes up, and the price of electricity therefore goes up. The same thing happens in the other direction: if supply exceeds demand, the price drops. Inherently, then, because some products and services are in demand more than others, some people must make more than others at any given point in time, and the base level around which their earnings fluctuate depends on the difficulty or rareness of the skills they have.

    4) People are willing to exchange more value to get that which is in higher demand in relation to supply. The last point assumed this one, but let’s make it explicit. If there is something that a person wants, but the provision of which is not their economic differentiator, they have to pay for it. In the example above, I have to pay for both electricity and shoes, or accept not making as much money as I otherwise would have. But if it’s harder to get shoes at any given time, then I have to be willing to pay more for them. Otherwise, those people who need shoes more than I do will be willing to pay more for the shoes than I do, and thus will get the shoes instead. The interplay of what I am willing to pay and what price is set in the market to balance supply and demand ensures that those people who need a given thing more can get it. In other words, if my shoes are not quite the latest style, and someone else’s shoes are falling apart, they would be willing to pay more for the shoes than I would, because their need is greater, and thus they would get the shoes rather than I. (And, absent price fixing by cartels, monopolies, or governments, they would pay the lowest price at which it is possible to get shoes.) This interplay, what Adam Smith called “the invisible hand,” ensures that any particular good will always be available in short order for the people who most need it.

  4. Marc, you suggest confiscating wealth gained by gaming the system – largely the government imposed system – and then turn right around and suggest adding more economic power to that system. See any contradiction?

    The reason, as Jeff suggests, is that you are trying to govern outcomes, not causes. Tyranny is the actual outcome.

  5. Increasing government power by giving it more control over the economy and the flow of money will lead to a privileged political class that milks the productive people. The natural tendency of human beings to establish hierarchy will corrupt any power center, and the more concentrated the power the more corrupt the resulting system will be. Every socialist system eventually tends towards tyranny for precisely this reason. Whether the privileged are called “The New Class”, “The Managerial Class”, or whatever, the fundamental cause of such developments remains rooted in human nature and the inevitable results wouldn’t have held any mystery for the founding fathers.

  6. people are already gaming the system

    People always game the system. Look at Chicago politics, or politics in any other large city. Why is California in such deep sh*t? Why can’t Obama find honest, tax paying Democrats for his cabinet? As long as there is a system, some folks will game it.

    And then there is the age old human passtime of rape and pillage. The sixties was a birthing time for the latest version to hit the streets. Progressive sorts would steal from stores and justify the act by proclaiming that the stores were rich and in any case, tools of capitalism. The result was an increase in suspicion and where I used to wander the aisles I found myself watched and distrusted. This is social breakdown. And let’s not even get started on the breakdown of the family.

    I share your concern about increasing inequality, but I think the best way to bring a good life to a wider swath of people is to bring back manufacturing. How? I haven’t a clue, I don’t really know why it left. But I’m not sure that unions, which are just glorified monopolies, are the way forward. Or that unions don’t offer another chance to game the system.

    Education also seems to me fundamental to reducing inequality. But education isn’t so hot these days. How did California, once near the top, fall to near the bottom? Where has the craft training gone? There is a demand for machinists, where are they? And how do your teach folks to set up tools when they don’t have the most basic training in trig? Has centralizing educational policy and text book choice helped or hindered education? Have teachers’ unions helped? Have teachers colleges helped by elevating social justice above educational accomplishment?

    I am pessimistic about the near term future of this country, I really am. I’ve felt for years that there was a sort of dark age on the horizon. A “progressive” dark age.

  7. AL, I hope your guy and your philosophy actually work out.

    But for the first time, I’m seriously wondering if I should leave. The historic precedents all show that big leftist government experiments all end with oceans of red ink at best, or oceans of blood in the more typical case.

    And since I’m not interested in being “middle class”, what is left to hope for other than fat taxes, regulatory strangulation, and overpaid “civil servants” who loot the public treasury while congratulating each other about what Nice People ™ they all are?

    After all, we’re getting a wonderful preview right here in Cali.

  8. The problem Tim, is that other people are already gaming the system…with outcomes that make them happy but are bad for the Republic.

    Agreed. But what underlies this issue is that the system can be gamed. And that is because the state has a monopoly on power.

    The state (Federal Government) has accumulated power over the years. And in accumulating power, has the ability to force us, the citizens, at the point of a gun, to acquiesce to their demands. And we do. We can’t say no to taxes; we can’t say no to “fees”; we can’t say no to laws.

    And because the state has this monopoly, they have seen fit to sell this monopoly to the highest bidders. Those bidders being actors with access to the power holders.

    Thus the gaming of the system.

    If we remove (or seriously restrict) the power of the state, then the ability to game the system is likewise restricted. With no access to that power, they have to go elsewhere. That elsewhere is back into the free market.

    To successfully blame Capitalism for our current woes is one of the greatest victories that Leftism has achieved in the (now) 21st Century. We have experienced Crony Capitalism, at its worst. And it is neither a “Liberal” nor a “Conservative” standard to bear when arguing against it. It is truly one of Liberty. And in that vein, Jeff and Tim are spot-on. Giving yet more power (both in laws and capital with which to create/enforce those laws) to the cesspool of corruption that controls Washington is the last thing we need to be doing.

    We, as a people, have abdicated on our responsibilities as citizens of this country. That has to end, or we’re doomed.

  9. AL, two problem with “social democracy”:

    1. The more power and influence in the government, the more it attracts “gamers”, for the same reason John Dillinger robbed banks – ’cause that’s where the money is.

    2. The more the government does, the less democratic it is, for the simple reason that the expanding bureaucracy is more distant from the levers of power exercised by the voters. This is why, if you really want a real “social democracy”, it needs to be heavily federated so local governments are running things rather than a big, distant, uber-powerful central government. Even there, beware of local political patronage machines, who suck all life out of the local economy.

    If the best jobs available are in the government itself, the economy has failed and the government likely killed it.

