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The Governments Have Learned from their Mistakes

| 28 Comments
It's too easy to satirize the mocking of naive innocents such as Jonah Goldberg, to engage in the fun but unedifying art of tu quoque aimed at the well-meaning gentlemen who note market failure and imply the panacea: Good for what ails you! Got market failure? Government will cure it. Government failure? More government will cure it. Personal problems? Government is here to help you with all your needs.


We live in an era where some fringe cranks focus in an inchoate way on government failure, or the pitfalls of government solutions for perceived market failure.

Sophisticated people focus more on how we acting together in a socially-responsible way can fix the problems that irresponsible private actors have inflicted upon all of us. The enlightened main currents of opinion recognize that it is certainly annoying to clean up after these messes created by private individuals and institutions, but if we don't accept the burden, the costs to us all will be higher.


The trouble is, as sagacious as people like Kevin Drum are when compared to simple-minded people like Jonah Goldberg, these guardians of the main currents of enlightened opinion fail to think beyond stage one: Why is it that bankers won't learn from their mistakes? What incentive structures have been put in place or, as importantly, what has been demolished, so as to discourage them from learning from their mistakes?

Demolished might be too strong a word. Decayed, dissolved, deteriorated might all be better descriptions, as in a building not well maintained, as with much of our public infrastructure (oh, but shovel-ready will fix this as well!)

Here is the question they dislike most, as it reflects a shocking lack of faith in our ability to solve public problems through collective action: Have the institutions they favor demonstrated a better capacity for learning from their mistakes than the ones they mock? If not, why not?

Are California or Michigan or New York &tc doing better learning from their mistakes than Goldman Sachs is? Are they really? We mock the idea that bankers are, but is it a fair mockery? Or the gaunt, chilling laugh of those who are practically undead themselves?

Have the PIIGS learned from their mistakes? Really now, have they? Is there at least as much at stake here as there is in even the biggest "too big to fail" bank or corporation?

Those who think the problem was embedded in a previous Administration or one side of the aisle need to free their minds as well. The reassuring myth that it is all caused by having the wrong sort of people in government, and now we've got the right sort of master-minds involved; those who believe in government and have faith in its capacity to solve all problems, is one they may want to reconsider, and take a more historical view. If they can open their mind to untainted history.

A few points to keep in mind as they open their minds: Firstly, a group that swept into power asserting that they were going to make break with the failed policies of the past often use as one of their cudgels against those who object to their policies the fact that their policies are no different from that of the previous Administration's. This double-think has an old and dishonorable history, dating back at least to the Administration they most admire: FDR's, which has gone down in progressive history as a sharp contrast from the supposedly do-nothing lassez faire Hoover Administration, when the truth was "practically the whole New Deal was extrapolated from programs that Hoover started," as Rex Tugwell admitted.

Why is this ancient history important? Isn't it true that only cranks and nutters, usually on TV or Radio or at some obscure Think Tank, rave on about comparisons between Hoover and FDR? True, but ideological finger-pointing and sneering over this obscures rather than illuminates: It closes the mind you want open to engage in any reconsideration.

Exactly as it is meant to.

In this way, we lose track of the original task: Unravelling the big ball of string that has come down to us, in order to see where it leads us in answering our question: Why our are institutions, private as well as public, apparently no longer capable of learning from experience?

(Btw, how's fixing education working out for you? How has throwing money at the problem worked out for you? Do you retain faith in the same government that has complete and sole responsible for one District's public education system, the District of Columbia's, to solve the problem's of our country's education system? Where does DC rank in per-pupil spending? Has it become the shining jewel which the rest of the country should emulate?. Over the last, pick a time period, lets say 35 years, has government learned from its mistakes when it comes to the provision of education? And yet the wise are confident it will do the best of all possible jobs when it comes to, say, health care...or student loans...or home mortgages...or the auto industry).

Our enlightened, when they speak of society's problems and the need for "society" to address them, they always mean by the later government. <--- Non-sequitur inserted to keep in mind when considering all of this.

Is their confident mocking laughter really warranted? From who's knee have the Banker's learned from since 1933 (or before)? Who shields them from the consequences of their own decisions? Who is shielding the rest of us from the consequences of ours? This confidence that we out here, private individuals and institutions, make mistakes, make blunders, but they are wise and will ever nudge us in the Correct Direction, save us from folly, and never lead us all into folly or, like lemmings, off a cliff (such as a cliff of unsustainable unfunded future mandates): Is it justified?

I assume the proper response is: If only we fallible members of the public would ever select the "correct" people to hold public trust, and never the "Right," all would be well: But again, it is our blundering that makes a mess out of their efforts on our behalf. We should not mock this confidence they have in their own ability, good intentions, and their sense that it is only the saboteurs and wreckers that constitute their political opposition who cause failures in government. But we should question this confidence as we untangle the ball of string that they have handed us in the form of opinion-leading Lippmanesque journalism and Schlessingeresque Court Historianism.

We might find that the tu quoque isn't a tu quoque at all, and that indeed it is their mindset that is the source of much of what they decry: That in the evolution of things, the problem is they have created a government that creates problems, then appoints itself to fix them, rinse and repeat ad infinatum, and that after sufficient iterations of this there is an utter displacement of responsibility. Who or what for example is really entirely to blame for the financial crisis? Both and all sides have some merit in the narratives they construct in order to point fingers at their despised boogiemen and hated political opponents. When everyone is responsible, no one is responsible, and this is the political economy we have created, and will deserve until we fix it "as a society."

If you know the solution, you're a better man than I am, Gunga Din. But if you think you know the solution with the confident mockery that some have, but the solution you have is a sham-solution, one that merely iterates the cycle again rather than breaking and reversing it, then you are not a better man at all, but the worst, however full of passionate intensity you may be.

28 Comments

Indeed.

Has the regulation industry we are about to further empower to oversee Wallstreet learned from its failings in the current crisis? Or the last one? Or the ones before that?

Have the Congressional Committees tasked (and given extraordinary subpoena power) to oversee these failed institutions learned?

