March, 2009

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Divide, Divide, Divide

Tuesday, March 31st, 2009

Some well-intentioned people may believe that man is intrinsically good and benevolent. I am not one of those people. Man is self-interested.
The pigs, Snowball included, rapidly became corrupt. Perhaps one thing that led to their leadership over the other animals is their education. Their superior education meant that the other animals relied upon them for information. The control of information within Animal Farm meant that no other animal was factually aware of things as they were both outside and inside the farm. The supposed superiority of the pigs not only gave the pigs false preeminence, but forced the other animals into a status of second class citizens (which is contrary to the tenet of Animalism that “All animals are equal”).
The rapidity of the pigs’ corruption tends to lead readers towards the belief that power without restraints universally corrupts.
In order to prevent tyranny, opportunities to exercise power must be restrained, either by division of power or by so many competing interests that it is impossible to implement policies.
Power tends to corrupt because of self-interest. There may be some cases where the exercise of power does not corrupt; however, I can only think of one – families in which the parent-figure loves all their children and is benevolent. This is because the unit is small enough that the leader can take into account all the needs and interests of its members. This is not a perfect case; even in families, individuals can be corrupted through the use of power.

Dr. Merkwurdichliebe

Tuesday, March 31st, 2009

Chris Martin

Sometimes, an idea’s worst enemy can be its own proponents, true believers or charlatans.  Snowball and Napolean both professed a belief in Animism.  The end result, though, was that animism suffered at the hands of self-interest.

Yesterday I listened to Russ Robert’s interview with Milton Friedman (my hero…) and they made an interesting point about the Federal Reserve.  Friedman advocates a systematic approach that would remove the human element.  He argues that, in the past 20 years (before the current catastrophe), the Federal Reserve has acted exactly as a computer program would have.  Why do we insist on having someone at the helm?  It seems like it’s a great idea to have someone who can make a discretionary diversion from standard procedure in the event of an emergency.

Do we, though?  Perhaps the fall of the USSR wasn’t so much a failure of communism but a failure of the human element in communism.  Eventually, people are going to act in their own self-interest – especially the people in charge, who stand to gain the most by “discretion.”

Russ Roberts made the point that, on a case-by-case basis, it’s easy to make arguments for discretion (e.g. the distortion of the US sugar market).  However, the aggregate effect of case-by-case discretion shows that we may be better of adhering to principle.  Eventually, the human element will fail, as it failed in Dr. Strangelove.

Animal Farm/Strangelove Posting

Tuesday, March 31st, 2009

In setting up their society, the Animals appear to assume that they are capable of avoiding the problems of humans that tend towards power corrupting.  Evaluate to what extent their assumption holds.  What does this imply about the universality of the prediction that power will corrupt and inevitably lead to totalitarian ways?  What if anything might prevent such an outcome? 

Comrade Napoleon and Stasis

Monday, March 30th, 2009

Jamie Wilson–It has been contended by some preeminent scholars that the author Virginia Postrel has divided people into two categories, stasists and dynamists. For stasists, change and evolution are viewed as enemies to the current state of things and should be avoided if possible. Dynamists view evolution as a good thing, with many benefits arising after a temporary period of pain. The book Animal Farm is a good illustration of this point. The animals, desiring to throw off the bonds of slavery, instituted a new social order– Animism — that would help make their lives better through reforms and liberty. Snowball was particularly adamant about creating a greater future with their new freedoms. Napoleon, however, was a pure stasist. Hijacking Animism and driving Snowball off the farm, Napoleon would only change those things that kept him from more power. By the end, he had achieved perfect stasis– the farm had regained equilibrium, at the exact point it was before the Rebellion.

Not everything can be looked upon in such stark terms, but with regards to moral and political issues almost every solution to a problem can be viewed as either being a static or a dynamic force. Sometimes, viewing the world in such absolute terms is beneficial. Not everything needs to be complicated! If people would detach themselves from their own ideas and see the bigger picture, I believe the stasis/dynamic model would be an accurate system to follow for important political decisions. If society allows itself to be swayed by relativism and charisma, just like the animals did in Animal Farm, we, too, will find ourselves on the road to serfdom (to coin a phrase).

The Future and Its Enemies

Monday, March 30th, 2009

Postrel divides the world into stasists and dynamists. Some object that her division is too stark, too simple, maybe even simplistic. Is it? Your answer might include substituting continuum from stasist to dynamist. Does a continuum  provide better explanatory power? Does her model actually explain the way people think? On all issues or just on some?

It would seem that sometimes crime does pay

Tuesday, March 17th, 2009

This may be a crazy thought, but maybe our country and our economy cannot and should not avoid a little bit of an economic depression.  Call this approach what you will.  Personally, I’d call it a wakeup call.  The government, in a frenzy of worry for what “could happen” if certain corrupt companies go under, is creating a system that rewards bad behavior.  This rewarding of bad behavior is one of the reasons why morals are collapsing so easily in the business world.  Maybe we should take a step back and let the market do the punishing acts against these crooks.  It would show to investors, business owners, and everyone else that poor business practices will not be rewarded. 

The most troubling worry that I see when applying this principle, is the effect that this could have on the mindset of the overall populace.  From the little I have learned about economics, it seems that the public’s mindset of what is going on is sometimes more important than what really is going on.  When a company like AIG goes down, it does take a lot down with it.  These effects would be deep and far-reaching to the economy and to the average American.  It could create a domino effect that would leave the economy going down a seemingly endless downward spiral.  However, I don’t see that the alternative is that much better.  These bailouts by the government cannot continue forever.  Someday the economic day of reckoning will arrive.  What the government is doing is only postponing and adding to the problem.