  10. Marc,

    I suspect our disagreement is deeper than you think, because for me, that both markets and governments are not naturally occurring is a consequence, while you stated “our markets today are not some natural feature of the universe, they are defined and regulated through human – actually, through government – agency.” I’ll pass over exactly what that means and implies — Are humans not natural? Are governments natural, but markets not? If neither is natural, why should one have primacy over the other? — and instead state that my belief includes the following points:

    1. human beings have a nature, a set of characteristics that are uniquely (in sum, anyway) human and which distinguish us from other entities that are not human beings;
    2. human nature is reasonably constant over large periods of time and is not alterable to suit the whims of any given political or economic system or any ideology;
    3. human nature is to seek to survive, to survive on our own terms, and to improve our ability to secure our own betterment (Boyd would say our capacity for independent action, Jefferson our ability to pursue happiness);
    4. the environment in which human nature is expressed is the real world, which is a world of limited resources, which implies competition;
    5. humans will act on their nature at all times, and any system in which humans must act and that is contrary to human nature will yield behavior that seeks to avoid the constraints of the system.

    I suspect that you disagree with some or all of those points. I suspect that you may (particularly if you are in broad agreement with Fanon, Derrida, or any of the other Rousseau-influenced thinkers of the post-modern Left) disagree with all of those points. I would be curious to see which you do and which you do not agree with. If you agree with these premises, then I either your logic or mine must be incorrect. If you disagree with these premises, I think they’re worth arguing. However, as a guest in your space, I don’t think it would be appropriate for me to do so without your consent, as it could get fairly long.

  11. Marc: What Nukem said, I couldn’t do better. If there hadn’t been CRA and Fannie Mae, would there have been house flippers and default swap punters to game them?

    It’s time for the Tea Parties – and all that they imply. Down with looter government.

  12. I see the role of government in markets to be a neutral third party in disputes, to help create a level playing field, and to keep the markets functioning smoothly. In my opinion, if they try to do a lot more than this then they tend to make things worse, not better. Regulations which are designed with a light touch and to keep the market fair and transparent and fine (I’m not against regulation per se) but regulations where the government tells the market what to do “for their own good” are just asking for trouble, and part of what has made this recession so severe.

    Look, if some guy is going around selling A but saying it’s B, there’s a legitimate role for the government to do something about that, because not all individuals are smart or knowledgeable enough to always tell the difference, and we should be able to at least somewhat trust what others in the market tell us. That’s in my opinion, anyway. Similarly if two people in a market make a contract, and then there’s a disagreement over it, it’s useful to have a third party with the ability to sort it out in a neutral manner and the authority to enforce its decision.

    But I really don’t see where the government gets the moral right to presume to tell us how our markets should behave. I also don’t think governments should be *in* markets, aside from when they’re legitimate actors in them. In other words, if the government wants to buy some new fighter jets, they should be players in the high performance aircraft market, obviously. But when they start setting up entities like Freddie Mac and Fannie Mae, that’s just asking for trouble. It really isn’t their role.

    I believe if the government does these things to ensure a free and fair market, and otherwise avoids messing with the market, the outcome will be pretty close to as fair as possible, and will naturally tend towards equality. Sure, some people will get rich and others won’t. The rich ones are either lucky or smarter or otherwise better at doing what they do. That’s natural and trying to “fix” is it not going to lead to any good outcomes.

  13. [Comment deleted while 12 year old son gets sent to kitchen to do chores – and I explain that online namecalling is a bad habit]
    kthxbi.

  14. Concepts like ‘property’ and ‘wealth’ are indeed vacuous without the police power of at least the minarchist state to back them up. Reading the Randroids, you would never know that even in recession the United States is a far nicer place to live than Somalia, which has for years been an experiment in chronic anarch(y)(ism).

    Even from first principles, something always rings a little odd in the glibertarian approach. For example, the idea that a newborn baby can claim the ability to choose how he labors is silly. So, indeed, we are born into this world entailed by obligations to our family, and in turn in debt to society and the government for the benefits that they have received (e.g., starting from police protection in the nightwatchman state, and going forward to socialized medicine and childcare in Scandinavia).

    But in every generation, teen boys read The Fountainhead and think they’re Superman. You might as well read Superman, and think you’re Superman, for all its applicability in the Real World.

    Nor have I ever heard glibertarians and Randroids call for the abolition of the limited-liability corporation or fractional reserve banking. Without these creations, modern economies would simply not exist. These constructs require regulation and they provide opportunities for fraud that didn’t exist under barter economies—but if you want to play in the modern, globalized world, you will have to allow government to permit and to regulate them.

    I may be interpreting Armed Liberal to suit my own biases, but I like the idea of lumping Lizzie Grubman, Bernie Madoff, and John Thain together. Thain (or at least his acolytes) probably thinks that being lumped in with an heirhead and a self-confessed swindler isn’t fair. I don’t agree. All three felt entitled to play by a completely different set of rules, based, as far as I can tell, on little more than their accumulation of money.

    Yesterday’s article on AIG’s wizards might provide an antidote to the idea that poor people who underdeclared their income when asked to by loan brokers eager for big upfront fees are behind the recession.

  15. Nukem/Jeff – look, there’s no question that if you read any economic history at all, that property as an individual right is something that comes up relatively late in history.

    Now I happen to think that property rights are a good thing, as are human rights and that both are recent political constructs.

    The nub of the problem, however, is to figure out what, exactly those rights are.

    And the reality is that government defines them.

    There was no right to copyright before the statute of Anne in the 18th century; the history of real property is complex even in England through the 15th or 16th centuries (I was taught that the “real” in real property referenced the notion that the property was ultimately the king’s).

    Now, as above, I like the fact that modern law and society are based in large part on the recognition of individual rights, including the right to property.

    But you have to acknowledge that these rights grew – they weren’t present in all societies throughout history. And that their enforcement is through the government – and that without the government and laws they would not exist.

    Marc

  16. AJL (#21), that’s a great synopsis of AIG you linked from the NYT. While it highlights the dire consequences of the regulatory philosophy of the Bush years, I don’t see that it shows that the Sand State-centered housing bubble wasn’t at the heart of this meltdown. (De-snarking “the idea that poor people who underdeclared their income when asked to by loan brokers eager for big upfront fees are behind the recession”, I take that as your assertion, though I could be wrong.)

    bq. But because credit-default swaps were not regulated, and were not even categorized as a traditional insurance product, A.I.G. didn’t have to put anything aside for losses. And it didn’t. Its leverage was more akin to an investment bank than an insurance company. So when housing prices started falling, and losses started piling up, it had no way to pay them off. Not understanding the real risk, the company grievously mispriced it.