Have the quasi-governmental entities like Freddie and Fannie who were smoked at least as badly as anyone else, but fly improbably below the radar screen?

But these are the groups destined to gain all the more power and control.

Its an old saw- when the market fails, the answer is more government. When the government fails, the answer is more government. And hence, any institution that isn't actively conservative will trend liberal over time. Its the path of least resistance.

Look at the road we're on, and more importantly where we are going. The term 'Command Economy' is the only way to describe it, and the Obamaites are its great champions, sugar-coat it how you like. But both parties are well ensconced in the corporate-public entanglement of interests that have got us to this point. We need a wholesale change of political class to possibly undue this.

This is denser than your normal fare, with a touch of mysticism, no?

Frist, about tu quoque. It's used twice here, but I think backwards. Here's a definition:

Tu Quoque is a very common fallacy in which one attempts to defend oneself or another from criticism by turning the critique back against the accuser. This is a classic Red Herring since whether the accuser is guilty of the same, or a similar, wrong is irrelevant to the truth of the original charge. However, as a diversionary tactic, Tu Quoque can be very effective, since the accuser is put on the defensive, and frequently feels compelled to defend against the accusation.

Porphyrogenitus (Pg) responds to Kevin Drum and Al's observation that Jonah Goldberg is out to lunch suggesting that we should refrain from enacting financial regulation of derivatives and hedge funds because financial institutions have learned their lesson, and are therefore not likely to repeat the same mistakes. Pg (I think)suggests in the first paragraph that he (Pg) is going to engage in some "fun but unedifying tu quoque" by noting that the government does not learn from its mistakes either.

The other reading might be that Drum and Al were engaging in tu quoque but that would make no sense, because they (clearly) are not. They are appealing to experience, a fish (elk) story in AL's case, for their skepticism of the Goldberg claim; they are not tu quoquing anyting.

However, in the second to last paragraph, Pg says this:

We might find that the tu quoque isn't a tu quoque at all, and that indeed it is their mindset that is the source of much of what they decry

This does rather suggest that Pg maybe thinking (erroneously) that Drum and AL are engaging in tu quoque? "Their mindset" appears to refer to the "Sophisticated people (who) focus more on how we acting together in a socially-responsible way can fix the problems that irresponsible private actors have inflicted upon all of us" (i.e. liberals).

Here's the mystical part:

Pg goes on:

: "That in the evolution of things, the problem is they (liberals) have created a government that creates problems, then appoints itself to fix them, rinse and repeat ad infinatum, and that after sufficient iterations of this there is an utter displacement of responsibility. (liberal label added)

It's mystical insofar as it seems to be offered as a key for understanding the political universe.

Here are a couple of general observations. I'm not sure that the claim "government does not learn from its mistakes" is true in the context of financial regulation. Bernanke, of course is an expert in the Great Depression. As I understand it, much of the banking regulations we have are the result of the lessons learned during the Great Depression. We also learned that failing to intervene when major financial institutions failed in the 30's deepened and prolonged the depression. Those lessons have been applied to good effect during the present crisis. We have backed off on regulation during the last 30 years, and this has hampered government in preventing some of the dangerous financial shenanigans that AIG, Goldman, Lehman et al. have engaged in. Reinforcing those regulations, and reinvigorating oversight, is indeed learning from our mistakes.

Roland: I meant it as in the title of my post, and my crude comment appended to AL's post: I was tempted to simply tu quoque Kevin Drum: The private sector hasn't learned, and government hasn't learned either! So's your mother!

But leaving it at that gets no one anywhere.

My point is: I think we learned the wrong lessons, and you still adhere to them. Btw, it is in part because people's views of what happened then are...wrong...that we learn the wrong lessons. We did intervene during that crisis, but in ways that made it worse (starting under Hoover). There is a reason why our depression was Great.

"[A] key for understanding the political universe."

Which brings me to Mark's post:

"[B]oth parties are well ensconced in the corporate-public entanglement of interests that have got us to this point"

I'm going to go off on a slight tangent but want to first say you're not wrong here. Note that when the good people do this it is called "public-private partnership," while when the bad people do it it's called "crony capitalism" or some such.

Anyhow, command economy is a bit much. Can I interest people in one of my hobby-horses?

Back when I was a student at UW-Madison in the early '90s, I had a bunch of courses where Corporatism was discussed. Note it doesn't quite mean what people think it means when they see it (Corporate control of government, or corporations and government entangled together, &tc): That's part of what goes on, but by no means the whole.

Most classes where Corporatist theory was discussed, it was sort of a disreputable thing with dark ties.

I had a Senior Seminar on the Spanish Civil War, for example, and Corporatist theory was part of it, and let me tell you, it wasn't the good guys it was associated with! No, sir!

But I had one class, a Sociology class taught by a bright, clearly up-and-coming professor, who contrasted (American) Individualism with Corporatism, and he clearly preferred the later over the former.

That professor's name was Joel Rogers.

His name came up recently, and in a way that confirmed something I already perceived.

(This is a reasonable explanation of Corporatism).

(Peeps might want to consider if they were taught the whole truth about both the New Deal and the Great Depression, especially the later's origins; really one also has to go back farther too, as that wasn't when the ball of string started to get tangled up either. Possibly the last time we had Bankers left to themselves was the 1907 crisis which they had to deal with themselves, and did).

Btw, sorry to drone on, but Rolland, may I humbly suggest that by buying into one of the cudgel-narratives, you're view of the situation is skewed, and thus your perception of the problem and how to address it is distorted?

Regulation, such as the SarbOx bill passed some time within the last 30 years (among others) is only one aspect of the incentive structure/de-structure. Here is just one aspect of the counter-narrative (note the date...Note also they didn't understand half the implications of banks being involved in a trillion-dollar project of dubious provinence, which makes their correct prediction an incomplete prediction).

The cudgel-narratives each have facts on their side but re selective in which facts they mention: A familiar aspect of the Lipmanesque Opinion Leading Journalism and Schlesigeresque Historianism we've come to accept as the source of our views.

Not that the time before was such a golden age but we are in an age - here we are blogging - where any such filters to create our opinions pre-packaged for us can fall from our eyes like scales, if we want to make the effort.

