Rod Dreher

Rod Dreher


The free market vs. moral character

posted by Rod Dreher

Jonah Goldberg doesn’t like the way we at Templeton framed our recent symposium discussion, “Does the free market erode moral character?” Excerpt:

I love the Templeton Foundation and I think they do fantastic work. But questions like “Does the Free Market Erode Moral Character?” bother me a great deal. As opposed to what? Socialism? Socialism certainly erodes moral character. Some of the most alienated, selfish, deracinated people I’ve ever met were people who grew up under the yoke of Communism. Arthur Brooks’s work has definitively shown that large welfare states siphon off philanthropy and erode altruism.
Adam Smith’s case for the free market rested on the fact that it encouraged good character (as Yuval Levin recently detailed), and I think Smith won that argument a long time ago. A more fruitful question, with deep religious and philosophical implications and precedents, would be “Does wealth erode moral character?” Debating that would still allow for some healthy attacks on the free market, because without free markets, wealth really isn’t something to worry about.

I don’t understand Jonah’s objection. “Does wealth erode moral character?” strikes me as a less fruitful question, because the answers are less likely to be controversial. Most of the world’s religious traditions teach that yes, it does. The arguments there are familiar. It would be harder to make a “no, it doesn’t” argument, at least based on the evidence, but I suppose one could make an interesting case that wealth might erode moral character, but not as much as grinding poverty does.
Posing it as Templeton did strikes me as guaranteeing a more insightful debate, especially given that there are a lot of serious people critical of the free market in the wake of the global meltdown. Mind you, Templeton is foursquare behind free markets, but it is by no means clear that free markets and moral virtue fit hand in glove. In fact, if you look at the (excellent) collection of answers we received, you’ll find a variety of opinions short of a full-throated “Yes!” from well-known capitalists and conservatives like Michael Novak and John C. Bogle. The discussion is more fruitful than Jonah gives it credit for being.
In my book “Crunchy Cons,” I quoted author Alan Ehrenhalt saying, “To idealize markets and to call oneself a conservative is to distort reality.” Ehrenhalt’s point is that the free market is so dynamic by nature that it makes it very difficult to conserve certain moral values and institutions that conservatives consider essential to the good life. Notice, though, that Ehrenhalt uses the verb, “to idealize.” That’s important. Few of us today would doubt the superiority of the free market over competing economic systems in providing for the material needs of the population. What we debate is where to draw the line — that is, which parts of our common life should be off-limits to market morality. If I’m reading Jonah correctly, he doesn’t believe that the market can corrode morality. Or rather, because there is no sensible alternative to some form of market capitalism, the question of whether the free market erodes moral character is a meaningless one. This I don’t get.



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Larry

posted March 8, 2010 at 3:05 pm


The First Commandment of the right: Thou shalt not question capitalist free markets, they are your lord and master, mother and father, son and daughter, the market gives all meaning to life, culture and society. The market holds the power of life and death over you, the market will make you prosperous or impoverished. All hail the capitalist free market!



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Brian

posted March 8, 2010 at 3:44 pm


I read the objection to be that the question is loaded, and because of that will almost certainly lead to nonsensical conclusions. Look, the question as posed is basically “Is the Free Market bad?” And you’re going to answer “Yes, it is.” Which will then lead to “Aha, we shouldn’t have free markets because they’re bad!” Which is of course insane.



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Antonius Magnus

posted March 8, 2010 at 3:50 pm


There is a very sensible alternative to capitalism–a socialist, government planned economy that looks for the benefit to the entire population, not just a wealthy oligarchy who then is “supposed” to allow their wealth to “trickle down” to the rest of us.
Profit is not the ultimate barometer of success, and possessing vulgar amounts of wealth does not indicate that the possessor is talented, professional, capable or even good at what they do. I believe that those with wealth can allow themselves to become isolated from the sufferings of those less fortunate, especially when they have the means to associate only with those others who are similarly situated. So then, an illusion develops; that the wealthy deserve everything they have, and have worked for it (the American dream idea) so they owe nothing to anyone.
In many cases, these people in question then become so disconnected with how the majority of humanity really lives, and unfortunately, many of them possess political power so they are able to make their views public policy or can influence those who can. This leads to asinine statements heard during the recent Health Care debate, like “Poor people can just go to the emergency room when they are sick, they have to treat you,” and “We have the best health care system in the world”; both obviously untrue statements easily recognized as such by anyone who is poor and who has tried to get any kind of health care at an emergency room with no insurance.
The moral problem is one of perception. I am not saying that all rich people are like this, but enough of them are to sour the flavor of good ole’ American capitalism for me, and to question the very possessing of wealth as morally problematic–a famous rabbi once said something about a camel and the eye of a needle….



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Boz

posted March 8, 2010 at 4:02 pm


The interesting question is WHAT KIND of character the market demands you cultivate. Smith was certainly correct that participating in markets requires certain types of discipline, self-restraint that are very akin to definitions of virtue given by other philosophers. Almost as a matter of definition, capital itself requires saving, the setting aside of goods produced at one time for use later on.
Key questions are: is this self-restraint the whole of moral virtue? (Hint: Aristotle and Aquinas would say “no”); how do the moral virtues left out by Smith relate to the moral virtues required by free markets? are there other aspects of free economic markets that destroy or erode the self-restraint required by other aspects of markets? Specifically, what about consumerism? The conservative case for capitalism (elaborated by Novak and Levin) focuses almost exclusively on production, but that isn’t even the whole of the market.



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TTT

posted March 8, 2010 at 4:14 pm


Goldberg seems to have few qualms about the moral character of Margaret Thatcher, a socialist by anybody’s definition.
“Socialism certainly denudes moral character”…… rubbish. As Glenn Beck still hasn’t learned, your community public library is a socialist institution, and so is the road you drive on to get there and the policeman who makes sure you don’t get carjacked along the way.



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the stupid Chris

posted March 8, 2010 at 4:30 pm


For all of those who believe this is a “loaded” question, I recommend following Rod’s link to the Templeton site and reading John Bogle’s contribution.



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fsd

posted March 8, 2010 at 4:30 pm


Why on Earth are you wasting your time reading Goldberg (and ours posting about him)?



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Larry

posted March 8, 2010 at 4:37 pm


There is a very sensible alternative to capitalism–a socialist, government planned economy that looks for the benefit to the entire population, not just a wealthy oligarchy who then is “supposed” to allow their wealth to “trickle down” to the rest of us.
I would certainly hope that our choices extend beyond having to decide between public and private slavery. There is very little difference between big business and big government in this regard.



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karina_b

posted March 8, 2010 at 4:49 pm


Perhaps it could be more precise– “Does the competition required for success in the free market erode character?” i.e., create “soulless capitalists.”
That’s how I’m reading it anyway.



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karina_b

posted March 8, 2010 at 4:59 pm


I don’t think the library is “socialist” by definition, it is just a social institution. That would mean that anything paid for by government funds and/or supported from the common tax fund would be socialist, which I don’t think fits the classical definition:
1: any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods
2 a : a system of society or group living in which there is no private property b : a system or condition of society in which the means of production are owned and controlled by the state
3 : a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done



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Anti Dhimmi

posted March 8, 2010 at 5:00 pm


Rod, could you let us all know when (or if) Templeton plans to debate the
following question:
“Does socialism erode moral character?”
Thanks.



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Rod Dreher

posted March 8, 2010 at 5:08 pm


What a bizarre thought, Anti Dhimmi. If socialism had any serious proponents in this country, that might be a useful question. But inasmuch as nearly everyone favors the free market up to a point, it’s by far the more relevant question. Besides, Templeton is a philanthropy that supports both the free market and character education. We’re interested in these questions, even if some thoughtful person is going to give us an intelligent answer with which we institutionally disagree. Everyone who supports the free market ought to be thinking about the way it affects the character of individuals and societies, for better and for worse. Only ideologues consider the question entirely out of bounds.



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Anti Dhimmi

posted March 8, 2010 at 5:30 pm


Rod, perhaps you haven’t been paying close attention to the last year’s economic news. General Motors and Chrysler are now government entities, although not as obviously such as Fannie Mae and Freddie Mac. Maybe you haven’t closely followed the debate over the latest version(s) of the health care proposal(s), which make nongovernment insurance companies into tightly regulated utilities that must compete with government entities.(As I’m sure you are aware, Uncle Sam is the biggest insurance “company” in the country already) Perhaps you have not looked into the current proposals for financial regulation, some of which would make banks into de facto arms of the government.
You write: If socialism had any serious proponents in this country, that might be a useful question.
Rod, if government control of most of the automotive manufacturing sector, much of health care (1/6th of the economy) and a large swath of the financial sector is not socialism, it’s a pretty good approximation of it. Government doesn’t have to outright own private enterprises to effectively socialize them; it can regulate them so much as to privatize the risk while socializing the benefits. That’s what was done in both Italy in the 1920’s and Germany in the 1930’s. Maybe you should read Jonah’s book some time? (Please, no argumentum ad Godwinium here).
It seems quite obvious to me that increasing government control of all areas of economic life has been expanding for some time. You may argue for a pure definition of socialism, and insist that anything less than an economy totally controlled by central planners from the Ministry of Silly Walks isn’t socialist. I’m not going to go around the maypole, playing No True Scotsman over what is and is not a socialist economy, I’m serious about the effects, not the labels.
The admininstration proposes control after control over sectors of the economy. Call it what you want, call it “bligblogism” if you want. But it’s a real thing that is really happening. If that’s too partisan for the current blog, then ok, I understand.
But if you cannot see how your question in a way resembles “Have You Stopped Beating Your Spouse”, then maybe you need to examine some of the premises.
Everyone who supports the free market ought to be thinking about the way it affects the character of individuals and societies, for better or worse.
Can we also think about the way that increasing government, state control of markets affects the character of individuals and societies? Or is that kind of thinking, mmm, out of bounds here and at Templeton?