    My interpretation is that some of AIG’s worst problems are the result of the way they piggybacked on the sustained rise in value of US residential housing (aka the bubble).

  17. Armed Liberal: Fair enough, I agree that having people “game” the rules is non-optimal. I’d propose there are various, relatively straightforward ways to deal with this.

    Number one: simplify the rules, and get rid of those which aren’t strictly necessary. I’d argue it’s the unnecessary number and complexity of the rules which make them so easily gamed. Look at the tax code. It’s full of loopholes. Now, imagine for a second there was, instead, a flat tax (one of the various proposals that are floating around). I’d argue there are a lot less loopholes in the simpler structure. Now, you have to consider other facets too – is it more or less fair, are any new loopholes that might be created perhaps larger than the many smaller ones which were closed, etc. But the way I look at it is rules create incentives, and rather trying to create a set of rules that are going to give a desired outcome, I’d look at designing a set of rules which give the desired incentives. And I’d argue, a relatively free market with as few rules as possible gives the right mix of incentives.

    Secondly, and on a related note, there has to be a willingness to fix situations which are clearly broken, but here’s the important part, not just by adding more rules to ban the undesired behaviour. Rather, there needs to be a willingness to remove old rules that don’t work, or change them to work better without just tacking more stuff on top. However, I think the failure here is our political class (and while I’m Australian I think we suffer from the same problem as your politicians do). The problem is that there’s really no incentive for politicians to repeal old laws, including those that aren’t working. In fact there are significant incentives not to. Nobody wants to close down a beareau – even if its function is hurting us collectively, rather than helping.

    So I guess what I’m saying is that having rules which can be gamed isn’t a problem as long as we have leaders who can react to this and solve it in an intelligent manner. But, I don’t hold much hope under our current political systems that such a thing is possible. And, I’d add, it’s probably impossible to have a system that can’t be gamed. Our aim should be to do two things simultaneously.

    1) Reduce opportunities for gaming the system wherever possible (with the knowledge that these changes can always make things worse due to unintended consequences).
    2) Resolve to do so in such a manner that the reduction in liberty is minimised. Especially if you look at reducing the imbalance in the rules as a way of improving liberty, that lets you look at the outcome of the rule change and ask whether it’s a net gain or loss to liberty and decide based on this whether it’s a good idea.

  18. AJL #27:

    bq. without the almost infinite leverage created by the unregulated credit default swap market, an uptick in mortgage default rates would have been much less catastrophic.

    We agree, except for the word “uptick,” for which I would sustitute “sharp and sustained rise.” But who would be so feckless as to allow businesses to insure (by another name) instruments with gigantic downside risks, without requiring set-asides of proportionate reserves? Answer: Bush Administration ideologues and regulators. Name and shame.

    bq. a motive for writing all of these crappy mortgages was the huge profits, fees, and bonuses that could be synthesized from them through derivatives. I’d say that this “top-down” bad lending exceeded in importance the “bottom-up” clamor of neighborhood activists in the slums for more credit there…

    Well, we didn’t agree on much of anything on this blog as regards the CRA; we had a back-and-forth without arriving at a conclusion, IIRC. Since then, I’ve read a two-part indictment of CRA and related legislation and regulation by Steve Sailer, which I find pretty compelling. I’ll use my link-chit for Part 2 (2/15/09), “The Minority Mortgage Meltdown (cont.): Charting The CRA Crackup.”:http://www.vdare.com/sailer/090215_cra.htm
    The first part, “The Minority Mortgage Meltdown (contd.): How The Community Reinvestment Act Fits In,” is dated 2/1/09.

    The theory that top-down greed was focused on the lucre to be gained through deriviatives is interesting, and plausible. Can you link to an article or post that provides some evidence?

    It seems unlikely that the derivative-derived rewards to those responsible for generating these mortgages would dwarf the boring commissions and fees that provided much of the impetus for keeping that party rocking along. But I could be wrong.

  19. When there’s a market distortion to be found, it will be arbitraged. That’s what markets do, sort of like the Internet routes around blockages. In the normal course of things, the arbitrage will eventually iron out the inconsistency in the market by making it expensive to maintain.

    When the distortion is maintained by force, that is, by the government, then the arbitrage opportunity remains, and becomes a way for the arbitrageurs to extract increasing amounts of wealth. Look at George Soros’ history: That’s how he made his first fortune, by arbitraging inconsistencies in the European forex markets until he finally forced the Bank of England to back off.

    To the extent that the arbitrage opportunity is obscure and complex, those practicing it enjoy some amount of both entry barrier and ongoing protection from scrutiny – the more so if there are vested political interests both creating the opportunity and trying to obscure its consequences. (Examples may come to mind.) And the longer the government induced inconsistency persists, the more elaborate and deliberately obscure the rent seeking and wealth extraction vehicles become. (Default swaps?)

    However one may view the profit making behavior of the arbitragers, they do have the signal virtue of showing just where the market has been distorted. Again, in an open market their opportunity will disappear as a result of their own activity. When the distortion remains as a result of government fiat, their activity becomes parasitic on the underlying market, and may/has driven it over the edge.

    So who’s at fault then? The politicians that decided to force lending to those who were not qualified and created vehicles to launder the toxic loans? Or the arbitragers who exploited that distortion and built a pyramid of leveraged derivatives on the fact that it was politically created and would persist?

    And coming around the point of the OP, where’s the virtue in using this sad tragicomedy as an excuse to sacrifice the productive to the nonproductive? And putting more power into the hands of the government, which will inevitably be used to create more distortions and consequent arbitrage opportunities?

  20. Getting back to the original discussion, one of WW’s commenters “gets it”: the middle-class tax hike is the CO2 emissions stuff. Like anything that is basically a sales or consumption tax, this will hit the poor and middle-class disproportionally more than the rich.

    Obamaphiles will argue that this is a tax on Big Corporations, but Big Corporations don’t pay taxes. Their customers do.

    The fact that the tax is hidden behind several layers of indirection doesn’t mean that the money to pay it ultimately comes from energy users or those who buy products produced with energy.

  21. On the whole a great post in explaining playing by the rules. The problem is the rules. If anyone here has a CPA ask him to show you the last complete set of tax codes he has for anytime in the last twenty years. Put them on the floor and stack them up. Before you finished you’ll find the stack is taller than you unless you’re Yao Ming.
    My point here is that there is money being denied to the system. The changes to get more money into the system keep being made at the fringes, i.e. rates as opposed to involving everyone. A flat tax and a killing of exemptions would go a long way towards getting everyone to play by the same set of rules.

