Comments appear not to work very well, so even though this should be more of a response to Nuttall, I'm making it a post.
I think that housing was a wise place for government to push investment (although for a contrarian view, see http://www.theatlantic.com/doc/200712/real-estate). I think where we went wrong is in lack of oversight, first in the area of subprime loans, and second in so many other areas that tangentially related to subprime loans, such as credit default swaps. (Although in some ways, I have to hand it to American capitalism. It's amazing how some of these financial instruments have managed to spread the costs of what started as an entirely local problem across the entire world).
Put it this way. Fannie and Freddie have been around how long? And this problem occurred when? After how many years of an intensely regulation-hostile administration? In my mind, blaming Freddie and Fannie--at least the idea of Fannie and Freddie--is like blaming your car engine for going out when you haven't changed the oil in 8 years.
The American economy is an ever-evolving machine, and that machine will constantly require maintenance. But instead of providing that maintenance over the last 8 years, our approach has been to avoid maintenance at all costs. Wall Street, being filled with some of our brighter minds because that's exactly the sort of labor capitalism rewards, will always find new ways to exploit holes and cheat the system. But this is no excuse to just give up on regulation. It's the reason why we must try harder to get it right.
Showing posts with label capitalism. Show all posts
Showing posts with label capitalism. Show all posts
Saturday, November 15, 2008
More on Capitalism
Hey guys, I'm still figuring out this blogging thing. Last time I used comment instead of post and it either went out into oblivion, or it was so bad that you guys politely said nothing about it.
Like Karl, I think there's a place for progressive government in business, and like Rob I'm dismayed at the outcome of most of governments' attempts to get involved.
Karl, the problem is, it is immensely difficult to come up with a system as consistently measurable as economic value. I challenge you, for example, to explain how a CEO's and a senator's pay should compare. There's no doubt the invisible hand has often led to economic surplus and steamrolled activities which people don't want aren't willing to spend time and resources on. Capitalism is not good at assigning value to things which are measured by a standard other than economic equity. I have friends who argue with me that a person should be free to sell their own organs (as I did so much blood plasma freshman year) for profit. I believe the invisible hand would lead to a repulsive outcome here.
Beyond enforcement of contracts, recognition of externalities, and planning/maintenance of infrastructure, there are precious few initiatives governments have undertaken which "grow the pie" of wealth. Programs aimed at redistribution have a distressing record of shrinking the pie--for example the policy of using Fannie and Freddy as agents of spreading home ownership. As I said in my lost comment, it is so hard to get policies right that it hardly seems appropriate to keep trying.
Like Karl, I think there's a place for progressive government in business, and like Rob I'm dismayed at the outcome of most of governments' attempts to get involved.
Karl, the problem is, it is immensely difficult to come up with a system as consistently measurable as economic value. I challenge you, for example, to explain how a CEO's and a senator's pay should compare. There's no doubt the invisible hand has often led to economic surplus and steamrolled activities which people don't want aren't willing to spend time and resources on. Capitalism is not good at assigning value to things which are measured by a standard other than economic equity. I have friends who argue with me that a person should be free to sell their own organs (as I did so much blood plasma freshman year) for profit. I believe the invisible hand would lead to a repulsive outcome here.
Beyond enforcement of contracts, recognition of externalities, and planning/maintenance of infrastructure, there are precious few initiatives governments have undertaken which "grow the pie" of wealth. Programs aimed at redistribution have a distressing record of shrinking the pie--for example the policy of using Fannie and Freddy as agents of spreading home ownership. As I said in my lost comment, it is so hard to get policies right that it hardly seems appropriate to keep trying.
Friday, November 14, 2008
A Rebuttal
So "leaning to the left" caught my attention enough that I'll jump back into the fray. For some reason, anytime someone says "left" or "liberal" around me, I get all defensive and into battle mode. I think it has something to do with having lived in Utah so long. [By the way, Robert, I know that's not your intention--I'm just interested in exploring my reaction to the phrase].
By the way, I should never check my email one last time before I go to bed, and I especially shouldn't have clicked through to Robert's post, because I just spent the last 45 minutes trying to think up the best way to articulate the fundamental flaws that I believe underly Ezra Taft Benson's views on government.