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Charles Cosimano

posted March 8, 2010 at 5:48 pm


In the sense that moral character is probably irrelevant to the lives of folks who don’t worry about it, yes, the question is pragmatically meaningless.



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Nick the Greek

posted March 8, 2010 at 5:49 pm


Socialism, socialism, waah waah waah! If you so much as ask whether the free market could possibly have a downside, then guess what. You love Stalin.
*facepalm*



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Anti Dhimmi

posted March 8, 2010 at 6:06 pm


Ok, since I raised objections, I’ll make an effort to offer an alternative. I’ll state my premises up front.
Premise #1: Humans will naturally trade things they don’t need for things they want. Even in the depths of Stalinism, there was an illegal market within the USSR; if nothing else, women could (and did) trade sexual access to men for food and/or alcohol. The market is a natural feature of any group of humans above some critical size (and no, I don’t know what that size is) that will spontaneously arise absent some extreme external force, or a religious cult requirement. I observe that none of the non-materialistic anti-trading communes have ever lasted more than a generation, as a rule, and as with groups such as the Shakers that abjured all sexual congress they were actively rejecting an integral aspect of human nature for a presumably higher purpose.
Premise #2: Trust is required for a market to function. In simple, village level cases, where neighbors trade excess wood or produce or what have you to each other, the level of trust may be high because of common culture, common relatives, etc. Trust is natural to small groups. As the market gets bigger, and trading occurs between people who don’t know each other, artifices must be introduced to maintain levels of trust. Failure to do this will result in higher costs to some, or all, participants. See the example below for details.
This leads to my last premise:
Premise #3: For any market above the most basic village level, there will be some sort of regulation. An unregulated free market beyond the “I’ll trade my extra squash for your extra tomatoes” doesn’t exist. If nothing else, fair weights and measures will be enforced by some group of people, cheating and outright stealing will be punished by some entity, and an arbitrator will hear disputes. Maybe those functions will be performed by religious authorities, maybe they will be performed by elders of the socity, maybe by armed agents from a remote leader. But there will be regulation, and it will be enforced to some degree.
Therefore a much better question might be this:
What level of intervention into markets is appropriate to maintain physical standards of goods sufficient to keep the market “high trust”, where “high trust” means I don’t have to test the food I buy for illegal pesticides, the toys I buy for lead, cadmium, etc., the software I buy for destructive malware, the machine tools I buy for safety, etc. etc. etc.
I realize this isn’t likely to be as freewheeling a question as yours, but I don’t beg questions (at least I hope not) and I don’t hide my premises.
Now on my example: a relation traveled to upcountry Thailand a few years back as a guest of a family. The family owned some property, and relations a store. So my relative goes to the store to buy some gum. The price he would pay is pretty low, but not as low as the host family. Why? Because the host family is a relation of the store owner. My relation got the benefit of a lower price. Someone from Bangkok would pay a higher price, because they would be “not from around here”, someone who obviously was Chinese would pay a still higher price because of prejudice, and if I had gone there I’d pay the highest price possible because “everyone knows farangs are rich”. This kind of sliding price is quite common in many places in the world, and it brings with it lower trust. I’ve been told that “one price” pricing in the Anglosphere was an innovation of the Society of Friends (Quakers) but don’t have any idea if it is true. Please note I’m not saying anything bad about upcountry Thailand, but using that place as an example of a market that has different priorities than other markets; a higher priority is placed upon benefiting family, than upon seamless operation, for example.
Suffice to say, it’s a lot easier for me to shop for groceries on a budget when I know that the posted price is what I’ll pay, regardless of who my relatives are. That’s a high trust environment, and it’s critical to making markets work their smoothest.
I hope this is useful.



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Anti Dhimmi

posted March 8, 2010 at 6:10 pm


Nick the Greek writes:
Socialism, socialism, waah waah waah! If you so much as ask whether the free market could possibly have a downside, then guess what. You love Stalin.
*facepalm*
Say, Nick, that’s a pretty cute strawman you are dancing with. Maybe you could put it down long enough to read the news from socialist Greece? You know, the EU country that is effectively bankrupt, due to too many claims by too many people on too few central government funds?



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Cecelia

posted March 8, 2010 at 6:35 pm


I think it was a good question and the answers demonstrate that. Perhaps some massaging of the question would make it less objectionable to folks like Goldberg. Although I suspect Goldberg’s sensitivity is cause there are so many questioning capitalism nowadays.
There are a few things I’d add to this discussion 1) there are a couple of forms of capitalism – one can have totally unregulated free markets or one can have capitalism with markets that have limits placed on them in the form of assorted regulations. 2) Adam Smith is a guy little understood – most people who quote his supposed love of free markets haven’t read the whole book. Smith is clear about the dangers and negative consequences of unrestrained free market capitalism – such as exploitation of the underclasses and he does propose and accept intervention on behalf of those who can be the victims of free markets. 3) It is not true that we have but two alternatives for organizing ourselves economically. Capitalism is a relatively recent innovation. Our only choices are not socialism or capitalism – a third way would be distributism which despite the impression the name gives – is neither socialist or capitalist. Read Chesterton. 4) Karin b – the operative term is “distribution of goods” – hence pulic sewage systems, libraries, transportation systems, schools, state universities,police departments etc are all distributed goods controlled by the state and hence are socialism.
Anti Dhimni – see number 4 above – “this” administration is continuing a long tradition in this nation. Have there ever truly been totally unregulated free markets – I think not if for no other reason that capitalism relies on strong centralized nation-state to function.
Personally – I think any system of economic organization is neither moral or immoral – it simply is. The consequences of the system are what make it moral or immoral. Early Christians lived communally – socialist as we would call it now – was that immoral?
Capitalism has one goal – profit and the efficiencies which maximize profit. There will therefore inevitably always be those who will do damage to the common good for the sake of profit. To deny that is o deny human nature and all of our history. The only way capitalism can avoid such corruption is if the definition of profit includes the common good.



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pro anti dhimmi

posted March 8, 2010 at 7:02 pm


Mr. Dreher, you are never more transparent than when you choose to furiously respond to a commenter stating that you find his point bizarre or absurd. Inevitably you choose to do this with the most insightful and intelligent comments. You’re not great at poker, huh?
Free markets are nothing but a feature of liberty. Now frame the argument thusly — “does liberty erode moral character” — and reflect on how stupid that sounds. (Oh but first you might want to carry on a bit about how bizarre and absurd my point is. that’s ok, I understand.)



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Boz

posted March 8, 2010 at 7:12 pm


Rod,
This is getting creepy. Goldberg is stalking you with his whiny complaints. What is it with you two? In any case, his comments really amount to nothing more than banging on the table and asserting that “this is a settled question!”–in a way, suspiciously similar to his complaints about “CrunchyCons.” No less a person than the paleo-neo-con Daniel Bell suggested that the free market might erode moral character (“The Cultural Contradictions of Capitalism”), so it seems like this is probably an OK thing for conservatives and the Templeton people to discuss.



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Anti Dhimmi

posted March 8, 2010 at 7:27 pm


Cecelia, when you use Marxist terminologies, you are limiting yourself to Marxist ways of thinking. Please note I am not saying that you are a Marxist, I am pointing out that the terms we use tend to circumscribe the boundaries of our thinking. So when you insist upon using Karl Marx’s term “Capitalism”, you are bringing along with it a number of unspoken assumptions and premises. The whole Marxist division of oppressor/oppressed is brought into play, maybe unconsciously, but it is there. The automatic assumption of “workers good, owners bad oppressors” lurks in the background. It may or may not have been a valid critique in 1848, but nowadays when “the people” via their representatives control every aspect of economic behavior, when entire companies are owned by government, when hundreds of millions are owners of industry via their retirement funds (be they 401K’s, 403B’s, or defined benefit state/local/federal/union finds), the dichotomy is without meaning. It’s like discussing genetics in Lamarckian terms, or talking about combustion from the point of view of demons breathing fire. The underlying premise just doesn’t match reality, and so if you are going to be scientific, you have to either jettison the premise, or ignore reality.
I agree that very few people have read Smith’s “Wealth of Nations”, just as few have actually read Locke’s “Two Treatises on Government”, and as a result there is a lot of sloppy thinking. Underlying Smith are certain premises that I argue are cultural as well as theological, and ignoring them leads to wrong thinking. Those who are carrying Marx’s deadweight around are even worse off.
Merely citing “tradition” is not very convincing. The socialist, central-planning tradition in the US is indeed long, longer than many people think (this brings me back to Goldberg’s book, again…) but that doesn’t make it right. I realize that your theology leads you to have a greater respect for Tradition (well, some Tradition) than others, but a tradition of socialism doesn’t make it right, does it?
I’ve read of disstributism, and also of corporatism. Both are outgrowths of Catholic thinkers, and in my opinion they only would work in a one-party state that just happens to include a church deeply intertwined with state. I note that no country, not even France, has really been able to make either of these notions work for very long, and I suspect it is because both systems contain certain assumptions about human nature that do not hold up for large groups of people. This brings me to the early Christians, who indeed chose to live communally…but they were free to leave the body at any time, and were not forced at swordpoint to join or to share. Rather different from the People’s Republics of the 20th century, wouldn’t you agree? And rather different from the corporate states in Europe, where taxation forces sharing one way or another..by force, if need be.
Or to put it another way, comparing the Christians from the Book of Acts with Karl Marx is like comparing a family with a penal colony. One of these things is very much not like the other…
In closing you write:
Capitalism has one goal – profit and the efficiencies which maximize profit. There will therefore inevitably always be those who will do damage to the common good for the sake of profit. To deny that is o deny human nature and all of our history. The only way capitalism can avoid such corruption is if the definition of profit includes the common good.
There is a Utopian assumption in this paragraph that no Catholic should make; corruption is inherent in any human endeavor due to the fallen nature of man. If I recall correctly, Augustine of Hippo made this rather clear in the 5th century A.D. You might want to rewrite this, or at least reconsider it.
Second, and I do not mean to pick on you, there is an underlying premise that you don’t acknowledge: you seem to assume a priori that while money and markets can corrupt, power does not. You seem to assume that government agents can only have good intentions, that there need be no check or balance upon them. History shows this to be simply not true. I shall rewrite your paragraph.
“Authority has one goal – order and the efficiencies that maximize order. There will therefore inevitably always be those who will do damage to the common good for the sake of order. To deny that is to deny human nature and all of our history. The only way government authority can avoid such corruption is if the definition of order includes the common good”.
Do you agree with this, or do you disagree? Does it bother you, or seem obvious?
This may seem a trivial issue, but it isn’t, because at the very bottom of any government, even if it is tribal, we find force. Government is force, and an ongoing issue in human history is what limits must be placed upon its ability to do violent, physical harm via force.