We can at least try to cleave closer to reality than taking up cudgels our political class in their petty struggles over who gets to taint themselves by being nominal leaders of this perpetual-motion machine they've built for us.

One of the reasons government has so much trouble 'fixing' business, is that these banking groups go out of their way to make business ventures as complicated as possible. If you look at how Enron 'hid' debt, how Goldman 'bet against' their own CDO's, how some companies make more money pre-selling stock than actually engaging in business. It takes an expert to understand this stuff. And experts tend to think this stuff is all perfectly harmless... group-think as usual.

Alot of this has to do with the 'shadow market' often discussed, but completely unregulated. People like Alan Greenspan considered this market to be A) small and B)a pure capitalist venture that should work without government.

He has since admitted that he made a "slight miscalculation." That slight miscalculation had a rather noticable effect on the world stage.

Now, I'm not saying that government "is the answer". I agree, government is not the answer to everything. But there needs to be a middle ground. We need the "entrepreneurial spirit" that corporations can bring. But the average citizen also needs to be protected from the worst excesses and abuses of power. (And vice versa).

Now your posts today seem to argue that government has become unruly since the 1920's... I tend to disagree. I rather like enforcing child-labor and OSHA regulations, even if they're not perfect.

Another example: the oil rig that's just exploded. BP was one of many companies that argued that regulation was unnecessary because it was "perfectly safe" and "not cost effective". I'm sure Louisiana is happy that BP saved all that money....

...or not.

Alchemist: If you read what I wrote, I did not say that the bankers learned.

Also, you're one of tose still thinking mainly at stage one: The bankers are making things hideously complicated and these institutions took on high-risk ventures (they collapsed not because they sold these, but because they bought them) why?

Responsibility has been decoupled from risk over time: In government and out (we were offered up some scapegoats, while other equally responsible people are still in government and some even appointed to higher positions, no?)

The issue of people fixating on one aspect of things, well if you want to keep your focus where they want you to keep it, I cannot tell you to do otherwise, can I?

Alchemist says government has so much trouble 'fixing' stuff for us because we're complex, using business as an example. Its a variant of the "saboteurs and wreckers" view.

The free economy is complex and needs to be simplified and controlled so those in power can manage us better. Freedom is complex and we need to be kept in our boxes so we can be arranged by the experts.

Pg:

Thanks for that link to John Ikerd's talk on Corporatism. A lot of what he says resonates. I note, however, that he is not advocating that government has no regulatory role. To the contrary, he's for regulatory control in the public interest.

The government and legislation/regulation, of course, is all we have to change the world for the better. True, Government is not immune to corporatism and rent seeking (as people here like to point out), but for better or worse it's all we've got. It strikes me that crippling and delegitimizing government, ala Tea Party sentiments, simply leaves the field to the corporatist forces. It doesn't begin to address the problem.

I see that Professor Joel Rogers was instrumental in writing the stimulus package.

Do I understand correctly, that one thing you are concerned about is moral hazard, that banks are learning the wrong lessons because we bailed them out? I think that's true and building positive incentives not to fail is a fine thing to keep in mind in drafting regulations and/or bailouts.

State Governments and citizens, it seems to me, are exposed to moral hazard from prolonged profligacy. Just ask the Greeks.

It's not that there's no role for regulation: You misread the post some, and are indeed captured by one aspect. None of your comments even address any of the questions contained theirin, which makes me wonder if you really thought about them.

As for my part, I'm not an Anarchocapitalist (or even a Libertarian, though I admit sympathies with that ideology). Indeed, just this weekend I got into an exchange of comments with some of them on another blog, and they think me too Statist. (Which doesn't make me right. I hate that canard where someone will say "I'm getting criticism from X and criticism from Y so it must mean I'm doing something right/must mean I've found the middle ground." - No, there are many ways to go wrong).

Some wiseacre once said if your only tool is a hammer, every problem looks like a nail.

Well, if your only tool is the hammer of government coercion and control, every problem looks like a nail to be pounded flat by fiat and force.

"The government and legislation/regulation, of course, is all we have to change the world for the better."

I humbly submit that this is not the case at all. Indeed it is this mindset that I beg people to break from. We are all well trained to think this way. Some of us escape it to one degree or another. (which does not mean we escape into truth...oh, no: Again, there are many ways in which to go wrong - such as going the complete opposite direction and deciding that because the hammer is not the solution to all probems, it is not a useful tool at all.

Looking to government as the panacea for any problem in the world is a very maladaptive mindset though. I know full well how powerful it is: Again, all the good and wise telll us so, and they are the most learned and smart among us. And of all the tools at our disposal, the One Ring, the Ring of Power*, ohhh, it beacons us ever closer, because it promises to make people behave: If we can't persuade them or use any of the other tools at our disposal, we can at least force them through the use of state power, no? This works so very well indeed....not.

Have you ever wondered why there were "Dollar-a-Year Men" btw? We're taught these were good, public-spirited businessmen and gosh darn if only we had more people like them today**...Have you ever heard of "regulatory capture"? It started very very early indeed (instantly, indeed, it was the project, as now): Big business inside the tent writing the regulations that would govern their industry, working with government to screw the little guy, their smaller competitors. Today, GE brings good things to life with its public spirit as well...

The benefits of this path are well taught to us, especially in our public schools and our government-funded universities and in most of our private schools where we're taught by teachers who were educated in public education. Btw, read a good Liberal philosopher, John Stewart Mill, and his remarks on education. Even if you read nothing else of his, his points on why there should be a Sepration of Education and State*** are worth pondering. It's towards the back of "On Liberty" (He wasn't a classical Manchester Liberal, what we would call a Libertarian, either: He was sort of a transitional figure between Classical Liberalism and modern "Great Switch" Liberalism).

"I see that Professor Joel Rogers was instrumental in writing the stimulus package."

Among other things.

