It takes an especially artful kind of lunacy–
–to draw a libertarian lesson from the financial collapse, but Tyler Cowen does it with aplomb in his New York Times column yesterday. My attention came to this through Barry Ritholtz, who gives a calm and reasonable response to Cowen’s rather loopy argument; I think it’s worth looking at in more detail, though, if only because Cowen provides a curious and potentially important inversion of the usual conversation on financial regulation.
Basically, he argues (and it’s worth reading in full) that the too-big-to-fail approach to finance policymaking, i.e. bailouts, is problematic because it reinforces finance’s unhealthy dependency on government — the same dependency that got finance into this mess in the first place, as big boys like Goldman Sachs manipulated government connections and endless regulatory incentives. The real solution to the problem, Cowen says, is the reintroduction of “market discipline.”
Okay, now, think about that in the abstract for a minute. Let’s leave aside the historical question of whether the government passively or actively incentivized bad behavior in the past, and let’s leave aside the ideological question of whether the market can be relied upon to impose discipline.1 To reach Cowen’s conclusion, you have to reason in principle not only that government intervention in the market is inevitably going to mess up finance’s incentives — fair enough — but that that the government will inevitably be so co-opted, or so incompetent, that those incentive changes will encourage irresponsible and/or unsustainable behavior on the part of finance. Furthermore, you have to assume that absent those government interventions, the same finance companies that so cunningly manipulated the government will pleasantly take their lumps in the open market without ever engaging in said irresponsible and/or unsustainable business practices. Does this really sound plausible?
It actually sounds kind of plausible when Cowen argues it, believe it or not, because he doesn’t fall back on the customary (and hilarious) libertarian idea of Wall Street tycoons as square-jawed, shiny-haired Ayn Rand heroes.2 No, to Cowen the finance companies are “politically protected ‘too big to fail’ institutions” — bereft of initiative, clinging happily to the government’s ankles, accepting the dollars that periodically float down to them and demurring from any constructive criticism of the state. (Wait, what? Yes, Cowen also holds that financial regulations “threaten open discourse” because they make finance hesitant to criticize government for fear of losing their gilded cage. Poor little guys!) Thus, any and all government interventions in the financial markets are by definition “political favors.” Using the bailouts as a dramatic recent example, Cowen makes a surprisingly believable case that government regulation stifles good business and holds finance back from accountability.
The catch: Cowen does this by conflating the bailouts — this is Ritholtz’s point — with the dense history of regulatory changes that preceded them, and by presenting finance’s regulatory heritage as a story of government actively incentivizing bad behavior. Naturally this is horseshit; you don’t have to be a rocket scientist3 to understand the difference between regulation and deregulation, nor to know that Wall Street has been basically running its own show since Reagan proudly and publicly took off the leash (leaving state apparata to follow finance’s directives, not the other way around). But just because Cowen’s argument is a little, uh, imaginative doesn’t mean it’s not also clear and appealing.
Maybe that’s why Cowen made the head-spinning decision to take the second half of his column and apply this same argument to, yes, health care reform. Witness this:
Even after Mr. Obama’s speech Wednesday night, we’re still at the point where the medical sector is enshrined as “too big to take a pay cut,” which is not so far removed from the banking motto of “too big to fail.” In finance and health care, a common political dynamic has created similar trends, namely, out-of-control costs, weak accountability, and the use of immediate revenue patches to postpone dealing with fundamental problems.
This would be where I shake my head back and forth and flap my lips such that they go “h-b-b-b-b” in an amusing manner, indicating surprise and confusion. The health care crisis is caused by… too much regulation?
Cowen’s solitary piece of evidence for this remarkable contention is that the Obama administration made political concessions to medical & pharmaceutical organizations, in exchange for promises of support for health care reform. In what way this is analogous to bailouts and financial (de)regulation, I really don’t know. If nothing else you’d think it’d establish that the administration’s making a concerted and realistic effort to “deal… with fundamental problems” in health care, but, well. Anyway, Cowen builds a whole elegant argument about “politicizing the economy” around this story and his aforementioned beliefs about finance, concluding:
In short, we should return both the financial and medical sectors and, indeed, our entire economy to greater market discipline. We should move away from the general attitude of “too big to take a pay cut,” especially when the taxpayer is on the hook for the bill. If such changes sound daunting, it is a sign of how deep we have dug ourselves in. We haven’t yet learned from the banking crisis, and we’re still moving in the wrong direction pretty much across the board.