  22. As far as rules go, I’d like to drop in a useful metric of sorts.

    Any set of rules that will support liberty has got to be operable at human speeds. I can’t make real time decisions if I have to refer to thousands of pages of regulations, and neither can anyone else.

    So what is needed is a way to streamline the rules so that they are easily internalized and applied. I will illustrate (at some length) by borrowing from my profession.

    I operate a very complex real-time system on a daily basis, if you would indulge me by considering the playing (and teaching the technique of) a string instrument a system; one in which the consequences of error or lag are both obvious and consequential.

    My usual description of the complexity involved is to imagine patting your head while rubbing your stomach… while jumping up and down, tapdancing, and saying the alphabet backwards. This is without even getting to the demands of tight ensemble playing.

    In order to help students develop a natural “feel” for this process, which indicates a smooth dynamic meshing of all the concepts involved, I break the understanding of each concept down, prior to re-integrating them, into three phases of definition (I’m beginning to move back on point now).

    The first is a negative definition, the place we all start when we don’t know what we are doing. Trial and error yields negative information. “Don’t lift that shoulder.” “That’s too much bow.”

    Collect a series of negative definitions of the same object, and you begin to gain an approximation of the truth, albeit a very processor-intensive one. Collect enough negatives, or ranges of negatives, and you can collapse them into a single positive definition.

    This is the Eureka Moment, when a student ‘gets it,’ when everything crystallizes and becomes clear as the processing load also collapses to a more manageable size. Going from negative to positive is the first phase change, and many people stop learning when they reach it.

    This is unfortunate because a second phase change is necessary for real-time performance. Being perfectly in balance (meaning without tension) at a single point in your bow is all well and good, but what happens to that balance when the bow is moving?

    What must be done is conceptually the same as going from negative to positive; you must collect enough of these static definitions (in this case, of bow balance) until they can be collapsed into a dynamic definition, resembling an equation that gives (ideally) all possible solutions. This is the second phase change, and it brings the processing load down to truly manageable levels for doing complex things in real time.

    Back on point. The problem with bureaucratic regulatory structure is that it is inherently static and negative; a list of things not to do. This is analogous to graphing a parabola by the terribly inefficient method of individually specifying each point that it does not pass through, or more aptly with a contradictory forest of bounded areas hemming it in that grows infinitely as the approximation narrows (the dynamic-negative version).

    So if you want to have a rule-based system that is compatible with liberty, you have got to find ways of specifying its goals in positively defined ranges of activity. “Life, Liberty, and the Pursuit of Happiness.” “Congress shall make no Law…”

    That’s how I think of it anyway.

    BTW, equal opportunity/equal outcome thinking is another great example of dynamic versus static definition, as is ecology/environment thinking. Examples are legion.

    Piercello

  23. Another example I just remembered. Ever notice that the classic debating terminology–straw man, ad hominem, etc.–all refers to examples of bad argument? What notto do?

    If you define debate positively, you get something like this: the only three possible areas of challenge to an argument are 1) the facts explicitly used, 2) the reasoning used to link them, and 3) the match between the reasoning and the standard of evidence used to select the facts. EVERYTHING ELSE is out of bounds.

    That third one is intended to address cherry-picking and self-cancelling arguments, but I’d love to see it more concisely worded!

  24. Jeff, If the free market worked the way you did in #34, than yes, the government would be unnecessary for safety. The problem with business that a bottom line is often more important than a strong business model.

    Look at the tainted meat outbreaks (human & animal) that caused hundreds of sickness BEFORE a recall was ordered (in fact, the USDA cannot force a meat recall). Look at the rating agencies of CDO’s, which spectacularly failed to adequately rate when money started to pour in. Look at the ‘lead toys’ scare last year… why wasn’t the industry testing itself? Look the tests for ‘mad cow’ disease, where the industry simply said… “Well, we’ll find fewer samples if we test less often…”. Ta Da! Industry rating itself.

    The only recourse are lawsuits or public image attacks. Again, large companies have media firms, high priced lawyers and political influence. There is no way consumers can adequately damage a ‘risky’ corporation.

    Simply put, the best investigator is one who has no interest in whether their inspectee passes or fails. Who can not be influenced, bought, or removed by political pressure. For my money, the best applicant for this system is government (which also has it’s own problems).

    I would argue that the problems with these programs is not that they are too strong, is that these programs are too weak. Essentially, they are not allowed to function without political interference.

  25. The one think that would have moved the thread forward most would have been an updated analysis of how many CRA mortgages are in default, and to compare that to a national average. I was unable, even stealing a little time away from the day job, to come up with anything, but Tomorrow is Another Day.

    Meanwhile.

    Jeff Medcalf:

    The problem, of course, once we are arguing not from first principles, but about pragmatic compromise, is that liberty quickly gets shuffled completely off stage.

    I am sorry you take offense at “glibertarian“, so I will drop the ‘g’ for now. Nevertheless, the idea of economics as an axiomatic science strikes me as repellent, whether the axioms be the beautiful libertarian ones, or the equally eloquent, if opposite, principles of Marxism. The quoted statement only makes sense when terms like “liberty” are also used only as defined within the axiomatic framework, and their relation to what those words mean in real world practice tends to be problematic. I have a bookshelf full of advanced math books, including some quite good ones on logic and set theory, that I can reopen if I ever get a first principles jones.

    It’s going off into this ahistorical fantasy that allows solecisms like

    The obligations, in other words, go the other direction; from the adult to the child, rather than from the child to the adult. Which, again to be snarky, is another argument I never expected from a progressive, though it does explain that giant Ponzi scheme of social security and such.

    First, you have said nothing about my claim that the obligations of parents to children are entailed by the prior support the parents got from the grandparents, and so on to the end of time. Second, your remark about Social Security seems to have backwards that only in late industrial Western society has the obligation of the children to support aged, post-work parents been attenuated: even now, even with Social Security, it is far from abolished. As far as I can tell, this is one reason libertarians and Republicans have always hated Social Security; it provides too much upward mobility for working classes who no longer have to choose between Junior’s education and Grandma’s operation. The obligations go both ways, which is why libertarian moral agent pod people who materialize unencumbered by history belong only in the science fiction that is disproportionately popular in such circles.