Anyhow, there are other tools in our dusty toolbox. Perhaps if we stopped thinking the hammer was the only tool we have, we might blow that dust off, scrape the cobwebs inside, pry the rusty lid open, and peer inside and see what else we have. I hear that in reality there are at least two tools that can solve every problem, neither of which happens to be a hammer or a ring: If it moves and it shouldn't, you use duct tape. If it doesn't move and it should, you use UD40. There might even be more than these four tools. If we free our minds, our arses might follow.

*I love mixing metaphors. It's a vice I don't care to break myself of.
**Indeed, we sort of do: Think of all the Goldman Sachs people in "public service" even now, helping us in the previous and current administration. Are any of these among bankers who haven't learned their lesson? Can't be: They're in government, and government is the solution to all our problems, not the cause of them.
***He doesn't use that phrase, but it's an apt encapsulement of his argument

I hate to hit this nail again, but it's critical:

"The government and legislation/regulation, of course, is all we have to change the world for the better."

This is among the best concise expressions of the view I was referring to that I've seen, to include the confident "of course."

There is so much that is not only wrong in this vision, however, but pernicious, that...well it troubles me.

I could tell you all the other ways in which the world addresses problems. Well, probably not all: I too am blind in one eye and would miss many, no doubt. But it would entirely defeat the purpose.

I would humbly like to ask you and others with this mindset to reflect on the many ways problems are addressed in this world in other ways, including in particular ways we normally take for granted. To perhaps even read some works that you will probably have a negative initial reaction to, and consider alternatives. To really think for yourself.

It's horribly condecending of me to say that, but to me it's far better for me to ask people to do that than to provide some list of how even the institutions they most despize and distrust actually provide some good in making the world a better place also, from time to time, and are innovative and creative in coming up with things that make the world a better place, and indeed there's far beyond this as well (this is no mere paen to what you think it is). There are all sorts of ways in which people cooperate (*true* cooperation) to make the world a better place.

Surely you did not mean things exactly as you put it, and one of your reactions will be that I'm niggling over words and taking you too literally. But isn't it interesting people see things that way, phrase things that way? That their default is to percieve their options as that one option? I find it noteworthy.

PG:

None of your comments even address any of the questions contained theirin, which makes me wonder if you really thought about them.

I perceive the questions in your post as rhetorical; If I've missed some of their import, forgive me. You'll have to elucidate.

Obviously the Drum criticism of Goldman hit a nerve with you, and I infer from what you say that you believe banking regulation reform at this time is a mistake. I also gather that your reasoning for this has something to do with moral hazard, and corporatism. What else?

Your position as to why we should not regulate banking, if that is your position, remains unclear to me.

I could tell you all the other ways in which the world addresses problems. Well, probably not all: I too am blind in one eye and would miss many, no doubt. But it would entirely defeat the purpose.

Sorry, that doesn't cut it. If you've got something to say on this let's hear it.

My point is: I think we learned the wrong lessons, and you still adhere to them. Btw, it is in part because people's views of what happened then are...wrong...that we learn the wrong lessons. We did intervene during that crisis, but in ways that made it worse (starting under Hoover). There is a reason why our depression was Great.

Ditto. What are the erroneous lessons you refer to, and why?

The purpose of participating in a forum like this, for me, is precisely to further independent thought. I'm not sure how mystery reading lists, and hide the ball arguments helps that cause.

Cheers.

PG: Please disregard the "Cheers." That's gratuitous and I aplogize. RN

"As I understand it, much of the banking regulations we have are the result of the lessons learned during the Great Depression"

Like Glass-Steagall?

Here's what the chairman of Berkshire Hathaway had to say about the idea of reinforcing failure vis the Dodd Bill:

"Munger said dedicating a single regulatory agency to policing the activities at big banks is “insane” because it would replicate a regulatory structure that “utterly failed us” – Washington’s egregiously unsuccessful oversight of the failed mortgage giants Fannie Mae and Freddie Mac.

Munger called the banks at the center of the crisis “superleveraged and supergreedy,” but saved his harshest criticism for the failure of regulators, legislators and accountants to play their watchdog roles with even the least vigor.

Likening banks to a tiger and the regulators to the tiger keeper at the zoo, Munger said it’s absurd to expect the banks to behave better without serious discipline. He added that he sees the backlash against Goldman Sachs (GS) as understandable – people are “furious about investment banks” – but ultimately counterproductive. Berkshire owns $5 billion of Goldman preferred stock.

“It’s insane to blame the tiger when the idiot tiger keeper caused the problem,” he told reporters Sunday. “The solution isn’t to beat the tiger to death.”

link

"One of the reasons government has so much trouble 'fixing' business, is that these banking groups go out of their way to make business ventures as complicated as possible."

Could this be possible due to our Byzantine tax code that nobody understands? And perhaps its became so complex intentionally, to exactly facilitate this kind of gamesmanship?

Roland: Most of your reply there was gratuitously snarky, but I'll set that aside because it's probably deserved.

"Obviously the Drum criticism of Goldman hit a nerve with."

No more so than Goldberg's simplistic argument hit a nerve with him and with AL. As for Goldman Sachs, I'd be happy if they went away completely: I think they're in business mainly to exact rents through the use of their manifest influence in government, a project that's worked out well for them for two decades, and they embody one half of the problem. But only one half. If they go away but the other half of the problem remains, something else will come into being to be the dance partner.

"I perceive the questions in your post as rhetorical; If I've missed some of their import, forgive me. You'll have to elucidate."

They're worth pondering as people engage in their own confident mocking laughter: I don't think these are questions they consider very much. It's clear that you don't.

"Your position as to why we should not regulate banking, if that is your position, remains unclear to me."

My position is that much of the interventionist policies - not simply regulation - contribute to creating the very problem they aim at "solving" with more of the same, and until they understand the problem their pretense that only the bankers have failed to learn their lesson, but government has all the answers, will produce more of the same.

Moral hazzard is one aspect of this indeed, but not even the entire ball of wax.

Lets go back to something Alchemist wrote:

"One of the reasons government has so much trouble 'fixing' business, is that these banking groups go out of their way to make business ventures as complicated as possible."