And now we come to why I’m so interested in this. No matter what its (minimal) merits, this line of thinking has a lot of political potential. It’s simple, it fits on a bumper sticker (”Government Should Work For US!“), it taps into the justified mistrust people have toward finance and big business — thereby avoiding the dealbreaking elitism that rightly curses most libertarian arguments these days — yet it also, in practice, excuses the government from any responsibility to rein in business, thereby making the Republican Party’s backers horny. This is good stuff!
There is truth in Cowen’s argument, in that that the bailouts create horrifically perverse incentives for Big Finance. I don’t think anyone disputes that. But it’s dangerous to let libertarians project that fact outwards onto an imagined history of regulatory interventionism; the “major lesson” Cowen wants us to learn from the financial crisis would be the worst possible outcome from what ought to be a teachable moment. Even the fact that sane people, in a forum like the New York Times, can debate this question — should we prevent future financial crises by DEREGULATING EVEN MORE??? — is a testament to how broken our political discourse really is.
–
1. The correct answers to those questions, by the way, are “It depends on what you mean by ‘government’” and “No.”
2. He does get in one perfunctory Atlas Shrugged reference, though, which I think is just a formality required by the Libertarian Columnist Oath.
3. WHAT’S THE NAME OF THIS BLOG? OH SNAP!!
Popularity: 1% [?]
Would you like to join in the discussion?Comments
“It takes an especially artful kind of lunacy–”
I got exactly this far in your article before deciding that if your argument needs to open with an ad hominem, the rest of it probably wasn't worth reading.
Shame because I know you are better than that.
September 13, 2009 at 8:50 pmoh for heaven's sake Matt. you know perfectly well i'm referring to Cowen's argument and not his character.
either way, this obsession you have with “civility” and “polite debate” is shallow and pedantic. reminds me of the New Republic circa 2006. my god i think i saw you use “shrill” somewhere else on this site recently. these are not things that mature people should worry about…
September 14, 2009 at 4:02 amThe problem I had with your headline was the weakness of your argument. I will give you the benefit of the doubt but it seems pretty clear that you felt that Mr. Cowen was the lunatic.
As for civility, I suppose you don't have a problem with Representative Wilson shouting at the President? You don't have a problem with the Birthers screaming arguments at politicians instead of debating the issues?
Mature people don't need to worry about civility? Perhaps you are right because mature people will simply ignore those incapable of handling a civil debate.
So along with the Glen Becks of this world, I guess I will start to ignore your articles when they pop up.
How's that for shallow and pedantic?
My “obsession” by the way isn't about polite debate but rather reasoned debate. Passionate debate will not always be polite, but those who win the day should not be those capable of being the most sensational. It should instead be those who are capable of making the most reasonable argument for their position.
Name calling and ad hominem attacks are not just impolite, they are substitutes for reasonable debate. So when people engage in these tactics, I lose interest in their opinion.
My guess is that you were simply feeding the frenzy of the left rather than trying to have a reasonable argument. Which is why I said it was a shame, because I know you are capable of making very strong and very reasonable arguments.
September 14, 2009 at 11:06 amhi matt!
I think it's very telling that we're debating the question right now of “should you read a person's argument when they phrase their headline in a discomfiting way.” That bespeaks a really, yes, shallow approach to political debate — you only want to receive arguments that fit a preconfigured notion of what acceptable debate looks like. This attitude is reductive, bullheaded, and utterly pointless.
It seems to me like you've confused actual logical, rational argument for the appearance of logical, rational argument. Those two things do not always correlate. (Have you read a David Brooks column lately? He writes in the most measured, evenhanded, academic tone you could possibly ask for — but his actual arguments more often than not are complete flapdoodle nonsense.) Particularly in the context of liberal blogging, where writing is characteristically lively and informal, gestures toward formal terms of debate can read as obsequious and pretentious, impeding effective communication.
More broadly, it's just silly to insist that commentators must always adhere to the strictures of “reasonable debate” — other than creating the appearance that we're all friends or something, what good does that do? Considering the arguments that many of today's prominent political figures put forward, it is quite justified to be much more sneeringly dismissive toward them than I am here towards Cowen (a comparatively cogent and sensible writer). People and ideas are not inherently deserving of respectful consideration. Many such ideas, and people, are just stupid.