    Jeff, again: Alchemist gave a list of examples of private regulatory capture and corruption. Did you try to explain it? Nor have I seen any explanation why private regulation did not exist or was not effective before the US regulatory era began in 1906. Rod Dreher has something apropos in his essay today on Limbaugh at CPAC.

    [Limbaugh on too much goverment] is a comforting lie. It is Rousseau conservatism: the idea that man is born innocent, but corrupted by society, or government. Remove the chains of government, and man will return to his natural, good state, which is one of limitless possibility. This denies two bedrock truths of philosophical conservatism, which are that 1) human nature is fallen, and 2) man must learn to live within limits. A conservatism that is not founded on a conscious recognition of those two truths is a false conservatism, and has a shaky foundation from which to criticize liberal utopianism.

    I also wanted to reply to AMac and A.L., but this is clearly long enough; I’ll add a second comment later.

  26. Jeff, we obviously profoundly disagree. Let me suggest the root of the disagreement – our markets today are not some natural feature of the universe, they are defined and regulated through human – actually, through government – agency.

    The rules of the game matter intensely in setting the outcomes; that ought to be obvious. And in the last generation, the rules have been shifted in a direction that further increases inequality, makes it harder for the middle class and small business owner, and have done so not because the natural rules of the economy have changed, but because the ref is blowing the whistle on different plays.

    I’m not suggesting overturning the market.

    But I am suggesting that we look at the rules under which it operates and see what we can do to reduce inequality.

    Marc

  27. The problem Tim, is that other people are already gaming the system…with outcomes that make them happy but are bad for the Republic.

    Marc

  28. I think that there is a broader discussion, regarding premises, and I opened a separate post in case you want to have that discussion. In reply to your immediate point, though, I am curious in what way you believe you can reduce inequality without reducing liberty.

    At the very best, I will grant that you can hold liberty steady while reducing inequality if and only if you are manipulating only extrinsic restraints. That is, if the government, say, has imposed rules that are being gamed to the benefit of some, you can reduce the inequality that gaming produces by changing the rules. However, this is only temporary, and will result in the same or some other entity gaming the new rules, and increasing inequality again. As long as there is an extrinsic system of constraints, the system can be gamed and, due to fundamental components of human nature, will be gamed.

  29. Jeff,

    I would suspect (‘though I will not presume to know what Marc thinks/believes–I’ll leave that to him to clarify) that where you and Marc differ is in presumed and derivative rights. I don’t know that I can give an in-depth philosophical treatise on this, but I’ll give it a superficial shot, and then we can delve in deeper if I seem to have struck gold.

    You reference “Life, Liberty, and the Pursuit of Happiness” earlier. These are fundamental rights outlined in the Declaration of Independence, and then built into our Constitution by its framers. They are assumed as inalienable, and bequeathed by “our Creator”. There are obviously many and sundry assumptions built into that remarkable statement, developed over the centuries and crystalized during the Enlightenment. But the critical, profound concept that gets built into the Constitution out of these assumptions is that government is derived out of the rights of the people. Not the converse. And I think Marc probably would agree with that, if I’m not mistaken. The government is (well, was) strictly limited in its functions and form. Out of the assumption that a government too powerful in body would necessarily be too restrictive of individual rights, including those of property, which you address quite well.

    I would further argue, and I think this is where the differences arise, is that markets, i.e., the consequence of individuals expressing the right to exercise ownership of their property, are at least equal to government as a derivation of individual rights. And actually, I think it could be correctly argued that they have primacy over those of government. I think that this expression of our rights is quite fundamental. (And Marc, if I may be so bold, I think this is where you’ve got your assumptions and derivative rights backwards. I think you are arguing that markets are actually a freedom bestowed on us by our government. I couldn’t disagree more, if that is what you think.)

    As a consequence, the only role of the government is to enforce/defend our rights. That can take many forms, and there are obviously injustices that can occur. One of the almost fatal flaws in the original construction of the Constitution was the allowance of slavery. How benighted, in the face of such an enlightened creation. And we’ve had to deal with that since. But the ability to amend the Constitution has given us the ability to right wrongs. What has been lost over the years, though, is the intent of the framers and the context of its creation. I won’t go so far as to say I am an Originalist, but I damn well am a Strict Constructionist, and I believe that the whole concept of a “living” Constitution has done more to destroy individual rights and empower the government than anything else, frankly.

    Like I said, I can’t really do this justice. This is worthy of a book, of which several have been written, I’m sure. There are all kinds of assumptions that can be argued, but I think I’m on pretty solid ground. And Marc, if I’ve totally misrepresented what you think or believe, I apologize. It is genuinely not out of ill will. And please feel free to correct me. And if that is the case, then I’m curious about what your position is, and how you come to some of the conclusions you’ve stated above.

    Thank you for your indulgence!

  30. Nuke – no, I think you’re on the right track in setting out Jeff’s and my positions (of course you’re wrong when you disagree with me…).

    Simple version is that governments preceded markets, and that markets derive their security, rules, and capabilities from governments. Note that there is no better way to distribute goods…

    But I’ll go as far as to suggest that property itself is a construct of the government.

    Disagree? Ask a copyright lawyer or someone familiar with 15th century (I think that’s right) British history…

    Marc

  31. Oh, I don’t disagree at all that governments preceded markets, simply as a matter of history. But my argument is that the uniqueness of the U.S. Constitution is the very fact that, for the first time, the construction of the government is derived directly from the presumed inalienable rights of man (of which are property rights, etc.). Most distinctly not the other way around. The historical precedence of government does not imply primacy over human rights. The fact that it has lived that way for an overwhelming portion of human history, I think, points to the source of much suffering and misery.

    That is an enormous break from the past. With all the profundity that implies. Which is obviously not lost on the present company.

    And property as a “construct of the government” (I really hesitate to use that phrase, because I think it implies way more than I’m willing to grant), in that we have contract law to support it, is still turned on its head by the Constitution. ‘Though a lot of the rules are inherited from British Law (the depth of which I can’t even begin to imagine, although I did read about it in my history courses), the point still remains that the government is there to enforce those laws in order to protect the God-given rights we have. Those rights are not given to us by the government. The government has its power only through our indulgence.