Here a bit of tu quoque is important: Can the same question be asked of government regulations? Is it only an acceptable for those inside it, like Geitner or Rangell or Dodd &tc to use as their excuse "the rules are too complicated for those of us who made them to understand, please excuse our mistake and confirm us/re-elect us?"

"The purpose of participating in a forum like this, for me, is precisely to further independent thought."

Excuse me for begining to wonder if your purpose is to snipe at arguments you don't like without really engaging their substance.

"What are the erroneous lessons you refer to, and why?"

I've mentioned several, including the lesson that government is the best - even the only - solution to every problem that occurs, that "regulatory capture" for example is not just an unfortunate side-effect, it was a feature built in from the beginning (Wilson had this, too) and thus we should be skeptical of regulations written by people who, oh by the way, have half a dozen or more members of Goldman serving in their Administration while we're being told to focus all our attention at how dumb and wicket private bankers are so we must pass the regulatory bill before Congress (and no other) right away to control them. This is just one of several I mentioned. Government accountancy was another alluded to: Bankers are mismanaging finances, and people mock them for their folly, but are our saviors in government doing so much better that this mockery is warranted? I mean, if one wants to talk about complex rube goldberg financing schemes, one needs look only at the recently passed health care measure in the U.S. - and that's only the tip of the iceburg! (People can also rightly mention the FAIL accountancy assumptions of the previous Administration's Prescription Drug Program - again, unlike others, I'm not taking up a cudgel for either side here. Other examples exist as well: You seem to want me to spoon feed you the exaustive list and if I don't, I've failed. Well, I'll note one of the things partisans do is create exacting standards for those they oppose, and relaxed standards for those they agree with, and leave you to think about that for a moment).

My points are embeded throughout, many rather explicitly: That you assert I did not make them to me implies that you do not read what I write in good faith, but I perceive this is in part because of your faith in government, your belief that it is the only tool we have to make the world a better place, and that therefore to wonder if it has learned its lessons is like questioning goodness itself.

I would humbly conclude, however, that it is especially important for those who have this faith to wonder not if the bankers have learned their lesson but if government has.

After all, one expects sinners to sin: But the angels can only rectify their sin if the angels know what they are doing themselves. One expects falable humans to be falable humans. But if one holds the view that the only tool for our salvation is government, the saints who serve us in it,and the missionaries outside government who promote it as existing fix our problems for us need to be correct.

If Goldman Sachs fails to learn its lessons, maybe next time they fall out of grace and are not hoisted aloft, rescued by angels. Life for the rest of us will somehow go on without them. But if you believe government is the only thing we have to make the world a better place, and those who run it singe their wings because they don't know they're flying everyone into the sun, that is a much worse outcome.

Porph- I'm sorry I misread your article. I felt your two articles together were leaning in that direction and responded. In general though, I think you've made a multiple-pronged argument, some of which is rhetorical, some is a direct argument against, and some is satire on satire...

As Nikles wrote, I'm having trouble coming up with a clear way to respond.

The main thrust of your article appears to be the double-satire... saying that 'mockery appears useless, mistakes are intrinsic to these organizations. In that thrust, I highly recommend "Stumbling on Happiness" which is about how people attempt to solve problems in their interpersonal lives, and why we make the same problems over and over again. (Obviously, not about corporations, but corporations are basically run by people...)

You also seem to argue that government, more than any other organization is uniquely unable to learn from it's mistakes. I agree (to a certain extent).

One of the major problems with government is that our party system tends to have a 'revolutionary disorder' of sorts. Even if you look at things like the stimulus project, it's largely viewed in two ways: The left views it as too small, the right views it the sort of thing that got us here in the first place.

Both sides agree: The economy would rebound stronger if the bill just went farther in their direction. Both sides see the only solution is to remove those opposing their success.

Furthermore, that 'revolution' needs to remove the 'bad' tools of the previous regime. Programs are scraped (regardless of success) for ideas that the new rulers like (it's fairly Zimbabwe-esque)

It's fairly clear why this happens, organizations fight as if "for survival", and any argument against their needs threatens their well being. See guns, see teachers associations, pro-choice/pro-life, doesn't matter. A chink in the armor could be the beginning of the end. Negotiation is death.

The result is that legislation becomes too complicated to succeed. Anything clearly articulated stands the wrath of some interest group. Parties not only try to define the problem, but the specific phrases necessary to describe the problem. Not using those specific polemic phrases is grounds for calling someone polemic.

Or like my comments above. I saw an argument that seemed to be opening up as anti-government (largely in conjunction with the previous article), and responded without getting the whole thrust.

I'm sure I'm taking this in a different direction than you want, but it's how I see it.

Rolland, demanding someone to fill all the gaps in your knowledge with a blog post or two doesn't advance the cause of independent thought, and neither does sneering they're "hiding the ball" when they don't spoon-feed you.

Carinthe:

You are surely correct that in one blog post it's possible to bite off only so much; in this case, it may be that Pg has chewed off too much for a simple blog post. I'm not looking for spoon feeding, but I am looking for something a little more focused and clear.

"I felt your two articles together were leaning in that direction and responded."

I actually posted the FDR speech before I had read the Drum thing, so the two posts aren't linked in that sense.

"You also seem to argue that government, more than any other organization is uniquely unable to learn from it's mistakes."

Actually that's too strong in two senses.
First, the post is a response to those who seem to think it is everyone outside of government that is uniquely unable o learn from its mistakes, while government is somehow exempt from this and thus our problem-solver.

I never said or implied that Bankers had learned from their misake: I didn't make the error of endorsing what Goldberg wrote. I do think there are various ways in which one dynamic contributes to the other (and vice versa). (No, I won't repeat my reasoning here).

Secondly, I think government, those in government and pro-government activists* outside of government can learn from their mistakes, or I would not be asking them to rethink some of their assumptions. I just don't think they have been any more successful at learning from their mistakes than the Bankers they mock.

"Programs are scraped (regardless of success)"

For better or worse few programs are actually scrapped and the ones that are tend to be minor and the scrapping does seem to be done more out of spite than anything. Major programs are rarely scrapped however and even grandly-anounced reforms of existing programs tend to boil down to tinkering around the edges and expansion. The exceptions, again, are a few relatively minor programs. But anyhow this a bit of a digression but again only a bit of it.