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Jon

posted March 8, 2010 at 7:52 pm


Re: Adam Smith’s case for the free market rested on the fact that it encouraged good character
This is a made-up invention of Goldberg’s. Smith believed in a striong role for government and religious institutions in forming moral character so that a free market could function properly. Morality was a prereqisite for capitalism, certainly not a product of it. Bernie Madoff would not have shocked Smith, whose own era remembered the South Sea Bubble.
The market by itself no more gaurantees prosperity and justice than biology alone guarantees health and virtue.



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ed

posted March 8, 2010 at 7:56 pm


Capitalism is the economic portion of liberty. Liberty supposes that since each man is free than he is the owner of his body. If he owns his body than he can own the fruits of his labor, private property. Free trading among free men is the basis of capitalism. Our forefathers wrote that the purpose of government was to protect life, liberty and private property (changed to pursuit of happiness by Jefferson to have an even broader meaning). Regulating or controlling a man’s business is therefore immoral. Taxation of those who work hard and produce wealth to give to those who do not is theft. God said thou shalt not steal. Socialism is the very definition of evil. It is the enslavement of mankind. Socialism is the diametric opposite of liberty, liberty that is endowed to us by our creator. Socialism is anti-Christian. Christians give willingly from the heart. They do not compell others to give at the point of a gun. Socialism is forced charity under the threat of violence. It steals from those who earn to give to those who do nothing but wait with an open hand. Liberty allows free men to choose, just as God gives each man the right to choose. Socialism, the destroyer of liberty, simply steals, not just a man’s property, but also deprives a man of the opportunity to give by stealing his property. There is no greater threat to liberty and Christianity than socialism.



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trotsky

posted March 8, 2010 at 9:09 pm


So Goldberg’s answer is “No.” Why would he object to the question being asked?



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Jon

posted March 8, 2010 at 9:58 pm


Re: Taxation of those who work hard and produce wealth to give to those who do not is theft.
There is no support in Scripture or Tradition for your view.
Failure to support the indigent is worse than theft: it is uncharity. A thief waas taken up to Heaven, by Christ’s own promise. He seemed to have another opinion of what becomes of misers, and it is impossible to read the Scriptures without coming up vitriolic denunciation of unjust nations.



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Clare Krishan

posted March 8, 2010 at 10:27 pm


the ethics that is not being scrutinized isn’t wealth creation (industry & catallactics) or wealth distribution (collectives for aggregate spending) but production of the specie of money that underpins the moral valuation of whatever form of economy is prefered. Currently we have centrally planned (ie socialism) of money with some dire spiritual consequences, see Ch13 here
http://blog.mises.org/?p=008833



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Cecelia

posted March 9, 2010 at 12:25 am


Anti Dhimni said : when you use Marxist terminologies, you are limiting yourself to Marxist ways of thinking.
And likewise when you use free market terminology you to limit yourself to free market ways of thinking. Seriously – capitalism is the term used to by left and right when describing our economic system. The term long ago outgrew its Marxist origins.
Anti Dhimni said: There is a Utopian assumption in this paragraph that no Catholic should make; corruption is inherent in any human endeavor due to the fallen nature of man.
Then you did not read the paragraph – I noted that our history demonstrates we cannot count on people to behave well when pusuing profit. I’d would also note that the idea that profit seeking when not defined as including the common good will always result in immoral behavior is a point made – repeatedly – by Pope Benedict in his recent encyclical Rerum Novarum. Last time I looked the Pope was Catholic. Perhaps you would like to tell the Pontiff he should not be saying such things?
What about distributism is incompatible with democratic societies? Distributism recommends the widest possible ownership of property by people – not the state. That surely seems very democratic to me.
To suggest that liberty is not possible without free markets is ahistoric. So – until the last 300 odd years – people have never had liberty? The one time in our history when we had anything resembling a free market was in the 1800’s – with of course the support of the federal government – including the use of troops. During this time – 85% of the wealth was controlled by less than 10% of the population, there was a tiny middle class and the majority of people were in the working class. Those people had no minimum wage, no standard work week, there was child labor, no workplace safety. People worked 6 days a week, 12 hours a day. If they were hurt on the job there was not obligation to care for the injured worker. Is this what we should believe is freedom?



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Matt

posted March 9, 2010 at 12:55 am


When Rod says in the article that “wealth might erode moral character, but not as much as grinding poverty does.” Has there been any credible studies on this as I would like to know more about the effect of poverty on moral character?



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Lavaux

posted March 9, 2010 at 2:20 am


Show me one instance where “public morality” supplanted “market morality” and produced morally superior incentives and results.
Public education? Hmmm. Teachers unions spend tens of millions making campaign contributions to the politicians who will write their employment contracts, and meanwhile the public schools get worse with each passing years because, inter alia, the union contracts foreclose teacher accountability.
Public health care? Hmmm. Congress raided the Medicare “Trust Fund” “lock box” and spent all the money, which was supposed to have been set aside for a rainy day, and now the program is insolvent. Results? It’s doctors vs. geezers. vs. taxpayers vs. hospitals vs. progressive ideologues vs. Blue Dog Democrats vs. a naked Rahm Emanuel in the shower room vs. the GOP vs. the White House vs. Congress in a the Mother of All Political Cage Matches. What a wretched spectacle! How’s that hopey-changey stuff workin’ out for ya?
Here’s the skinny that the pundits are too smart to figure out: Markets are places where people meet to exchange information and trade with each other, which is why tasking them to promote virtue or morality is stupid. People should come to markets with those things already in place or not, and the thus failure to instill virtue or morality is not the market’s.



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Lavaux

posted March 9, 2010 at 3:21 am


Antonius Magnus, here is where your ideology falls apart: It quantifies and qualifies “suffering” by material standards.
You propose that the rich do not suffer because they are wealthy while the poor suffer because they are not. This is false, of course, because all men suffer. (Luke 1 vs. 50-53: “His mercy extends to those who fear him, from generation to generation. He has performed mighty deeds with his arm; he has scattered those who are proud in their inmost thoughts. He has brought down rulers from their thrones but has lifted up the humble. He has filled the hungry with good things but has sent the rich away empty.”) Hence, you put the rich in a social bubble where there’s no suffering and everyone else in a social bubble where there’s nothing but suffering. Again, this is false. The solution, you propose, is to dispossess the wealthy while inhibiting the creation of wealth, thereby putting everyone in the same social bubble where there is no suffering. Logic dictates that this solution must fail because everyone suffers regardless of what measures one applies to quantify and qualify suffering.
The book that makes this case best is Saint Thomas Moore’s “Utopia”. His Utopian society forsook measuring success, failure, status and power by material measures, adopting instead a seniority system predicated on longevity in undivided obedience and loyalty to the collective. Guess what? People suffered in Utopia, particularly those whose personal dose of free will and curiously novel notions of self-actualization brought them into conflict with the collective will. Moreover, the Utopian social order was not equal, i.e. some elevated themselves above the rest to lord it over them. Sum all this up, and what you get is the truth that human nature causes suffering and inequality, which is of course the truth that the Saint was getting at. Therefore, keep your Utopias to yourself, Antonius Magnus, and keep your hands off of my liberty. I will decide for myself the terms and conditions of my own suffering, not you or the collective.



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Jon

posted March 9, 2010 at 6:22 am


Re: Show me one instance where “public morality” supplanted “market morality” and produced morally superior incentives and results.
There is no such thing as “market morality”. The market is every bit as amoral as physics or arithmetic.
Re: Currently we have centrally planned (ie socialism) of money with some dire spiritual consequences
Govermments have been in the money-creation business since Croesus of Lydia minted his first drachma.



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Indy

posted March 9, 2010 at 7:18 am


Rod, don’t worry too much about what Goldberg says about anything, although you are right to throw open his comments to debate to see what others think. (You’re braver than Goldberg in that sense, his site doesn’t allow comments.) He is a political creature so his arguments are going to be political. The giveaway is in his “criticize free markets? Hrrmph, that must mean socialism is better” argument. No, dude, it doesn’t, we don’t just face either/or choices.
What we face are decisions on what to regulate and how much and what not to regulate or regulate less. And what services the federal government should provide, what services state and local government should provide, and what should be left to the private sector. (And that all important, albeit often scary question for those who operate in the political world – how we’re going to pay for it.) The realistic answer isn’t “everything” or “nothing,” it’s “some,” for both the public and private sector. Where people fall along the spectrum for the apportionment of “some” is going to vary depending on political philosophy. (Most probably would agree that national defense should be handled by the military, not by Blackwater types. Beyond that, there’s a lot of healthy debate.) But it isn’t a choice between anarchy and dictatorship. To write as if that is the case is just fear mongering, a sure giveaway that someone inherently is unserious about the issues.
Look at the debate we had here in the comboxes from over the weekened on David Brooks’s column about the Utopianism of the New Right and the New Left. If people don’t understand underlying behaviors – and knowing how real people act in the real world of business, or government, doesn’t seem to be Goldberg’s strong suit – of course they’re going to make either/or arguments. In the real world, people aren’t afraid of nuance. Very often, their livelihoods depend on it, because they have to sort through choices in a regulated environment that nevertheless leaves them to decide how to interpret what is required. We see that at home, at the office, in our churches. It’s only in the political world that you get the us (capitalism) v. them (socialism) blather. Solutions to problems aren’t going to come from fighting keyboardists like Goldberg, they’re going to come from people who understand human nature, business, government, ethics, morality, and why and where man is weak.