    Said another way, and hopefully more simply–We adopted much of British Law around property rights. But those laws are there to protect rights we already have. They are intrinsic to who we are. The only role the U.S. Government is supposed to have, as granted by the Constitution, is to enforce those laws to protect our rights.

    Okay. It’s after 2am my time, so I’m going to check out. I’ll pursue this further tomorrow (later today!). I’m actually really grateful this conversation has come up. It has allowed me to crystalize a lot of my thoughts of late. I’d really like to do some re-reading of the Founders’ writings. I happened to pick up the Federalist Papers a few days ago on a lark. Maybe I’ll start there. It’s only been 20 years since I read any of those essays. What the hell.

  32. [P]roperty itself is a construct of the government

    Ding. Ding. Ding. There is the core of our disagreement. It is also the difference between the English and the French enlightenments. Where the English began their reasoning with life, liberty and property (of which “the pursuit of happiness” is an expansion), the French began with liberté, egalité, fraternité. The English enlightenment was about the rights of individuals, and the French enlightenment was all about the betterment of the collective to the (presumed) benefit of all.

    I do not at all believe that property is a construct of the government. I believe that the atomic bit of property is the human body, and that all property arises from derivations of personal self-ownership. That is, because I own myself, I own the ability to choose how I labor. Because I own my labor, I can exchange my labor for something of value under conditions I accept, or I can own the product of my labor. Because I own the product of my labor, I can exchange the product of my labor for something of value under conditions I accept. And so forth.

    If you believe that property is the construct of government, then it logically follows that the government owns all property, and all property rights. And it logically follows from that that the government owns the products of all labor, and the labor, and the producers of labor, which are the people. And if the government owns me, how am I more than a slave?

  33. The problem, Nicholas is that the rules matter; once the rules become nontrivially complex, there are outcomes embedded in the structure of the rules.

    So the winners in those outcomes proclaim the rules ‘fair’ and the losers disagree.

    Marc

  34. Nicholas – We’re actually pretty close here.

    One thing that I am unhappy about is that the rules in many (most?) cases have become so complex that it’s a) impossible to know exactly what they are; and b) impossible to comply with all of them because they are internally contradictory.

    So we electively ignore them.

    Which means a) that the legitimacy of the rule-making system gets deprecated; and b) that all of is are violators, meaning that at any time we’re subject to sanction if someone gets mad enough at us.

    Marc

  35. Amac, one point I am getting at, which I think we agree on, is that without the almost infinite leverage created by the unregulated credit default swap market, an uptick in mortgage default rates would have been much less catastrophic. (One item I found interesting in that article is that all of AIG’s traditional insurance divisions remain profitable, for all the difference that makes on the financial Titanic.)

    A second point, which I’m not sure we agree on, is that a motive for writing all of these crappy mortgages was the huge profits, fees, and bonuses that could be synthesized from them through derivatives. I’d say that this “top-down” bad lending exceeded in importance the “bottom-up” clamor of neighborhood activists in the slums for more credit there—all the more so, since CRA loans, when last checked on this blog, were less likely to be in default than average.

    The people gaming the system, as is often the case, were the ones at the top who were able to use connections (like everyone with Phil Gramm, or Bernie Madoff with his son-in-law) to keep the scam going. Given that we aren’t going back to a barter economy, I’d say that’s a better argument for sending those miscreants who violated existing laws to jail for a long time and getting new laws passed while memories are fresh. When a GOP Congressman thinks FDR caused the Great Depression, with some sort of Time Machine, I suppose, we need a refresher course, quick.

  36. Andrew – because we’re all having too much agreement here … two comments:

    1) I 100% agree that the ‘top-down’ pressure was very strong. But without the political opening provided by the community activists, would the regulators have been so blind and stupid?

    2) Even before all this, there are a bunch of (legitimate, if disputable, I think) claims made that FDR took a panic and a deep recession – which we’d had before and recovered from – and inadvertently turned them into a depression. Rather than backhanding those claims, might it not be a good idea to carefully examine them and see what (if any) lessons we can learn from them?

    Marc

  37. Fair questions, A.L.

    But without the political opening provided by the community activists, would the regulators have been so blind and stupid?

    Yes, I very much think so. Under the Republicans we suffered from a government that believed regulation was bad, and that government policies were best when skewed towards a very, very tiny fraction at the top. After one term of Bush, real wages were up only for the top five percent. After the later Bush trainwreck, that number is probably the top percent, maybe even less. I don’t think even the most fanatical Republican can use the CRA to explain the SEC’s indolent investigations of Madoff and Stanford, while, conversely, my idea that Republicans (and DLC Democrats!) felt that Captains of Industry could regulate themselves in their John Galtian wisdom explains this behavior very well.

    There is now a “revisionist” history of the Great Depression, just as there is now a respectable revisionist history of just about everything except the Holocaust, where “respectable” must be deleted. According to this school, it is some sort of coincidence that the economy hit rock bottom right at the FDR Inauguration after 3½ years of free fall under Hoover. Yeah, you can argue that the economy would have rebounded faster under a continuation of Hoover’s policies, which had accomplished so little between 1930 and 1932, but you would be arguing from a religious belief that New Deal economics had to be bad, not from any causal mechanism that was seen in the Real World. GDP Graph.

  38. Andrew – I feel the need to go do some reading about FDR before I say much, so let’s put that issue in the freezer for the moment.

    I’m torn about the issue of regulation – whether it was simply the regulatory capture by the regulated that Madoff exemplifies, or whether there is a more complex dynamic that merits examination.

    And I do think that the model I’m proposing – in which wealthy and connected financiers and equally connected activists align their interests – explains a lot of domestic politics these days.

    But that argument needs to be expanded, and I think that the subprime/CRA nexus is a good place to do some research and make a case.

    Marc

  39. Terms like “Randroid” and “glibertarian” cheapen the discussion. Shame on you.

    In any case, I am no Objectivist, and certainly not an anarchist. I want someone to be watching the sausage makers to ensure they’re not putting in rat droppings, or dead rats. Government is necessary in some form; it is as much (in fact, precisely as much) a product of human nature as markets are.

    The disagreement, I think, is over what powers should be granted to governments. I would prefer to err on the side of individual liberty wherever possible, because frankly, I don’t want other people telling me what to do and what not to do: I’m not a child. Government inherently infantilizes, and minimizing its ability to do that is a good thing, as far as I am concerned.