In any blog post and comment thread there is a big danger of the "describe the elephant" problem: I think it's what Rolland wants to draw us into, and there's a tendency even among those who don't deliberately want to. Blind people groping about an elephant and getting fixated on that part of it which is most obvious to them or which they want most to pick at (perhaps to demolish an argument they don't like, for example). Then those who want to can say "ah-HAH! See? he's only concerned with over-regulation, but really if he had it his way, we'd be worse off!"

No, the Elephant - the Minotaur - is a whole beast. Singling out this or that feature, arguing specific points, these arguments have their merits (and demerits) and losing the big picture is one thing that keeps us from really understanding the problem(s) we have and thus addressing them in a real way.

As for my part I think one of the things people see missing in my argument, such as it is, is any real "solution" - I refused to come right out and say all regulation was bad, but seemed (to them) to imply it! They want to pin me into a corner, a nice tidy box so they can dismiss things and move on.

However, I clearly said that I don't know what the solution is. The only thing I do know is we have to unravel the string and see where it really leads before we can say we have learned from our mistakes. I said and implied what I think some of them are, in some cases explicitly (Rolland elides over those) and in some cases implicitly (Rolland wants me to be more explicit). In some cases I entirely omitted...in part because I don't pretend to know the entire answer (so, no, I wasn't implying I had the key to understanding the entire universe).

SO I can't give what some are demanding: The point is that we all need to do more intellectual work than apparently some want to do. They would much rather mock one aspect of the problem, or those devils who are their ideological opponents. Part of my point is that this mockery, which I satired in satiring, in and of itself gets us nowhere.

Those who claim to know...don't. But they expect us to say "well, until you have something better to offer, let us address the problem with our solution. The time for talk is over." - thus we go blindly ahead and insted of making the world a better place, we might be making it worse one, because they'd rather not really face any of the questions that challenge their own dubious assumptions (such as, for example, they know how to fix education and the only problem is we won't let them get on with it...or they know how to fix health care and the only problem is we won't let them get on with it...or they know how to fix the financial sector, and the only problem is we won't let them get on with it. Physician, heal thy self: Show us in DC the model of a public education system worth emulaing. Show us in DC the model of health care worth emulating. Show us in government's own budget projections for things like the health care bill a financing model not full of gimmicks and scams as bad as devised by any banker born in hell. Then maybe you'll have demonstrated you've learned from your own mistakes and can direct the rest of us).

*most people who think of themselves as dissidents are actually pro-government activists. If you want some my arguments supporting this assertion, see the archive at my own blog.

I don't mean to threadjack, but I think that the whole discussion is largely a lovely example of the failure to understand the purpose of argument. The whole idea of logical fallacies like tu quoque was that some arguments are not reasonable. Why not? Well, because the purpose of argument as originally conceived was for people or groups who have a common goal to come to a shared policy best for all. It might not be the policy that any of them started out advocating, but it is the one that is best for the most.

We have lost that as a political tool, and I suspect that it is in part that we no longer have a common goal. All sides say that they want to make the US a better country. Most say that they want us to be more secure, more prosperous and more just. Yet in reality, both of the major political parties want only to be in power. They have no fixed principles other than gaining power, and they will do or say what they must to that end. Then they will casually and cheerfully trash the very policies that they spent months arguing for, not because governing makes them more responsible and they were advocating irresponsible policies in order to gain power, but because those policies are no longer convenient.

But power for the Republicans and power for the Democrats are not compatible goals: one must come at the expense of the other, so long as our system remains a first past/every major office is elected system. And incompatible goals are not subject to being resolved through reasonable argument, only through superior power being employed, or through estrangement. At some point, either we need to reform our system to be more plural in views, or undo the Federal monstrosity that has grown up over the last 80 years and return to most governance being done at the state level, or we need to split into two (or three, depending on how you look at the NE/Chicago vs. California/Pacific Coast liberal styles)countries. We cannot continue to live in peace when the two parties capable of governing each see themselves instead as rulers, and see their goal as being to trounce the other side.

In a less party-specific way, the same thing is playing out in this thread: it is clear that Porphyrogenitus and Roland have widely divergent goals. As such, their argument is unproductive: it cannot reach a conclusion that both would agree was reasonable. In a broader sense, it seems to me that Porphyrogenitus' position is that government is not uniquely the province of angels, but has flaws and faults that its supporters refuse to examine, including flaws which induce strife and misery. Meanwhile, Roland's position seems to be that the government is in fact uniquely the province of angels, and that questioning the need for any part or role of government is questioning the firmament itself: government is the only possible answer to all problems involving strife or misery. These are both premises, not conclusions; not being logically arrived at, they cannot be logically disposed of. The only solutions are to come to an agreement on agreed first principles, and start from there using the tools of argument (rhetoric, logic, evidence, avoidance of fallacy, etc), or to abandon the argument as unproductive.

Boy, that needs some editing. "First past" was supposed to be "first past the post". The other errors are more minor. Preview is my friend.

Mr. Nikles comes in here and champions "independent thought," immediately following his demand that Porphyrogenitus extend himself to explain everything to Mr. Nikles on his own terms.

Mr. Nikles, I suggest that instead of requiring others to come into your world and explain things to you, that you exercise your brain a little and try to understand theirs. So far you've very neatly demonstrated your insular thinking and have provided us a perfect example of Porphyrogenitus's argument.


Jeff:

In a broader sense, it seems to me that Porphyrogenitus' position is that government is not uniquely the province of angels, but has flaws and faults that its supporters refuse to examine, including flaws which induce strife and misery. Meanwhile, Roland's position seems to be that the government is in fact uniquely the province of angels, and that questioning the need for any part or role of government is questioning the firmament itself: government is the only possible answer to all problems involving strife or misery.

As to your characterization of Pg's argument, I think that's right and I have no quarrel with it. However, what does it mean to note that government has flaws within the specific context of financial regulation? Pg seems to be opposed to regulation because government is an imperfect institution, but without much guidance as to an alternative, except to challenge people to think about it. That's fair enough as far as it goes.