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Lavaux

posted March 9, 2010 at 7:40 am


Re: “There is no such thing as “market morality”. The market is every bit as amoral as physics or arithmetic.”
I disagree. Three ethical principles of markets come readily to mind: What’s mine is mine and what’s yours is yours, no express deceit (caveat emptor), and pacta sunt servanda (promises must be kept).
As a consequence of the first ethical principle, you have to give me something of yours that I want to get something of mine that you want. The exchange must be voluntary (no duress) and the subject matter of the exchange as well as the exchange itself must be free of mistake, impossibility and impracticality.
As a consequence of the second ethical principle, express deceit provides grounds to rescind exchanges whereas puffery, latent and patent defects do not unless they’re intentionally obscured.
As a consequence of the third ethical principle, promises become obligations such that the parties to an exchange of promises or things for promises are obliged to keep them.
Any of this stuff sound familiar? It should; it’s the basic property and contract law that all nations who permit capitalistic market activity apply to voluntary exchanges. The simple ethical principles upon which this law is predicated are themselves predicated on two simple moral commands: (1) Do not steal; (2) do not lie. Hence, I can’t understand how just market conduct can be said to produce social injustice when the unjust and just states of “social justice” are ascertained according to material measures.
Ironically, capitalism doesn’t measure the justness of the outcomes of market activity according to material measures whereas socialism does. Go figure, huh?



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Indy

posted March 9, 2010 at 8:37 am


Do not steal and do not lie need to be considered in context. The problems go beyond what is legal and what is illegal. How much sunshine and transparency are required? What is the entity required to report? Does it operate in an environment that requires oversight or auditing? How reliable are the reporting mechanisms? How reliable are the audits? Are there potential environmental issues that might affect an audit of its activities? (Arthur Andersen, which collapsed as a result of its handling of obligations regarding Enron, reportedly struggled in some of its audit activities after it expanded its consulting side. The consulting rather than the auditing side drove profits during the 1990s.) How much does the consumer as opposed to the seller know about the risks involved in the transaction? (In the case of some of the people who received sub-prime mortgages, not nearly enough.)
The savings and loan collapse in the 1980s that cost taxpayers over $100 billion didn’t result in many criminal prosecutions for actions taken by thrifts during the Reagan administration. That the thrifts took risky actions after they were freed from previous prohibitions on offering financial services cost the taxpayers a lot of money. But except for some well-known cases involving fraud, such as the Keating Lincoln Savings & Loan case, the actions that led to the collapses often were legal. While fraud is actionable, poor judgment and greed need not be. But depending on the business, sunshine and regulation can reduce the chances of bad outcomes in some cases. Just as going to church (and in the case of Catholics, going to confession), or going to AA and working the 12 steps, can encourage more thought and self examination in one’s personal life than a “do what feels good at the moment and what I can get away with” approach does.



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Dan Berger

posted March 9, 2010 at 9:43 am


This was going to be a bit OT, but Indy’s last post made it relevent:
Anti Dhimmi (?) said, “Government doesn’t have to outright own private enterprises to effectively socialize them; it can regulate them so much as to privatize the risk while socializing the benefits.”
Au contraire; the equation, over the past couple of decades and through both Demo and Repub administrations, has been to privatize the benefits while socializing the risk. Does that count as socialism? I’ve heard it called “crony capitalism.”



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Lavaux

posted March 9, 2010 at 9:43 am


Indy, I recited the basics of the ancient Lex Mercatoria and showed how it was grounded in moral commands. Modern financial instruments and corporate entities are novelties requiring novel regulation. Some of this regulation has worked well sometimes while some of it hasn’t, but all of it is undermined by the politics motivating perverse incentives and outcomes.
Take for example the business judgment rule. Capitalism is a profit and loss system, with the profit side incentivizing risk-taking and sound innovation and the loss side punishing excessive risk-taking and foolhardy management. Make the business judgment rule too harsh on directors and executive officers, and you get less risk-taking and sound innovation leading to less profit and less economic growth. Make it too forgiving, on the other hand, and you get excessive risk-taking and foolhardy management leading to losses and less economic growth. Hence, an adequate balance between harshness and laxity is required that America’s business judgment rule has achieved. Problem is, when the state bails out insolvent corporations to save jobs, a moral hazard is created undermining the business judgment rule together with capitalism’s profit and loss incentives. The law can only do so much to achieve just outcomes, and the taxpayers always end up eating the losses when politics intervenes.
Another example is mark-to-market accounting, which required financial firms to carry underperforming assets on their balance sheets as liabilities, thereby forcing many of them into artificial insolvency. Did the mark-to-market accounting rule produce accurate financial reporting? In some respects, yes, but it also contributed mightily to the recent financial meltdown. What ever happened to that rule? BTW, has anyone found a way to accurately measure the monetary value of goodwill without selling its vehicle to a willing buyer?
Should poor judgment and greed be actionable? By whom and against whom and under what circumstances and law? Asymmetric information will always plague some markets, yet I don’t know one lawyer who would take a client he knows will later sue him for malpractice. Ditto for doctors. Do you know any, perchance? This is the reason some states codified the “Good Samaritan Rule”.
The topic is whether free markets conduce or erode ethical behavior. I say neither: The laws making free markets possible assume that those doing business operate according to certain basic ethical principles. When this proves untrue, the law sometimes makes remedies available. Therefore, no one who understands the basics proposes that free markets are to blame for unethical conduct. Rather, they correctly put the blame on the individual wrongdoer(s) limited by the principle of implied consent for some of the rough stuff that goes on (e.g. an ice hockey player gets some teeth knocked out by a high stick). Don’t send your kid to market to sell the cow unless he knows it’s worth more than a bag of magic beans.



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TTT

posted March 9, 2010 at 9:48 am


Regulating or controlling a man’s business is therefore immoral. Taxation of those who work hard and produce wealth to give to those who do not is theft.
Robber-baronism is immoral, and thinking the “invisible hand” can provide protection to consumers, the environment, and general wellbeing is nonsensical; at best, it has after-the-fact corrective powers, and if the “fact” is your death by someone else’s hazardous product, that power is worthless. I can’t think of anybody who would actually prefer to live in the U.S. economic environment of the 1890s rather than today, except for a tiny handful of elitist oligarchs and the naive Beckers who apparently think a working civilization magically fell out of the sky with no group inputs, sacrifice, or regulations.
Oh, and while we’re talking about freedom:
The legitimate object of government, is to do for a community of people, whatever they need to have done, but can not do, at all, or can not, so well do, for themselves — in their separate, and individual capacities. –Abraham Lincoln



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hlvanburen

posted March 9, 2010 at 10:49 am


The comments in response to this post have been quite interesting. It seems that many have an aversion to truly discussing the original question as framed by the Templeton people. Instead they offer a variety of non-responses, from straw men to ad hominems to simple obfuscation.
What is it about the question that is so threatening to these folks? Why do they seem unable to discuss the question in a rational, calm manner?
It’s almost as if Templeton asked the question “Does Christianity erode moral character.”
Has “free-market capitalism” become a religion, and therefore become sacrosanct?
Interesting….



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Anti Dhimmi

posted March 9, 2010 at 10:55 am


Cecelia writes:
And likewise when you use free market terminology you to limit yourself to free market ways of thinking.
You miss the point. When you insist on using the terms of Karl Marx in your thinking, you restrict yourself to thinking in his terms: the oppressor/oppressed dichotomy embeds itself.
Seriously – capitalism is the term used to by left and right when describing our economic system. The term long ago outgrew its Marxist origins.
The fact that many people use bad thinking does not make bad thinking correct. People use words such as “freedom” and “democracy” in careless ways all the time, leading them to believe falsehoods without questioning them. Oh, and argumentum ad populum is still a fallacy.
Anti Dhimni said: There is a Utopian assumption in this paragraph that no Catholic should make; corruption is inherent in any human endeavor due to the fallen nature of man.
Then you did not read the paragraph
You mean this one?
Capitalism has one goal – profit and the efficiencies which maximize profit. There will therefore inevitably always be those who will do damage to the common good for the sake of profit. To deny that is o deny human nature and all of our history. The only way capitalism can avoid such corruption is if the definition of profit includes the common good.
You state clearly that if a definition of profit “includes the common good” then corruption can be avoided. You are clearly saying that human beings, by writing some sort of law code, can perfect themselves by their own power. Maybe you did not mean to write that, but that is what you wrote.
– I noted that our history demonstrates we cannot count on people to behave well when pusuing profit. I’d would also note that the idea that profit seeking when not defined as including the common good will always result in immoral behavior is a point made – repeatedly – by Pope Benedict in his recent encyclical Rerum Novarum. Last time I looked the Pope was Catholic. Perhaps you would like to tell the Pontiff he should not be saying such things?
Did that Pope also say that by including “the common good” in a definition, corruption would be avoided? I doubt it. Most Popes, at least in the last couple of centuries, seem fairly aware of human sinfulness and the imperfectability of humans by their own efforts.
Look, your statement is clear: you are asserting a perfectability of humans via human effort. That’s more gnostic than Catholic.
What about distributism is incompatible with democratic societies?
Where did I make such a claim, please?
Distributism recommends the widest possible ownership of property by people – not the state. That surely seems very democratic to me.
For some definitions of democracy, such as a one-party Catholic theocracy, that’s true. On the other hand, if you wish to accept the notion that by owning equity shares in companies, people own a piece of the means of production, then the US is a lot closer to distributionism than you think, thanks to the extensive pension system (both public and private) which hold enormous quantities of publicly traded stock.
If on the other hand you are preferring the version of distributionism championed by Belloc and Chesterton, then you’ll have to explain how it is that guilds (not unions, mind you) are compatible with any modern representative government, and who gets to decide what is “enough” (the theocratic government, I’m sure). Or I could cheat a bit here and point out that Dorothy Day was an anarchist who thus was opposed to representative, Constitutional government altogether…but since Chesterton in turn abhorred anarchism, that would be a stretch. In any event, since no one has been able to make this notion work above the micro, co-op level, there seem to be some problems with scalability absent a very heavy government footprint on an economy. I’m all for any voluntary association people wish to form within the market so long as they aren’t promoting illegal actions; the Ditchling guild clearly worked well for a couple of generations. But that’s voluntary, in order to make a national distributionist system into reality a whole lot of mandatory actions would have to be taken. That gets back to the nature of government: force.
To suggest that liberty is not possible without free markets is ahistoric.
That depends on the definition of “free market”, doesn’t it? Define the term, and we can discuss it.
So – until the last 300 odd years – people have never had liberty?
Considering that markets have existed for over 5,000 years, this statement doesn’t seem to make a lot of sense. You seem to regard the free marketplace as some sort of artifice that has to be created, probably by some prince or king or whatnot. As I pointed out earlier, in premise #1, it is a normal and natural feature of human beings to exchange excess “stuff” for “stuff” that is desired. Probably even before agriculture, the wandering nomads exchanged ‘stuff’ between tribal groupings when they met in the course of a year. So the free market is simply part of our nature. God gave it to us, along with other things such as music, art, and so forth.
Returning to Rod’s original question:
A market is going to reflect the nature of the participants. To ask if the market affects moral character is like asking if the act of painting affects moral character: painting what? Painting a lovely landscape, or painting porn? It’s not the paint, or the act of painting, that contains moral character, it’s the painter.
So it is with trading. It’s not the trade that affects moral character; the trader’s moral character affects the trade.