 

Knowledge, Education, and Hope

Tuesday, March 17th, 2009

I had just been pondering the struggle between government and markets before I read this week’s question. Before I was forced by the post to come up with some solutions I was resolved to give up and be a government antagonist. Since my eyes have been opened from my pervious state of ignorance to this seemingly hopeless situation I am tempted to wish that ignorance is bliss. I know better than this however, I know that knowledge is power. If I were in the position to stand up for markets I would use this very truth, that knowledge and education are the answers. When in all of history have free markets let us down, especially compared to times that government has let its people down. There will always be winners and losers and what is fair about politicians choosing these winners and losers? Bailout recipients have not earned the right to stay in business, no more right than any other institution that has failed and been replaced for something that was needed more in the past. Markets allow for creative destruction based on merit, demand, need, etc. This is the best way to serve people and if people are happy and prosperous for the most part would this not look good for the politicians who allowed this? To choose going against free markets there is an artificial market created based on artificial risk and wealth that will most likely depreciate in value with time. This cost outweighs the benefits of an immediate “market cure”, especially when the market and risk is based on something that is failing. This depreciation of valued goods and wealth will be felt eventually by the population; it will be negative for the society which will be a reflection of its leadership. Politicians and economists can only make educated guesses and hopefully an educated society will understand and not give up hope so quickly.

Economists as our Governors

Tuesday, March 17th, 2009

Nate Whitaker

An interesting thought occurred to me as I was reading the price of everything. People are driven many times by there passions; that mixed with democracy is like giving kids gasoline and matches and telling them to “be safe.” I wonder if a country or society would run better if it was set up more like an aristocracy which had purely economists at the head. They would be there merely to “not do anything,” or at least as little as possible.

A lawmaker feeling the need to deliver promises to constituencies seems to be one of the most obvious economic and social problems in many instances. Because there will always be some losers in a free market system, it is hard to convince people that in the long run everyone will be better off.

Concerning AIG I am kind of torn. For the most part I am of the opinion that no company should receive special protection from the government; this creates greater problems for people in the aggregate. I heard Ben Bernanke give an interesting analogy in contrast. He described this crisis as one of a neighborhood fire. If your neighbor’s house is on fire it is in your interest to put it out so that yours doesn’t catch fire. After the fire is out then you assess penalties for who is held responsible. Banks might be an exception to the survival of the fittest rule because they are so crucial to generating wealth.

nobleness is next to godliness

Tuesday, March 17th, 2009

Unfortunately, politicians that promise to not do anything about the state of the economy would never be elected in any modern society.  We live in a society that demands action, and I think that in general people think that the job description of a politician is ‘knowing what needs to be done to fix the economy’–because we are all too busy to worry about things like that.  After all, we live in a specialized society.  People become specialists in their specific careers so unless you are an economist, learning about the economy doesn’t seem to be a worthwhile endeavor–it is a job for someone else to worry about.

That being said, people hear stories about the seemingly negative effects of capitalism and regulation-free economies.  They respond to these stories by becoming ‘noble’ citizens and electing politicians that promise to save the lives of thousands of workers who are losing their jobs due to failing industries and the ‘all american’ brand names that those workers belong to.

So politicians in America (and I guess all over the world?) have two main problems that they face concerning how to handle the economy: First, they need to actually understand what is best for a free-market economy. and Second, they must figure out a way to convince voters that less regulation is actually better for the whole in the long run–that failing businesses do not mean a failing economy.

Concerning the first problem, I don’t know how to fix that.  The second problem, I think that U.S. citizens are pretty concerned with where their tax dollars are going, and if voters fully understood the amount of money they were personally spending on keeping failing industries alive then they wouldn’t be so happy about it.  If the whole situation was sold as ‘saving the economy’ rather than ‘saving those poor auto and textile workers jobs’ then we might get somewhere.  Instead we just continue down the same path, trying to be patriotic and noble by pretending to care about individuals, and blinding ourselves from the reality of what is going on.

Heather

Save only the trees with lots of roots.

Tuesday, March 17th, 2009

Let me stand alone on this.  AIG is one of the few companies that cannot die.  In better terms, AIG is already dead, but it shouldn’t be able to fall.  Shannon mentioned a giant tree in the rainforest.  If it dies, should we brace it so that all of the life can be sustained?  AIG should be compared to one of the biggest trees in the rainforest, its roots intertwined to almost every other tree.  If it dies, what will happen if we don’t brace it?  It will kill everything else in the rainforest.  There aren’t many companies that we can say the same for, but the biggest insurer in the world has a lot of roots and dominos.  It should be braced so to not kill the rest of the rainforest.

I am a huge promoter of free markets.  Prices will distribute assets and property.  Some will come up winners, some will be losers, and everyone will end up with a higher quality of life.  In the case of GM, let Toyota make us better cars and trucks and let creative destruction take its course.  I would say this of almost any company.  The government should not step in and turn us all into Socialists, but an AIG crash would freeze up almost every bank and insurance company alive.  Capital must be accessible to allow more investment, and banks are the great distributers of capital.  Maybe I sound Keynesian, I promise I am not.  Let’s just keep the capital flowing.

Jacob Peterson