Your representation of my position on the other hand is not correct. Government most definitely is not "uniquely the province of angels." It contains many charlatans, power seekers, and rent seekers, and there is surely a bit of angel and a bit of charlatan and power seeker in every politician. It comes with the territory. Good government, I think is a constant struggle . . .that's true for politicians as well as the electorate; it's also true whether government is large or small.

Tony Judt has observed “Until the late 19th century, government was simply the apparatus by which an inherited ruling class exercised power. But little by little, the state took upon itself a multitude of tasks and responsibilities hitherto in the hands of individuals or private agencies.”

The forces of corporatism that Pg has referred to, it seems to me, are working towards a state where government is simply the means by which a corporate ruling class perpetuates and serves itself. I don't have the sense that Pg disagrees with that.

The question is what to do about that; in this case specifically what to do about finacial regulation. Judt would say (I think) that financial regulation is one of those multitudes of tasks that the state has taken on to moderate private activity, to moderate the corporatist state. Those who are advocating against finacial regulation, I think, are supporting the forces of corporatism.

You may not agree with that last sentence, but the point I raised earlier, is that collective action to regulate something like financial markets (which can do great harm if unregulated) can only be done through government. This says nothing about the Dodd bill, or what regulation should look like, just that if we want to control these forces through collective action, government must be the tool. The struggle is to do it through good governement rather than bad. But that's the ongoing struggle.

Pg seems to suggest that, no, financial regulation may be better tackled without regulation, through some means other than government (good or bad) . . . and that's where I'm unclear as to what he has in mind.

Chris: I think you're suggesting that I've missed the secret handshake for the initiated and that will become apparent through additional exercise of the brain. I'm working on it.

I'll take up Roland's gauntlet on that.

Look- bring libertarian (small l) doesn't mean you don't believe in a role for government. But that role should be specific, well defined, and limited. As opposed to the expanding, invasive, corrupt, and arbitrary system we have now. .

And size matters. A government this large can't be effective, by and large. Its too big to be wieldy. Too beholden to be honest. Too arbitrary to be predictable. And predictable is THE game for business.

Specifically, there are ways it can be effective. How about fulfilling its role as the playing field leveler (instead of the king maker) by breaking up these 'too big to fails', or better yet preventing them from getting this large to begin with? How about using legislation like Glass-Steagall to limit both exposure and playing both sides of the fence? How about simplifying the way we tax instead of complicating it? How about forcing transparency, both in corporate finances and in their ties to government?

And then if companies fail- they fail. If people cheat, prosecute them. Send somebody to jail for once. I'd certainly trust a prosecutor to actually execute their job rather than a regulator twisting in the political wind.

These aren't ideas? Why is it that any idea doesn't require a budget isn't taken seriously in some quarters?

I wish I'd had a chance to comment before now, but, alas, I haven't. It's been a very interesting discussion so far.

To the degree that I understand him (and I think I do) I'm at the very least in rough agreement with Porphyrogenitus. Since I'm coming late to the party, though, I'll just respond with a few thoughts about both the basenote and the comments.

First, on the notion of tu quoque, I think it's important to remember that it's not always a fallacy. It's a fallacy when it's used unfairly, as a distraction, or in some way tangential to the discussion at hand. If I'm chowing down on a cheeseburger while lecturing you on animal cruelty and the virtues of veganism, "tu quoque!" is satisfying, but not logically compelling.

If I'm hectoring you on your policy of ever-increasing spending without new revenues (leading to massive deficits) with the implicit argument that I'm the only other game in town and I'm advocating ever-decreasing taxation without spending cuts (leading to massive deficits,) "tu quoque!" has some real logical force to it.

The "Is our institutions learning?" question might not rise to the level of tu quoque, but it seems perfectly reasonable to me to ask why one group is absolutely convinced that it, and only it, is capable of learning. (For some specimens of my acquaintance, it is absolutely perfectly reasonable to ask why they are convinced that their side, and only their side, has nothing left to learn in this coarse world of ours.)

Second, on the learning issue... well, learning is critically important to me on a number of levels, and I think about the learning process on a regular basis, bot individually and collectively.

One of the very reasons I'm generally against bail-outs is that I believe pretty strongly that the act of bailing out-- which necessarily reduces pain-- sharply reduces the amount of learning that takes place. The more people involved (and when we're talking large companies, we're obviously talking about many, many people) the more the learning is diluted.

Now, I phrased that carefully, by saying "generally." I don't advocate letting children learn about the law of momentum by playing in traffic, and I don't advocate "teaching Wall Street a lesson," by plunging us into a generational depression that would require us to suit up and kick the China to pull ourselves out of. Some learning experiences are a little too painful. (Now, if I had some hard and fast guidelines on that, that'd really be something! God help me when someone asks my opinion in five years when California is looking for a federal bail-out....)

In those circumstances, all we can hope is that by design or incompetence, the administering government can make the bail-out sufficiently painful for the bailed-out that they have no appetite for a repeat performance.

So when Porphyrogenitus makes the claim that Roland characterizes as "mystical" (I don't agree): "That in the evolution of things, the problem is they have created a government that creates problems, then appoints itself to fix them, rinse and repeat ad infinatum, and that after sufficient iterations of this there is an utter displacement of responsibility.... I think it has some teeth.

The first clause seems taken care of just by virtue of repeated bail-outs. I'm quoting Porphyrogenitus directly, not Roland with his insertions, because I don't think this is a uniquely liberal-left problem. Both Bush I and Bush II were associated with bailouts, too, recall.

The second clause is cynical. But that doesn't mean it's wrong. My uncertainty is whether he means that the government does this on purpose, or if the government just bumbles in to it. I'll give at least tentative buy-in to the second interpretation.

And the third clause is just a consequence of the first two. I find no mystical qualities here, at all. It encapsulates my core complaint with the bail-out mindset, that it inhibits the learning process by dispensing with the pain.