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Anderson

posted March 9, 2010 at 10:57 am


Taxation of those who work hard and produce wealth to give to those who do not is theft.
What about taxation of those who don’t work hard yet produce wealth? What about giving to those who do work hard yet have very little?



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Anti Dhimmi

posted March 9, 2010 at 11:41 am


hlvanburen writes:
The comments in response to this post have been quite interesting. It seems that many have an aversion to truly discussing the original question as framed by the Templeton people. Instead they offer a variety of non-responses, from straw men to ad hominems to simple obfuscation.
In my opinion, this is because Rod’s original question was so broad, and so poorly defined, that each person brings their own unconscious premises about what a “market” is, what “free market” is, what “moral character” is. The result is any number of people talking past each other, because they don’t know what anyone’s definition / premise is.
What is it about the question that is so threatening to these folks? Why do they seem unable to discuss the question in a rational, calm manner?
The question uses terms that have semantic loading: both “free market” and “moral character” have meanings that are both deep and wide. Since probably everyone here has a different definition, and since no one (save myself) chooses to post their premises, it is inevitable that emotions will arise, and quickly. You can’t discuss things like freedom and morals in this rather narrow communication channel without someone getting worked up.
It’s almost as if Templeton asked the question “Does Christianity erode moral character.”
Hmmm…no, I don’t see this. However, maybe you are unaware that for over 150 years certain organized, pseudo-religious organizations have made it their business to demonize, hate and even kill people that engage in trading, i.e. the market? Maybe you’ve never heard of “kulaks” and what was done to them?
Has “free-market capitalism” become a religion, and therefore become sacrosanct?
Speaking of strawmen…



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Rod Dreher

posted March 9, 2010 at 11:57 am


Anti-Dhimmi, the original question was not “Rod’s”, but one put by the Templeton Foundation to various experts, before I got here. I do think that H.L. Van Buren makes a good point, and you only underscore it by this comment:
However, maybe you are unaware that for over 150 years certain organized, pseudo-religious organizations have made it their business to demonize, hate and even kill people that engage in trading, i.e. the market? Maybe you’ve never heard of “kulaks” and what was done to them?
Do you see what you’re doing here? You’re making anyone who makes any searching moral inquiry into the relationship between the free market and morality into someone who’s a fellow traveler with Stalin and his deadly persecution of the kulaks. If this isn’t making the free market sacrosanct, and above criticism, even constructive criticism by free-marketeers who want to make the market serve human goods better, then what is?
The free market was made for man; man was not made for the free market. The free market, like any economic system, is only good insofar as it serves the Good. Why on earth does saying that make one some sort of crypto-Stalinist?



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Rod Dreher

posted March 9, 2010 at 12:05 pm


And to the person who said the question “Does the free market corrode moral character?” is as stupid as “Does liberty corrode moral character?”, I would suggest that you have not thought enough about liberty and morality.
Morality is meaningless without a significant degree of liberty. Our moral choices have no weight if we are not permitted to make them.
On the other hand, a state of perfect liberty is impossibly utopian. So, we are left to ponder how much liberty is wise to grant to individuals, given that there is no perfect liberty in this life. We do this all the time, every single day. You are not at liberty to sell heroin, because most people believe that allowing people the liberty to buy and sell heroin will harm individuals and the moral character of society. So we have laws against heroin. If people decide otherwise in time, then we can change the law.
The point is, the tension between morality and liberty is ever-present. It’s why we have politics. Liberty is not a primary good; it’s a relative good — relative to the uses we have for it. That you think liberty is an unassailable moral concept can only mean you don’t really know what you mean by it. The Founders certainly didn’t think that way about liberty. Was it Adams who said that American liberties can only be sustained by a moral and religious people? The connection between the kind of liberties we are blessed to have in our republic and the moral conditions they require to thrive were clear to the Founders, if not to all blog commentators.



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the stupid Chris

posted March 9, 2010 at 1:45 pm


Free markets are nothing but a feature of liberty. Now frame the argument thusly — “does liberty erode moral character” — and reflect on how stupid that sounds.
“Does liberty erode moral character” isn’t at all stupid, anti pro. It raises all sorts of questions that free people should answer: What is our preparation for liberty? What is the purpose of liberty? What aspects of liberty do we exercise at our peril?
Perhaps Paul put it best put in 1 Corinthans 6:12 All things are lawful for me,” but not all things are helpful. “All things are lawful for me,” but I will not be enslaved by anything.
Civilization is the term we apply to the various systems of limitations we put on liberty. Those limitations were created in the light of long human experience that Paul so succinctly sums. Every culture has done it differently, some more successfully than others, but each finds its expression in the limits it puts on liberty.
So does liberty erode moral character? You bet. That’s the answer of humanity down through the ages, and we haven’t changed all that much.



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hlvanburen

posted March 9, 2010 at 2:11 pm


“That you think liberty is an unassailable moral concept can only mean you don’t really know what you mean by it.”
To many people the concept of liberty begins and ends with their exercise of it. Perhaps it is the natural outcome of the free-love generation moving into positions of power and responsibility, but when I hear words such as those from Anti-Dhimmi I feel that their concept of such self-centered liberty misses the mark by miles from what our founders envisioned.



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Anti Dhimmi

posted March 9, 2010 at 2:17 pm


Rod Dreher writes:
Anti-Dhimmi, the original question was not “Rod’s”, but one put by the Templeton Foundation to various experts, before I got here.
All right, then it’s the Templeton’s question, and you unthinkingly posted it to this weblog. If you wish to deny your own responsibility for posting it, I cannot stop you. But it is a disappointment.
I do think that H.L. Van Buren makes a good point, and you only underscore it by this comment:
However, maybe you are unaware that for over 150 years certain organized, pseudo-religious organizations have made it their business to demonize, hate and even kill people that engage in trading, i.e. the market? Maybe you’ve never heard of “kulaks” and what was done to them?
Do you see what you’re doing here?
Yes, I’m pointing out that there has been organized persecution for over a century and a half of ordinary people who engage in a certain kind of activity, and that awareness of that might just account for some of the defensiveness that people exhibit regarding markets. Sorry that wasn’t clear to you.
You’re making anyone who makes any searching moral inquiry into the relationship between the free market and morality into someone who’s a fellow traveler with Stalin and his deadly persecution of the kulaks.
No, I’m not. I’m stating a fact. You are making a strawman out of a factual observation.
If this isn’t making the free market sacrosanct, and above criticism, even constructive criticism by free-marketeers who want to make the market serve human goods better, then what is?
Um, a statment of fact?
Yes, that’s right, my observation was factual. HL was questioning, in a rather sarcastic manner, why anyone would be defensive about free markets. I was pointing out one possible reason. Look, if someone asked “Why are Jews so defensive about criticisms”, and some other person brought up the Holocaust, would that be out of bounds to you as well? And no, the analogy is not over the top, because the active persecution to death of people for engaging in the simple act of trading is as much an historical fact as the Holocaust, and not just in the USSR, either, I can cite similar horrors from Kampuchea, the PRC, etc. This discussion doesn’t take place in a vacuum, we all bring our histories to the table. So when someone breezily wonders why anyone is defensive about markets, I offer a copy of “Let History Judge” by Medvedev as a starting point.
Could you please take the time to read all my other postings in this thread before erecting your next strawman and bashing it? You could start with the one in which I spell out my premises. Or you could read my responses to Cecelia. Especially the one in which I point out that any morality in the market comes from the hearts of traders, not from the act of trading.
Again, I find this disappointing. I’ve gone out of my way to be as thoughtful as possible in this thread, and you choose to ignore every bit of reasoning, in order to bash a strawman. Very disappointing.