And I still haven't thought of the best way to articulate things. That's understandable because Ezra Taft Benson put a lot of time and thought into his article, and one would expect that a decent rebuttal to the article would require an equivalent amount of time and thought. Back when I was in school I would have been up to the task. But now with my job and family responsibilities occupying so much time out of my life, it'll have to wait.
[Which reminds me of something I read once in The Atlantic--something about how Arafat, I think, once he got into power, decided that the best way to pacify some of his more radical terrorist supporters--whom he perceived as potential threats--was to give them wives and families. And apparently they have statistics showing that it worked. At first, I thought oh, that's a testament to the importance of families. Now I wonder if it's just because the former terrorists were so busy taking out the trash and fixing broken cabinet doors that they didn't have time to entertain radical thoughts. :)]
Anyway, I have no qualms with disagreeing with Ezra Taft Benson here. In fact, I think that many of our early church leaders would have disagreed with Ezra Taft Benson's poitical views. And no, I am no position to back that statement up right now.
Here are some of my gut responses (probably a little repetitive in light of previous blog posts, but maybe one day I'll say it the right--er, left--way):
(1) Ezra Taft Benson's ideology appears to assume that, for the most part, all "wealth" is fairly allocated to those who created it, and all "costs" are fairly allocated to those who actions resulted in those costs. But this is clearly not the case. Our markets and monetary systems have innumerous flaws that I will not list here (though I have previously tried to explain some of these flaws). I'll just use an example (perhaps even a deliberately deceptive political cheapshot) as a proxy for those flaws: is the work of a plumber who takes home 250,000 a year really 6x more valuable than your average school teacher? Or (without the political cheapshot), is the work of your average CEO really 10x more important than senator? Should our Patent and Trademark Office be filled with grossly incompetent patent examiners because law firms are able to pay anyone who would be competent for the job 4x more in salary? (In case you couldn't guess, the last rant was inspired by my day at work).
Note that I am not saying that everybody should be paid the same as everyone else, I am merely observing that markets fail to fairly reward people the value of their work. Accordingly, our incentives are often in the wrong place, and our productivity is steered in unhealthy directions, sometimes with self-destructive consequences.
(2) The government, having created the monetary system in the first place, should also be responsible for taking measures to "fix" that monetary system to correct for market failures, including taking taxes and providing certain benefits.
(3) Not all government programs that involve the "redistribution of wealth" are zero-sum. For example, keeping people healthy and off the streets pays many indirect benefits to all citizens.
(4) Concentration of wealth, particularly when it involves the means of production, is as much a threat to life, liberty, and the pursuit of happiness as a despot or an invading foreign power. I believe I have blogged on this previously.
(5) Government action is necessary to initiate beneficial programs that, absent government involvement, no one person or entity would have the incentive to undertake (highway system, pollution controls, etc.) I.e., the tragedy of the commons.
(6) One thing I do agree on is that a lot of government is best left to the local level. Of course, I believe this is more true for executive and judicial branches and less true of the legislative branch. But maybe I'll save that conversation for another day.
(7) The point that I feel most adament about is that Ezra Taft Benson's political ideology distances the individual from government in a way that is unhealthy in the modern world. The people of this world become increasingly inter-connected every day, and it's time we started treating government as a forum in which we negotiate our interconnectedness, as opposed to a necessary evil.
And from this remark, let me just jump to one of my personal pedastool points. We all look forward to the day when God's kingdom will be restored to this Earth. But most of us assume that since it will take an intervening force to make that restoration possible, we should just be all doom and gloom and live in survival mode while we watch the world crumble around us. But why should we act this way? Is it not possible that a great deal of the intervening force that brings forth God's kingdom will be us taking a role in the future of the world, engaging our brothers and sisters in discourse instead of sitting firmly entrenched in our sheltered positions?
Sorry, not sure how I ended up on that pedastool. I should go to sleep.
Oh, and here are some articles that say things in a way I only wish I could:
http://maxwellinstitute.byu.edu/publications/transcripts/?id=119
http://www.geocities.com/Athens/Oracle/7207/demosp.html
By the way, I should never check my email one last time before I go to bed, and I especially shouldn't have clicked through to Robert's post, because I just spent the last 45 minutes trying to think up the best way to articulate the fundamental flaws that I believe underly Ezra Taft Benson's views on government.