    Let me give an example of a market-based alternative to food safety, though I haven’t thought the idea through and am not certain it would work. Why does the government have to inspect sausage makers? Why not have private organizations which inspect sausage makers, and which allow some mark to be put on the packaging show that it’s passed that inspection regime? Those organizations could make their money from the sausage makers, and I could buy sausage with the marks that show it’s inspected to be: healthy and safe (the dead rat thing), no hormones, Kosher (well, not for pork sausage, I suppose :-), from free range pigs, from a farm using green energy, and whatever else I might want. There would still be a role for government here: protecting the public from fraudulent use of trademarks that show such things. And of course, there is the potential for private corruption just as there is for public corruption, though in that case, a corrupt inspecting agency could be put out of business by its competitors, while a government agency that is corrupt just rolls on until the government itself fixes it.

    Not everything has a market-based solution, but where a market-based solution exists, I tend towards it absent a clear reason why the government-based option would be better, because the market-based option gives me the ability to control what I will and won’t take, and the government-based options don’t tend to do that.

    And that is all because, as I noted earlier, any increase in regulation is inherently a reduction in liberty.

  40. Oh, I meant to mention, by the way, that of course babies cannot choose how they labor: babies are not moral actors. A part of the makeup of each culture is determining at what age or condition a person becomes an adult. Until recently, that was around 13 for most societies. I tend to think of children younger than 13 as an obligation, a duty. (In fact, though I don’t want to get into the debate, it is why I think that abortion is morally wrong, even though I think it should be legal in at least some cases.) Theories of how one may morally act presuppose moral actors, which is why they concern adult humans, rather than pets or children, as those undertaking the acts. The obligations, in other words, go the other direction; from the adult to the child, rather than from the child to the adult.

    Which, again to be snarky, is another argument I never expected from a progressive, though it does explain that giant Ponzi scheme of social security and such. As far as I’m concerned, though, that’s a pretty selfish view, which if taken seriously legitimizes all kinds of stealing and other wrongs inflicted on children by adults.

  41. Since the concept of individual rights itself comes up late in history, it’s no surprise that the concept of property as an individual right comes up late in history. Yet markets existed before the concept of individual rights, and were based on a common law concept of property that still, largely, holds. The fact that the conceptual definition came up late in history does not mean that the thing being described came late, just as the fact that calculus came late didn’t mean that the things calculus describes did not exist before.

    And just as a snarky aside, this has to be the first time that I’ve heard a progressive argue that older things are inherently better. :-)

  42. I agree, actually. Like I said earlier, I want the government watching the sausage makers. That is not in contradiction to the point that increasing regulation decreases liberty. In this case, it’s a trade that I’m willing to make, and that I think most people are willing to make, because people want safety before they want liberty.

    The problem, of course, once we are arguing not from first principles, but about pragmatic compromise, is that liberty quickly gets shuffled completely off stage. After all, if the government exists to make us safe, then we have to be made safe and the government has to do it. And since the government’s only unique tool is legal coercion by force, the government will impose more and more safety — and eventually “safety” — by coercive use of force. So we quickly go from the government making sure sausage is safe to the government deciding that we all have to be vegans because eating meat is bad for the environment.

    And there is no principled reason why, once you grant the government the power to keep you safe from more than force and fraud, the government should stop short of totalitarianism. And that is why I would rather have the government inspect and label sausage, and let sausage be sold with rat droppings in it as long as that is clearly stated on the label (so that people will know what they’re getting), than get into the position of deciding what may and may not be sold. (Or for that matter, why the government should be able to ensure that companies post complete and accurate financial statements before being allowed to sell shares publicly, but should not be able to constrain the salaries of corporate officers or decide what companies can and cannot do with their resources or what they can or cannot sell.) Once we grant that the government’s job is to keep us safe, not to create an environment within which we are free and can keep ourselves safe, we grant that the government’s only limits are what it can get away with short of provoking a revolution. (Which is, by the way, the reason for the second amendment: disarming the public allows the government to get away with more limitation of our freedom because it reduces the changes of successful resistance.)

  43. Oh, I wasn’t offended. The “shame on you” comment was intended as gentle, tongue-in-cheek chiding. It’s not that name-calling is offensive, just petty and childish. The constant resort to ad hominem is the written equivalent of sticking out your tongue, and about as dignified and convincing.

    Your implication, for example, that I (as a member of the class you are naming) hate Social Security because it “provides too much upward mobility for working classes who no longer have to choose between Junior’s education and Grandma’s operation” is simply wrong. Put aside the name calling, if you will, and defend Social Security, but attacking me on the (inaccurate) grounds that I want to keep people poor reveals a level of insecurity in your position — or, less charitably, an emotional or religious hatred of people who disagree with you. I hate Social Security for two reasons. The first is that it is unsustainable unless the pool of wealth available to those who pay into the program is growing more rapidly than history indicates is possible over the long term. The second is that Social Security makes us dependent on the government, and reduces our choices in how to plan for our personal future, both of which bad from my point of view. This is also off topic, so I’ll stop now.

    I don’t know about economics as an axiomatic science. I think economics is more descriptive than proscriptive, though I note that at least macroeconomics tends to be fairly good at broad brush predictions of how people will behave under different constraints on the use of scare resources (and terrible on predicting individual behavior and in particular terrible as the basis of a political ideology). I would put economics on much the same footing as psychology, perhaps a bit better than psychology, as a science; certainly better than astrology and nowhere near as good as physics in its predictive utility.

    But I noted my definitions earlier, when I said that humans seek, in order, the ability to survive, to survive on their own terms, and to increase their freedom of action. The last of these is where liberty comes into play. Now, you can plausibly argue about how much of any of the lower-order goals someone is willing to give up to get a higher level goal, and how much of that higher level goal. For example, some percentage of people will give up anything and everything — down to their dignity, parts of their bodies, even their children or spouses — to keep breathing another day. Others would rather die than allow their loved ones to be harmed. Human behavior has a wide range. I know I fall fairly consistently into the range of preferring freedom to security. I suspect you fall fairly consistently into preferring security to freedom (particularly if you only have to give up a little of your own freedom to gain a great deal of security at someone else’s expense).