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the stupid Chris

posted March 9, 2010 at 3:38 pm


Anti,
You seem very smart, which is why I don’t understand your objection to this question. You grasp how language, economic theory, and philosophy limit our understanding of things, but don’t seem to apply this to the language, theory and philosophy of “the free market.”
It’s not at all wrong to examine the unexamined effects of how we talk about things, how we think about things, and how we therefore react to things. There’s nothing at all neutral about “the free market,” any more than there’s anything neutral about “socialism” or “communism” or “fascism” or “democracy” or “autocracy” or “theocracy.” So examining the effects of these things on our moral life seems a rather worthwhile affair, if only to know clearly our own Achilles heels.
The “hearts of traders” and others who participate in free markets are directly influenced by how we speak and therefore think of our interactions, not just the mechanics of what we do. If you’ve seen Undercover Boss one of the things remarkable about it is just how out-of-touch those bosses are with the lives of their “labor units,” the human beings who are their employees. Now there’s a strength to being able to analyze “man-hours” and “labor units” but there’s also danger that we, like those employers, lose sight of the humanity of the people behind the statistics.
Similarly, the growth of “institutional investors” has created a class of investing agents who have too often lost sight of the people whose money they invest. This “feature” of the free market has an effect on the moral calculations of all who participate.
To deny these effects upon us is to bury our heads in the sand, to behave as if what you see as true of Marxist analysis is false about Market analysis.



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Clare Krishan

posted March 9, 2010 at 5:26 pm


Jon “Govermments have been in the money-creation business since Croesus of Lydia minted his first drachma.”
not ex nihilo they haven’t – the material of choice (GOLD) was limited and high cost… now we have the opposite – unrestrained and ex nihilo…
Rod “On the other hand, a state of perfect liberty is impossibly utopian. So, we are left to ponder how much liberty is wise to grant to individuals, given that there is no perfect liberty in this life.”
er, no… as Newton’s apple had the liberty to fall (or Eve to eat it) all actions have consequences… morality ceases when liberty ceases. Instead what you advocate is moralism, a VERY DIFFERENT CREATURE, a form of relativism, indeed. When a collective arrogates rights to itself at the expense of the rights of its members, a utilitarian consequentialism comes into play… so long as the masses get a net benefit, then the individual is ‘abounden (like Adam in his sin) to pay his due to enjoy a share in same. This isn’t morality this is power playing, aka politics.
The grace required to act in a fully human, rational manner isn’t inherent… its all gift. That’s why we accept the responsibility of sharing this gift – those of us who can exercise self-control pass this skill onto others voluntarily and indirectly while those who cannot act rationally (children, the infirm, those who violate others) learn it sort of involuntarily and directly via the consequences of actions of others (temporary custodial care in a school setting, a carehome or a penitentiary) . The end never justifies the means… the least force necessary to secure social flourishing can be settled privately by mutual agreements such as foster care, aggregate association can be made binding legally using financial penalties, the brute force of State government ought not be the first remedy sought for every human moral failing… but we seem to be going down that route, sadly



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Anti Dhimmi

posted March 9, 2010 at 6:26 pm


the stupid Chris writes:
You seem very smart, which is why I don’t understand your objection to this question. You grasp how language, economic theory, and philosophy limit our understanding of things, but don’t seem to apply this to the language, theory and philosophy of “the free market.”
Please define your term. What do you mean when you refer to “the free market”? Do you mean the regulated equities exchanges? Do you mean the mass market for manufactured products? Do you include me trading produce with my neighbor? Do you mean some abstract, ideal agora? What do you mean? Much of the disagreement that I see on this thread seems to stem from people talking past each other, because they are using different definitions and premises.
It’s not at all wrong to examine the unexamined effects of how we talk about things, how we think about things, and how we therefore react to things. There’s nothing at all neutral about “the free market,” any more than there’s anything neutral about “socialism” or “communism” or “fascism” or “democracy” or “autocracy” or “theocracy.” So examining the effects of these things on our moral life seems a rather worthwhile affair, if only to know clearly our own Achilles heels.
I’ll grant that the term “free market” has semantic loading, and thus arouses different emotions in different people. But viewed abstractly, “the market” is just a human artifact, like “the art of painting”. The act of putting paint to canvas is just that, an act, any moral content comes from the painter, not from the objects. The act of buying a bottle of water at the local store is just that, an act of buying water. If you want to read all sorts of deeper, hidden meanings into that act, then I find myself wondering why you are doing that. Some aspects of this thread remind me of debating a deconstructionist about literature; it’s really difficult to come to any conclusion if everything is subjective.
The “hearts of traders” and others who participate in free markets are directly influenced by how we speak and therefore think of our interactions, not just the mechanics of what we do.
Ok, I’ll agree with that. But how the traders speak and think of their interactions is a function of their culture, not of the act of buying and selling per se. So once again, I don’t see the point of focusing on the market, when it is the people that matter. To me, this whole discussion is like someone standing on a street corner, wanting to discuss the moral significance of a stoplight, because there’d been an accident recently. It’s not the stoplight that caused the accident, it was the driver(s), right? So why focus on something that is peripheral?
If you’ve seen Undercover Boss one of the things remarkable about it is just how out-of-touch those bosses are with the lives of their “labor units,” the human beings who are their employees. Now there’s a strength to being able to analyze “man-hours” and “labor units” but there’s also danger that we, like those employers, lose sight of the humanity of the people behind the statistics.
I don’t watch much TV, but what you say doesn’t surprise me. One of the best managed places I ever worked was a small electronics factory that had 3 layers of management: the owners, who worked in an office at the front of the building, the shop manager who had a desk in the workshop, and the line supervisors who sat at the same table or machine, and did much of the same work as the assemblers. A small organization where everyone knew something about everyone else’s job. The market was computer peripherals in North America and Europe. Naturally the mindset and attitude of the owners affected the entire operation; attitudes flow from the top down as a rule. “The Market” made no difference to our moral character, though, we were all adults and brought that with us to work. This is a long winded way of saying “What’s your point?”.
Similarly, the growth of “institutional investors” has created a class of investing agents who have too often lost sight of the people whose money they invest. This “feature” of the free market has an effect on the moral calculations of all who participate.
Ok, now you are talking about equities, debt and more abstract instruments such as MBS’s, CDO’s, etc. None of the more esoteric instruments could exist without government support, implicit or explicit. Furthermore, the chase for yield has led to more and more of these things. Why is there a chase for yield? Because traditional debt instruments don’t pay very well (below the rate of inflation all too often). Why do those debt instruments not pay well? Because central bankers around the world have lowered interest rates to nearly zero, in an attempt to mop up the mess that was created by central bankers in the 1990’s.
You want to talk about those evil Wall Street traders? Fine and dandy. Just save some space to talk about government meddling, rent seekers, central bankers that have been playing “chicken” with debt since 1987, and the moral compass of all those players as well.
But all you are saying in this case is: “People with a defective moral compass do bad things in the marketplace”. That’s hardly news. Both the books of Proverbs and Eccleiastes have a thing or two to say on that subject. So once again, you focus on the inanimate, while the real issue is in the hearts of people.
To deny these effects upon us is to bury our heads in the sand, to behave as if what you see as true of Marxist analysis is false about Market analysis.
Sigh. Marxist’ analysis has shown it cannot predict with any accuracy at all. Since Marxism presumes to be scientific, applying the standards of science are sufficient to falsify it. (Observing the results should suffice as well).
We could look at merchantilism, or monopolism, and make some observationsa about the moral effects of each. We could look at corporatism in the same vein. But to attempt to analyze some abstract notion in moral terms is kind of odd.
Or to put it another way:
“Darn that stoplight! It caused another traffic accident!”



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Jon

posted March 9, 2010 at 6:43 pm


Lavaux, while I do not quarrel with your ethical preceopts, they do not come fronm the market, but are rather prior to it, arising from the better angels of our nature, and from the millenial traditions of religion and ethics that we share. And even you note that the government must be called upon to enforce these precepts at need.
And indeed, there really is no such thing as a “free market”. That is as much a chimera as the perfect vacuums and frictionless surfaces one finds in Intro To Physics books. In the real world the market is always constrained– and will even constrain itself if so permitted, as Adam Smith noted when he observed how businesses collude to limit competition.
The market is not self-regulating at all.



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hlvanburen

posted March 9, 2010 at 8:54 pm


“In my opinion, this is because Rod’s original question was so broad, and so poorly defined, that each person brings their own unconscious premises about what a “market” is, what “free market” is, what “moral character” is. The result is any number of people talking past each other, because they don’t know what anyone’s definition / premise is.”
I wish I could believe that you would be as exacting in wanting definitions if the question were “Does socialism erode moral character”. My guess is that had that been the question you would have energetically weighed in without first trying to define terminology.
I strongly suspect that your questions (and your lack of any attempt at bringing a consensus on the definitions you seek) are designed to simply derail the thread.



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Indy

posted March 9, 2010 at 9:07 pm


Interesting thread as was the original Templeton symposium. When I read Reich’s piece there, I thought of how I deliberately have patronized some small businesses in my neighborhood in an effort to keep them from going under. No such luck with some of my favorite places, they continued compete and ended up throwing in the towel to the big box stores that drew more customers with their bigger inventory and discount prices. I’m probably one of the few people in my area who sometimes puts down a product marked “made in China” and browses around to see if I can find a similar one “made in the U.S.A.” I’ve actually paid more for something in such instances just to buy American. But I’m comfortably well off and can make choices that affect my wallet that way. Not everyone one. Of course, it’s harder and harder to find items made here. Still, I thought of that as I read Reich’s musings about neighborhood stores and big box stores.
I appreciate the fact that Rod tries to encourage us to discuss these things without veering off into the usual political us v. them, either/or framing. Given all the defensive posturing one sees on purely political sites, it’s refreshing to come to a place where the blog owner encourages people to talk about core issues rather than politics. We centrists find it difficult to find a comfortable home at the sites where people play political zero sum games. Real life workplaces aren’t that, which is one of the things that makes political sites irritating for me. People seem to feel they must, must, must defend “their side”and attack, attack, attack “the other.” That’s antithetical to my workplace experiences. I started out in a professional environment where we were encouraged to take a hard look at things as they were, even if it meant considering negative feedback and thinking “what are we doing wrong, why aren’t people buying into this?” The goal always was to respect input and to improve products, processes, whatever, not to get into defensive crouches.
As to the issue of the market place and morality, I don’t think we’re all going to come to an agreement on it, which is fine with me. (One of the pluses of living in a democratic society, we position ourselves on different points along that spectrum I mentioned this morning. We all don’t have to agree. Cool.) I do think to some extent, in looking at issues such as this one, we’re shaped not just by our upbringing and our individual character, but our life and work experiences. We know our own jobs and the work environment well but largely look at those of others as observers. I recently read a political book in which the author noted that Jacqueline Kennedy once said of her marriage to John F. Kennedy, “We’re like two icebergs, the public lie above the water, the private life submerged.” So too the professions in which we all work and the ones we observe from outside that others work in. In the way we look at things we know and don’t know, some things are above water, much is submerged.