But we're talking about governmental learning as well as corporate learning. How do governments learn? Through pain, of course. Specifically, getting voted out of office. And when do politicians get voted out en masse, in blocks big enough to force them to sit up and take notice? Mainly... when economics are tough. Seriously, there are few or no better determinants, in the American system, than the strength of the economy as felt by the common citizen.

That makes the learning process slow and indirect (first the citizens have to learn, then they have to vote people out, then the new crop has to learn the right lesson) but I think it's still there. In theory. My gut feel is that this sort of thing tends to delayed landslide-like events, as things pass a point of no returns, and then the electorate feels not just poorly led, but deceived, and lash out.

(Corporate learning, when not inhibited by government, at least tends to be more direct.)

And that, incidentally, is why I get so torqued off by electioneering games, like gerrymandering safe districts, leading to mass incumbency. Also high on my list are bills whose timing with respect to taxes and benefits is calculated to obscure culpability. You can learn a lot by figuring out the learning mechanisms in any given system... and watching to see who is subverting them, and how.

I think there is a distinction between 'government' learning, and 'politicians' learning. Yes, getting booted out of office or losing your majority can (in theory anyway) teach a politician or a party a lesson. But I'm equally concerned with the bureaucratic lifers that actually run most of the government. The actual regulators and such. The guys that were supposed to be watching Madoff.

Those guys are almost guaranteed lifetime employment. If they screw up badly enough... their budgets get raised. What are we doing to deal with that?

I have little I care to add right now, some peeps have expanded on the argument rather well.

(Beginning of a long, meandering digression): I will note re. Roland that yes a single blog post can bite off more than it can chew, but that doesn't mean it's worthless or that the focus should always narrow down. Blogs aren't books: This has positive and negative aspects. Everthing is a tradeoff (more on that in a bit). One of the good things about blog posts is some can be seen as the start of (or continuation of...or expansion upon) an idea or consideration or discussion or what have you.

There are certainly long-running themes in what I post, for good or ill (which is why someone can perceive connections between two posts, even if the connections weren't conciously intended). I see trends that I think will/are leading us into all sorts of...problems, to put it mildly. But have yet to find a solution I myself find convincing (so what can I offer anyone else? False reassurance?): Our situation is thus tragic.

I would obviously like people to perceive the problems I perceive (who doesn't? Kevin Drum would obviously like people to perceive the problems he perceives, &tc): The difference is, I suppose, don't pretend to offer a panacea (though clearly there are things I would rather see us do, which I think would help/improve things).

I'm less confident I'm right...and I'm also less than confident various others are, either. Which makes me skeptical of "fixes" imposed on everyone universally from central authority. This is not the same as arguing we should do nothing, or even being against all regulations.

Indeed, I'm for doing rather a lot...to paraphrase something someone I read often (who is a crackpot) said in his endorsement of Sotomayor: There's nothing I hope for so much as change.

end of complete blithering

Now to close this comment with something of substance, in support of something marc posted.

How Laws are really made in the beamtenstaat (from epa.gov):

Federal Regulations Affect Every American
Regulations have a direct impact on your life and the life of every American citizen:
• The price of the coffee you drink in the morning is affected by regulations written by the Commodity Futures Trading Commission. The television shows you watch are regulated by the Federal Communication Commission. The quality of the air you breathe is affected by regulations written by the Environmental Protection Agency.
• Regulations have the power of law. Breaking them can result in fines and even jail time.
• Regulations outnumber Congressional statutes. For every statute passed by Congress and signed into law by the President, federal agencies create about 10 regulations, each of which have the force of law.3
Our regulators are, for the most part, insulated from the governed. No one really holds them accountable. The people who are appointed to "Plum Book" positions are rotated out when an Administration is replaced, but that's a tiny fraction of government.

Regarding actual legislation, who writes the bills that pass through Congress? Not the Congressbeings: Even supporters of a measure, if they're forced too by constituent pressure, learn about the content of "their" Bill sitting in folding chairs in the basement of the capital and being taught about it by staffers.

Even the most experienced Legislators don't understand the rules they've made for others.

Our real process has become: Staffers, GS-Ns, and outside interests write the legislation. "Good Government" types would like to fix this process by removing the influence of outside interests, leaving the rest in place.

Only that's not even true: They want to remove some outside influence, mainly corporate/private enterprise...except that's not even true: They're rather for "public-private partnerships." Good-Government types are very confused. Heck, I know! I am a "Good Government Type* at heart!

How are these people held to account through elections? Hardly at all. Even the Congressbeings are hardly held to account (what sort of institution has a 14% approval rating and a 90%+ re-elect rating? A Politburo? Or U.S. Congress?)

Now, aspects of he above can be niggled apart I'm sure. I mean, really, what do I want? Undo the Civil Service Code and return to the Spoils System and Tammany Hall? (I will say one thing: The people of 100+ years ago wouldn't have left a pit in NYC for nearly 10 years, nor did they suffer infrastructure decay gladly, and what they would have built - years ago already - how grand it would be...but I digress again into half-a-point).

Noting again that the above is only part of the iceberg...only a facet of the edifice we have built up...only the corona of the Red Giant Government we've built.

Obama came into office promising a new era of accountability & transparency. I thought at the time, and it's been confirmed ever since, that what he meant was not government accountability & transparency, but us to our rulers. Really even Left Good Government types are...underwhelmed...by our government on matters of transparency & accountability in this brave new age in which we live.

Well I'll stop babbling there: I admit I advanced the ball barely at all in this comment, even with its length.

I originally came over because I was going to post something on how the Administration handled the most recent attempted terrorist attack (in NYC). Short version: Rather well, all things considering. (How the intellectual class has handled it, OtoH: Rather discracefully, all things considering. Their disapointment that it wasn't some eeeeevil White Male Wingnut is palpable, leaving them once again with the wan warning to be vigilant for any evil WMW Backlash).

Anyhow one could probably quibble about how the Administation handled it and it is true that once again we got lucky (the bomb fizzled), but these things are very hard to stop in advance, and thus far I think they've done as well as one can reasonably expect. Maybe I'll add more in a real post later but I have to get back to IRL.

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