And I still haven't thought of the best way to articulate things. That's understandable because Ezra Taft Benson put a lot of time and thought into his article, and one would expect that a decent rebuttal to the article would require an equivalent amount of time and thought. Back when I was in school I would have been up to the task. But now with my job and family responsibilities occupying so much time out of my life, it'll have to wait.
[Which reminds me of something I read once in The Atlantic--something about how Arafat, I think, once he got into power, decided that the best way to pacify some of his more radical terrorist supporters--whom he perceived as potential threats--was to give them wives and families. And apparently they have statistics showing that it worked. At first, I thought oh, that's a testament to the importance of families. Now I wonder if it's just because the former terrorists were so busy taking out the trash and fixing broken cabinet doors that they didn't have time to entertain radical thoughts. :)]
Anyway, I have no qualms with disagreeing with Ezra Taft Benson here. In fact, I think that many of our early church leaders would have disagreed with Ezra Taft Benson's poitical views. And no, I am no position to back that statement up right now.
Here are some of my gut responses (probably a little repetitive in light of previous blog posts, but maybe one day I'll say it the right--er, left--way):
(1) Ezra Taft Benson's ideology appears to assume that, for the most part, all "wealth" is fairly allocated to those who created it, and all "costs" are fairly allocated to those who actions resulted in those costs. But this is clearly not the case. Our markets and monetary systems have innumerous flaws that I will not list here (though I have previously tried to explain some of these flaws). I'll just use an example (perhaps even a deliberately deceptive political cheapshot) as a proxy for those flaws: is the work of a plumber who takes home 250,000 a year really 6x more valuable than your average school teacher? Or (without the political cheapshot), is the work of your average CEO really 10x more important than senator? Should our Patent and Trademark Office be filled with grossly incompetent patent examiners because law firms are able to pay anyone who would be competent for the job 4x more in salary? (In case you couldn't guess, the last rant was inspired by my day at work).
Note that I am not saying that everybody should be paid the same as everyone else, I am merely observing that markets fail to fairly reward people the value of their work. Accordingly, our incentives are often in the wrong place, and our productivity is steered in unhealthy directions, sometimes with self-destructive consequences.
(2) The government, having created the monetary system in the first place, should also be responsible for taking measures to "fix" that monetary system to correct for market failures, including taking taxes and providing certain benefits.
(3) Not all government programs that involve the "redistribution of wealth" are zero-sum. For example, keeping people healthy and off the streets pays many indirect benefits to all citizens.
(4) Concentration of wealth, particularly when it involves the means of production, is as much a threat to life, liberty, and the pursuit of happiness as a despot or an invading foreign power. I believe I have blogged on this previously.
(5) Government action is necessary to initiate beneficial programs that, absent government involvement, no one person or entity would have the incentive to undertake (highway system, pollution controls, etc.) I.e., the tragedy of the commons.
(6) One thing I do agree on is that a lot of government is best left to the local level. Of course, I believe this is more true for executive and judicial branches and less true of the legislative branch. But maybe I'll save that conversation for another day.
(7) The point that I feel most adament about is that Ezra Taft Benson's political ideology distances the individual from government in a way that is unhealthy in the modern world. The people of this world become increasingly inter-connected every day, and it's time we started treating government as a forum in which we negotiate our interconnectedness, as opposed to a necessary evil.
And from this remark, let me just jump to one of my personal pedastool points. We all look forward to the day when God's kingdom will be restored to this Earth. But most of us assume that since it will take an intervening force to make that restoration possible, we should just be all doom and gloom and live in survival mode while we watch the world crumble around us. But why should we act this way? Is it not possible that a great deal of the intervening force that brings forth God's kingdom will be us taking a role in the future of the world, engaging our brothers and sisters in discourse instead of sitting firmly entrenched in our sheltered positions?
Sorry, not sure how I ended up on that pedastool. I should go to sleep.
Oh, and here are some articles that say things in a way I only wish I could:
http://maxwellinstitute.byu.edu/publications/transcripts/?id=119
http://www.geocities.com/Athens/Oracle/7207/demosp.html
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