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Indy

posted March 9, 2010 at 9:10 pm


That should be “We’re like two icebergs, the public life above the water, the private life submerged.” She didn’t use the term lie, that was my mispelling of life.



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Anti Dhimmi

posted March 9, 2010 at 9:40 pm


hlvanburen writes:
“In my opinion, this is because Rod’s original question was so broad, and so poorly defined, that each person brings their own unconscious premises about what a “market” is, what “free market” is, what “moral character” is. The result is any number of people talking past each other, because they don’t know what anyone’s definition / premise is.”
I wish I could believe that you would be as exacting in wanting definitions if the question were “Does socialism erode moral character”. My guess is that had that been the question you would have energetically weighed in without first trying to define terminology.
Socialism is a way of organizing society, while markets just “are”, they exist no matter how hard people try to stamp them out. Should my question be asked, I’d ask what variety of socialism is under consideration: small group utopianism such as the Shaker / Amana groups, corporatism, “socialism in one country”, Rotarian socialism…the variations matter. But by all means, believe what you wish.
I strongly suspect that your questions (and your lack of any attempt at bringing a consensus on the definitions you seek) are designed to simply derail the thread.
Sorry, I was unaware that bringing a consensus is my job; I find “consensus” to be overrated in many cases, as it can easily become groupthink. I offered my premises in order that my position would be clear, and to avoid talking past people who held different definitions. It seemed the reasonable and logical thing to do: state premises, then argue from them. If you don’t like my definitions, please by all means offer up your own, or criticize mine, as you prefer.
Or you can just continue contributing only sarcasm and snark, if that’s what you believe to be your best use of time…



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Anti Dhimmi

posted March 9, 2010 at 10:05 pm


Indy writes:
When I read Reich’s piece there, I thought of how I deliberately have patronized some small businesses in my neighborhood in an effort to keep them from going under. No such luck with some of my favorite places, they continued compete and ended up throwing in the towel to the big box stores that drew more customers with their bigger inventory and discount prices. I’m probably one of the few people in my area who sometimes puts down a product marked “made in China” and browses around to see if I can find a similar one “made in the U.S.A.” I’ve actually paid more for something in such instances just to buy American. But I’m comfortably well off and can make choices that affect my wallet that way. Not everyone one. Of course, it’s harder and harder to find items made here. Still, I thought of that as I read Reich’s musings about neighborhood stores and big box stores.
Localism vs. globalism is an issue that we like to think is something only we modern folks deal with, but that’s not true. Consider the original tax revolts in the New England colonies; one of the objections raised was British merchantilism that mandated trade between Boston and London, Charleston and London, but prohibited trade between Charleston and Boston. Colonists wished to “buy local” in a sense, the business interests in London preferred to keep them as captive customers of their licensed trade houses. “Nothing new under the sun”, as the old man says in Ecclesiastes.
There is a modern social construct that many people don’t like, and that is “Lowest Price” as the be-all and end-all of any purchase. It is a construct that results from a huge supply of very low cost labor, and low cost energy as well. All the low-wage factories in China would find it hard to make a profit if it weren’t for the fact that they are effectively “next door” to the port of Long Beach, albeit with a time lag of some weeks. So long as it is not expensive in energy to pile containers onto a ship in Shanghai and move it at 11 knots to Long Beach, the cost of “stuff” will remain low. Laws could change that, although at this time there are powerful political forces opposed to it.
Some years back, libertarian thinker David Kopel made a point to urge people to not buy things made in China, from his perspective it was a slave labor issue. No idea how that is working out now, but Chinese goods as we all know are ubiquitous. This makes it much, much more difficult to make a moral choice, if you share Kopel’s position on Chinese factories. Heck, I am finding it all but impossible to buy garlic cloves that don’t come from China some weeks, and that is ominous to me in terms of the security of food.
I frankly don’t know how to deal with this. On the one hand, there can be no question that some factory cities in China are running on slave labor. On the other hand, the history of countries like Japan and Korea tells me that the best way to lift people out of virtual slavery and/or penury is by getting more money into their hands so that they, or their children, can do something else or can demand better conditions of work. This is an issue of social development, of individual conscience, of fair trade vs. cheapest price trade.
My parents and grandparents were opposed to buying cheap goods. They preferred things with higher quality, whether tools or clothing or furniture, because they came from a world where making things last as long as possible was a virtue. I speculate that when and if petro-energy becomes more expensive, making transportation more expensive (shipping, land, air) the era of cheap but plentiful goods will come to an end, and “make it last, use it up or wear it out” will become a common cultural position again. If transport becomes more expensive, then manufacturing will have to move back closer to customers, and changes in agriculture will be seen as well.
Until that time, goods from Asia will outcompete North American goods on price, although not at all necessarily on quality. Although, hmm, the ongoing shift from “spending” to “saving” in the American public may portend a shift in what people spend on, as the economic crisis grinds on.



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the stupid Chris

posted March 10, 2010 at 12:51 pm


Socialism is a way of organizing society, while markets just “are”, they exist no matter how hard people try to stamp them out.
The question is about “the free market” not “markets.” The notion that “the free market” in America since 1980 could refer to any old market in any old nation during any old era seems willfully ignorant.
To be clear: We’re talking about a market theory that presumes all markets to be rational and self-correcting when free of governmental interference, by which is meant governmental regulation. The same theory also offers that the only proper consideration for anyone participating in the market is whether they will profit from the exchange.
The “flaw” Alan Greenspan found at the heart of his economic theory is that these assumptions are simply false. Markets are no more rational and self-correcting than the human beings who trade in them. What’s more, the focus on profit to the exclusion of all other considerations leads to a moral myopia that rewards the very behavior we otherwise term “moral.”



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Anti Dhimmi

posted March 10, 2010 at 7:38 pm


I wrote:
Socialism is a way of organizing society, while markets just “are”, they exist no matter how hard people try to stamp them out.
the stupid Chris replied:
The question is about “the free market” not “markets.” The notion that “the free market” in America since 1980 could refer to any old market in any old nation during any old era seems willfully ignorant.
To be clear: We’re talking about a market theory that presumes all markets to be rational and self-correcting when free of governmental interference, by which is meant governmental regulation. The same theory also offers that the only proper consideration for anyone participating in the market is whether they will profit from the exchange.
Well, at last someone defined a term and offered a premise. Thank you. Now I’ll discuss it:
This theory is bullshit. It doesn’t match reality. So talking about it is pointless.
I’ll expand point by point:
*Bullshit: See Kindleberger’s “Manias, Panics and Crashes”, which traces market history in western Europe and the US for a couple of centuries, demonstrating conclusively that markets of any sort go through various cycles, typically involving too much debt funding too many projects resulting in a crash followed by debt repudiation. See any work about the South Seas Bubble, the Mississippi Bubble, the Tulipmania, the canal and railway bubbles of the 19th century for further verification. Also see what work remains of the Soviet economist Kondriatoff on long waves. Or just turn on CNBC and watch for any real estate update by Diana Olick, and bear in mind that “smart” economists predicted the real estate crash would be all cleaned up by early 2010.
*Doesn’t match reality: See above.
*Talking about it is pointless: How about if y’all debate the morality of Lamarckism, or Lysenko’s theories of genetics? Or the phlogystin theory of compustion?
There, am I still “willfully ignorant”?
The “flaw” Alan Greenspan found at the heart of his economic theory is that these assumptions are simply false. Markets are no more rational and self-correcting than the human beings who trade in them. What’s more, the focus on profit to the exclusion of all other considerations leads to a moral myopia that rewards the very behavior we otherwise term “moral.”
The flaw in the heart of Greespan’s “theory” was the arrogant notion that he, or anyone else, could have sufficient information to set the price of money. Why not have the Fed decide the correct price of orange juice, or electricity, or newspapers? I’m probably the only person who posts here anymore who was buying groceries in the mid 70’s when Nixon’s insane wage and price controls were phased out, so you’ll just have to take my word for it that it was quite interesting. More than once I saw the price of some mundane thing such as frozen juice concentrate change on a daily basis. That’s the result of central planning of prices.
Greenspan chose to bail out the 1987 stock market crash by papering over the cracks with debt. From that arrogant action, a river of results flowed, including his next arrogant decision in 1991 to mitigate the much needed recession, followed by a worse decision in 1995. After the crash of the dotcom bubble (caused by Greenspan’s insane debt policy), an active decision was made to reflate the economy by creating another bubble. The result? The housing bubble. Why is it worse? Because when an equities market crashes, the damage is largely done in a matter of months. When a housing bubble pops, the overbuilt structures linger for years and years, affecting the price of all residential real estate, dragging lending instutions down, and locking people in place.
The canary in the coal mine was Long Term Credit Management. When LTCM misused the Black/Scholes model to way, way overleverage itself, it set itself up for destruction, because there’s no way to predict when a “black swan” will show up. LTCM’s collapse should have been allowed to go all the way down, as Enron’s did. But the difference, of course, was that LTCM’s collapse would have damaged a lot of Wall Street firms, not the least of which was surely Goldman-Sachs. So lobbyists rushed to DC and convinced the Treasury and Fed to bail out LTCM.
Thus the stage was set for moral hazard to grow, not shrink: because LTCM was bailed out, many other institutions decided that by golly, Uncle Sugar could be counted on to bail them out as well. So we saw Lehman and Bear Stearns and Goldman etc. go to the regulators in the ‘naughts and whine that their 12:1 leverage was too puny to make money (because the interest rate was still effectivly zero, thanks to Greenspan’s insanity) and they by golly were Really Smart Guys who could handle a lot more leverage. Like 20:1, or 30:1 or even 40:1. The think about that kind of leverage (and that’s what LTCM was doing) is that any pertubation in the market the wrong way wipes you clean out, and leaves you holding a billion dollar bag.
I could go on about CDO/MBS games, the bogus “insurance” AIG wrote on those things, Citi’s role in all this but I’m sure most eyes are already glazed over.
So here’s the bottom line, from Kindleberger to Kondratieff and other sources: human beings will do stupid things in markets. They’ll overdo things, and create too much debt along with too many canals/railroads/stock companies/tulip bulbs/Pets.com/houses. When the house of cards comes down, there needs to be a “lender of last resort” to stop the landslide. However, that lender of last resort must be perceived as extremely reluctant lender, or that moral hazard things comes back to play.
No market is self regulating beyond the simplest “I trade produce with my neighbor” level. There’s always someone to regulate weights and measures, for example. No matter how far up the market tower you go, you find some need for rules and enforcement of those rules.
However, the usual human alternative in the 20th century, to demand a whole lot more control of markets, comes with its own price. See, you can have a market that is more or less lightly regulated, and you get recessions and even a depression every 3 generations or so. Or you can have a hyperregulated market, like the Soviet Union…and permanent depression. Because it is physically impossible to ever have enough information delivered to some central authority to make all the decisions about prices that need to be made in any functioning market.
Maybe the above doesn’t fit in with your worldview or theology (if any). That doesn’t matter. I’ve dished out reality as I see it: flawed, sinful humans do stupid things, including government regulators. There is no perfect economic system, because imperfect, imperfectable humans run economies. The gnostic heresey / Rousseuian conceit that somehow humans can be perfected, and thus a perfect world constructed, has led to untold misery for centuries, turning the 20th century into the biggest charnal house in human history.
Anyone who argues that somehow, if we just pass enough laws, write enough regulations, create enough courts, somehow we can make humans be good is arguing from that heresy / conceit. I have less and less patience for such foolishness.
So you can either have an imperfect system that goes through boom and bust cycles, or you can have a more controlled system that never has any booms, or if you really want to try “socialism in one country” you can create an economy that basically is in a permanent depression.
Likely we are heading for the latter. We are “turning Japanese”…
I hope there is enough willful ignorance in this posting to satisfy you…