Conversely, insistences on polite and “civil” debate can delegitimize political arguments that really should be heard: think about the antiwar left in the early years of the Iraq invasion, who were widely marginalized as “shrill” (that's a word with a fraught history) left-wing wackos, excluded from acceptable political debate because their attitude toward the Bush presidency and Washington establishment was rudely condemnatory, harsh, and looked like fanaticism. They were completely right, as it happened, but whaddaya gonna do.
(I react especially harshly to this “civility” business for personal reasons, too — both because I had this exact argument endlessly for four freaking years at Harvard, where most of the political crowd naturally had a big ol' stick up their ass, but also because I see this attitude as fundamentally elitist. The idea that we should all conduct ourselves in politics like the Yale Debating Club is dismissive and exclusionary toward people who won't, or can't, act like people who would be in the Yale Debating Club. Any attitude that tries to wall off political debate from broader cultural access is, to me, immediately suspicious and potentially destructive to the discourse. But that's probably just one of my populist bugaboos.)
Anyway, look, you would have a point if my post had been an argument that Tyler Cowen eats his own poo or something. No one is saying that political debate should consist solely of hurled insults and the publication of people's addresses. But surely we can move past the middle-school-caliber issue of whether commentary ought to be ignored because it was MEAN, or had a SWEAR WORD in it, or whatever. Aren't there still two wars and a recession going on?
(oh and, on Wilson and birthers: no, I do not have a problem with these people. Sure, Wilson made kind of a dick move interrupting the President while he was trying to give a speech, but whatever, it's nothing to make a federal case about. And the birthers: more power to them! They're not hurting anybody, wandering around out there bein' all crazy and stuff. Good for them for expressing their wacko beliefs.)
September 14, 2009 at 12:00 pmMarkus,
I am as far from a Harvard Elitist as you can get. Grew up in farm country, went to a small state school and live in fly-over country.
You make a good argument that I shouldn't judge a book by its cover… or article by its title. As an author though you should know that many people will be put off by such a title… not just the Harvard Debate Team members.
I do object though to the notion “some ideas, and people are just stupid.” Certainly I am not going to argue that everyone is smart and every idea is a good one… but isn't it dangerous to dismiss someone as stupid because you don't agree with them?
The screaming anti-war protesters from a few years ago are a good example. I didn't agree with them (nor do I agree with your thought that they were right) but I didn't dismiss them as stupid because of our disagreement. Nor did I dismiss them as stupid even though many of them were incapable of coherently forming a thought while chanting.
Instead, I dismissed many of them because they were simply ignorant of many pertinent issues. Most of those I talked to knew nothing about the oil industry other than “Haliburton is evil!” (usually exclaimed quite loudly with clenched fists) Why would I listen to you as you chant “No Blood for Oil” when you can't even tell me the first thing about the oil industry?
So perhaps I should go back and read your article even though I didn't like the title. Honestly, I probably won't. Perhaps it's my loss for missing out on your perspective, or perhaps it's your loss for losing an opportunity to persuade me. Either way, your title didn't sell the soap this time.
September 14, 2009 at 3:40 pmhey matt,
I won't be offended if you choose not to read the above blogpost. I really won't. (It's not very interesting, actually, unless you're really into abstruse discussions about libertarianism and regulation.) I do not write or title my blogposts to maximize readership — if I did, they would all be called “27 PICTURES OF MEGAN FOX AND/OR LOLCATS.” This makes our conversation rather academic.
But on the “stupid” thing: just to be clear, I don't dismiss people as stupid because they disagree with my opinions. I dismiss them as stupid because their opinions are stupid. Those categories might correlate from my perspective, but there is an important difference; stupid opinions (unlike logical, falsifiable, relevant opinions) have no intellectual value, and serve no purpose except to clog our political discourse like leaves in a storm drain. Which they do with gusto: read Politico and you'll be awash in stupid opinions, which despite their utter lack of value define day-to-day political reporting. Surely we can at least grant ourselves, as commentators, the luxury of ridiculing or ignoring them.
(Oh, and, re elitism: I don't mean to accuse you personally of elitism. To your credit, Matt, I have never seen you demonstrate anything of the kind. I just mean that the argumentative attitude you're promoting can, when systematized, lead to elitism in practice.)
September 14, 2009 at 8:55 pmHave something to add?