    In terms of governance, though, there really is an observable continuum between absolute liberty (anarchy) and absolute tyranny, the major problem being that neither maximizes our overall, collective ability to survive, on our own terms, with maximal freedom of action. Humans are social animals, and we survive (most often) in a social context. The arguments really fall on a curve: how much curtailment of his individual ability to choose will someone tolerate in order to gain the benefits of society. I think that politics is the mechanism for making those tradeoffs, while economics describes how individuals and collectives do so, psychology describes why we do so, and history offers the best approach we can of understanding how prior choices have worked out.

    My reading of psychology tells me that each individual tries to maximize his ability to survive (as does all life), on his own terms (as does all intelligent life) with maximal freedom of personal choice (that is, with maximum freedom of action). My reading of history tells me that there is a certain range of stable balances between absolute liberty and absolute tyranny where both societies and individuals are most stable and happy; that once a society falls out of that balanced range (too little or too much government, or too little or too much liberty — they are in many ways opposites), it tends to accelerate towards either anarchy or tyranny; that anarchy and tyranny can more easily become each other than either can become a stable and free society; and that we have been moving towards the tipping point into tyranny for at least the last 50 years, and probably the last hundred. My reading of economics tells me that the way to move away from that tipping point, and back to a more stable social base, is to increase liberty at the expense of government. I could certainly be wrong on any or all of these points, but I’m willing to defend each of them in some detail.

    (As an aside, I don’t think “solecism” means what you think it means.)

    [Y]ou have said nothing about my claim that the obligations of parents to children are entailed by the prior support the parents got from the grandparents, and so on to the end of time.

    I disregard your claim on the grounds that I think it specious. At some point, there was a beginning, where there was some individual living thing that cared for its young. That individual was, by definition, in no debt of care to any ancestor, not having been cared for by any ancestor. In contrast, each generation that followed and continued to care for its young carried the duty to its offspring to keep them secure until they could act in their own interests. Once the offspring reaches the point of being able to care for itself, no duty is owed in either direction, though humans’ particular nature (both as social creatures and because of our capacity to love) tends to produce behavior identical to that which would exist if a duty were entailed. (I don’t think “duty” means what you think it means, either.) My duty to my children has nothing to do with my parents (though my ability and willingness to carry out that duty have a lot to do with their example), but with my and my wife’s decisions to bring them into the world in the first place, and their inability to care for themselves otherwise.

    Alchemist gave a list of examples of private regulatory capture and corruption. Did you try to explain it? Nor have I seen any explanation why private regulation did not exist or was not effective before the US regulatory era began in 1906.

    I believe I noted above that private regulatory regimes are subject to corruption, when giving the example of a possible private regulatory regime for sausage making. Humans try to maximize their personal happiness by maximizing their personal freedom of action, and that means that we are subject to corruption when given power. It doesn’t matter whether that power is commercial, governmental, religious, or of some other nature. Heck, even the power relationship of a parent is fraught with some danger, if the parent’s notion of duty to their offspring is not strong.

    As to why private regulation didn’t exist before 1906, you are somewhat misinformed for someone who is constantly decrying his opponents’ historical literacy. What, precisely, do you think mediaeval trade guilds were? They were certainly cartels, on the one hand, but they were also guarantors of the quality of goods. But the regulatory regimes that arose when we shifted from hunter-gatherers to farmers (one of which, in fact, was the concept of government itself) were not well suited to our societies when they industrialized. And industrialization combined with ineffective regulatory regimes caused the miseries of late-1800s cities, which in turn led to the rise of progressive regulatory regimes in the early 1900s. (And as I said earlier, this was not all to the bad: I like the fact that government is watching the sausage makers.) The problem is that the mentality that gave rise to these new governmental regulatory schemes was heavily influenced by the French Enlightenment, which among other things preaches strongly about the collective as important and the individual as essentially meaningless. And a part of the fallout of this was the increasing tendency of these new government regulatory regimes to forbid private regulatory competition. So instead of the natural tendency of people to seek a balance of government and non-governmental regulation, we find ourselves in the position where our lives are increasingly regulated by government. And as I stated earlier, the government’s only unique tool is the legal recourse to violence. This in turn leads to where we are now, which is that we are losing more and more ability to choose for ourselves what will make us happy.

    Some people think that is a good thing, in that it promotes social cohesion and leads to the greater good for all, while individual freedom decreases social cohesion to the detriment of all. I would be happier if they would make that argument, rather than trying to pretend that increasing government regulation does not degrade personal liberty.

    Rod Dreher has something apropos in his essay today on Limbaugh at CPAC.

    So? Limbaugh is an entertainer. I pay no more attention to him than I do to Ann Coulter or Michael Moore or Al Franken. If I want political entertainment, I listen to Wait Wait…Don’t Tell Me, which is at least funny, rather than strident. I do find Dreher’s quote slightly amusing, in that I was not aware that my political philosophy (which is in many ways conservative) is based on the tenet that human nature is fallen (in fact, I would argue the opposite), and that the tenet that man must learn to live within limits is not a political statement, but a statement of physical science and economics. Based on that little snippet you present, I’m unlikely to pay any more attention to Dreher in the future than I already pay to Limbaugh, which is to say, essentially none.

  44. Erk – needs an edit function. “Scare” resources? Should have been “scarce,” and there were a couple of other typos.

    More importantly, though, I wanted to expand on a point that I realized could be misinterpreted.

    But I noted my definitions earlier, when I said that humans seek, in order, the ability to survive, to survive on their own terms, and to increase their freedom of action. The last of these is where liberty comes into play.

    When I say that liberty comes into play in the last of these three, it sounds like the last point is a direct corollary of liberty; it is not. These three points are respectively corollaries of “Life, Liberty and the pursuit of Happiness.” What I meant by that is that you cannot have liberty (cannot control the terms of your survival) without life secure from arbitrary harm, and you cannot pursue happiness without liberty. In other words, liberty comes into play in the pursuit of happiness because liberty is required to make the choices that will (if you make good choices and are not terribly unlucky) make you happy. If you take away the ability to make choices, you also take away the ability of some people to be happy. Take away enough choices, and you take away the ability of most people to be happy.

    Abortion (another off topic point) is defensible on this ground, in that the freedom to choose not to bring a baby into the world might be conducive to the mother’s happiness (I’d argue the point, but it’s defensible). Somehow, though, “freedom of choice” is only applied, by any progressive commentator I’ve seen, to apply to abortion, and not to, say, industrial production or health care. Odd, that.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>