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the stupid Chris

posted March 10, 2010 at 9:08 pm


Though you are vehement in calling “bullshit” first, the fact is that we largely agree. I’ll leave it at that.
But I will add the proviso that the stink in the theory behind “the free market” was apparent long before LTCM, it was apparent during the Savings and Loan fiasco, which also cost the taxpayers while rewarding the perpetrators.



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Anti Dhimmi

posted March 10, 2010 at 10:09 pm


the stupid Chris wrote:
Though you are vehement in calling “bullshit” first, the fact is that we largely agree. I’ll leave it at that.
I’m vehement because this thread has tried my patience, what with no one willing to define terms or state premises, and when that happens I sometimes get terse. I was going to just leave my reply at that, but reconsidered because after all you did do something no one else did: define something.
Meta-point: I drift in and out of reading this site. Sometimes the navel gazing, how-many-demons-are-on-the-point-on-my-head, nature of this site becomes just too much and I quit for a while. There have been threads from time to time that looked more like something written by junior high school girls than any adults, and I frankly had enough of that sort of thing many years ago.
But I will add the proviso that the stink in the theory behind “the free market” was apparent long before LTCM, it was apparent during the Savings and Loan fiasco, which also cost the taxpayers while rewarding the perpetrators.
I mention LTCM as the canary in the coal mine because by bailing them out, the Greenspan Fed and the Treasury set a green light to even more irresponsible behavior by even bigger firms. It can’t be said too often:
The bailout of LTCM set moral hazard standards that led to the 2008 crash.
Manias, panics and crashes are part of a normal, working market. But excess creation of credit by central bankers makes the highs “higher”, and that means the lows…are lower. Probably no one believes me when I say that the economic mess is not at all over in this country and the world, that’s ok, I’m used to it. Come back in 2012 and we’ll see how things are going. Lather rinse and repeat in 2014. For a start, the residential real estate market is about to get stinky again, because another set of adjustable rate mortgages start resetting this year, and that continues into 2011. That means more foreclosures on top of the horde that banks are already sitting on, which means more writedowns for banks, more insolvent banks, and more debt issues. That means more credit contraction, from the credit card in your wallet to lines of credit for businesses, which will mean unemployment going up at a time when the leading edge Baby Boomers are starting to retire and draw on both Social Security and various public/private pension systems.
To put it another way, the ground may be soaking, but it’s gonna rain some more. Better check your roof for leaks, get an umbrella, etc.
Moving on to the S&L crisis you brought up…
Now, maybe you’d like to blame the S&L crisis on some particular political party, or some group of people. But the reality is, it was a bipartisan disaster, brought about by hubris and greed for power. The S&L crisis was simply the result of the late 1960’s – 1970’s inflation. S&L’s were locked in to long term (20+ year) debt at interest rates that were reasonable in 1965, but fatal by 1978. That inflation was a result of LBJ’s attempt to fight a war while also expanding transfer payments in an unprecedented way at the same time. That inflation was the reason Nixon had to take the US off of the gold standard in 1971, because the alternative was to cut the Federal budget way, way back, so much so that it would have largely consisted of Social Security, Medicare and social welfare. Once the US was no longer limited in how many Federal Reserve Notes it could create by the gold standard, printing money was just the thing to do. In order to bring inflation back down to a “low” level of 3% or less, the Volcker Fed jacked interest rates sky high. It had to be done, or hyperinflation might well have set in, leading to a really ugly Weimar crash. But the S&L’s had to borrow money high while lending low and receiving low income. That’s sure death for any financial institution. So yet another set of bandaids were put on an institution by gooberment, but remember it was gooberment that created the inflation problem in the first place.
A lot of real people were really hurt by that inflation. I recall a newspaper story from the LA Times around 1974 or so. A man and his wife had planned their lives with care. He’d worked in some defense plant in the 40’s, switched to a manufacturer in the 50’s, stayed with the company long enough to vest in the defined-benefit pension plan, saved money…he did all the stuff he was supposed to do. And when he retired in 1970, his retirement income of $400/month was supposed to be more than enough to keep him and his wife in a comfortable living for the rest of their lives. That’s right, $400/month. Not an unreasonable assumption at the time. I rented a 1-bedroom apartment for $80/month about that time. But their plans blew up, because a couple of Presidents wanted to buy votes, and so they both had to go back to work, for the crime of doing what they were told was the right thing to do. Multiply that by millions. Millions of retirees watching what was supposed to be adequate savings melting away, due to inflation, because LBJ and Nixon couldn’t bring themselves to spend less money. Millions of people seeing their plans destroyed, because politicians wanted to buy votes. And the reverberations of that inflation are still with us, in various ways. Bipartisan disaster…
You brought up the S&L’s, Lincoln Savings is part of that mess. A classic example of rent seeking businessmen buying themselves some politicians, in order to get favors: the “Keating Five”, remember them? But buying politicians would not work so well, if gooberment did not have so much power, starting with the power to set the price of money.
Let me sum up: when arrogant gooberment officials decide they know how to run an economy, they will screw it up for everyone. When some arrogant businessman runs his company into the ground, hundreds, maybe even thousands, suffer. But when someone like Alan Greenspan screws up, hundreds of millions suffer. Something to think about, when the temptation to give gooberment officials “just one more bit of power”…
PS: In the long run, the value of every fiat money ever created by humans has reverted to the value of the paper it was printed on, or ‘zero’. Something else to think about.



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Indy

posted March 11, 2010 at 7:12 am


I don’t find many of the discussions on these boards to be like a bunch of junior high school girls. Maybe it’s because political sites are much worse than this one in terms of yelling and emotional responses (if that’s your take on teenage girls). Yeah, I know, you might have thrown that phrase out because there’s no worse thing to call guys then some allusion to females but that would be needless name calling, right? At any rate, I’m not seeing it, by and large, people seem to do pretty well. If you think about what they write – and read between the lines – you can learn a lot.
You mentioned inflation. I’ve talked to some older people who made a lot of money with money market accounts and CDs while interest rates were high. Of course, that was a bad time to take out a mortgage. It’s true that the thrifts struggled during the inflation of the 1970s but the savings and loan crisis of the 1980s had many contributing factors. Until the 1980s, thrifts only could accept deposits and make home mortgage loans. They faced a number of limitations and couldn’t offer the range of financial services that banks could. With deregulation came diversification and for some thrifts, temptations. Passage of legislation in 1980 and 1982 led to removal of the ceiling on deposit account interest rates. The number of thrifts soared. The number of examiners fell. There were other problems (use of RAP standards rather than the more conservative GAAP, removal of previous limits on loan to value ratios), as well. The Tax Reform Act of 1981 led to a boom in real estate. Some thrifts doubled, tripled in size. There were savings and loans in Texas and California that grew 100% per year for a while during those heady times. Then things started to collapse around 1984. Insolvent thrifts weren’t closed quickly enough, losses accumulated. The economy in Texas tanked (oil prices plummeted, falling 50%; the real estate market in the state crashed). In 1987, half of the nation’s savings and loan losses were centered in Texas. The bailout ended up costing billions



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girl

posted March 13, 2010 at 11:52 am


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Anti Dhimmi

posted March 16, 2010 at 8:26 pm


I wrote:
There have been threads from time to time that looked more like something written by junior high school girls than any adults…
Indy replied:
I don’t find many of the discussions on these boards to be like a bunch of junior high school girls.
Then we are more in agreement than disagreement, it would seem.
Your points about S&L’s are pretty good, however in order to reap the benefits of high interest CD’s in the early 1980’s, one had to have some capital to commit to them, and the early 1970’s inflation ate quite a bit of that for many people. Every silver lining is found around a cloud, as it were.
Too bad the spammers are showing up.



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