« The Future of Free Market Conservatism- Becker | Main | Macroeconomic Policy and the Current Depression--Posner »

11/30/2008

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c031153ef013482fee65f970c

Listed below are links to weblogs that reference The Future of Conservatism--Posner:

» Mom Blogs - Blogs for Moms from
TITLE: Mom Blogs - Blogs for Moms URL: http://momblogs.info IP: 69.61.11.226 BLOG NAME: DATE: 02/15/2009 03:33:59 PM [Read More]

» minnesota commercial real estate license from minnesota commercial real estate license
teach through lip aid city down rock community party [Read More]

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

Alex

The financial crisis is "largely a consequence of innate weaknesses in free markets"?

Judge, I see Fed manipulated interest rates, conforming mortgages, war, government bailouts, excessive tariffs, and a tax structure that encourages the misallocation of capital. Your thoughts?

Michael F. Martin

An alternative view of the rise of political parties and ideological commitments is that they are a substitute for the racial and ethnic identities that tended to constitute political conflict and cooperation before the Enlightenment. In other words, it was a step for us to base our us/them distinctions on abstract ideas rather than kinship relations, but we nonetheless remain trapped in us/them distinctions. Can politics exist without these distinctions? To reframe the question, what us/then distinctions are non-ideological? There aren't many substantive theories broad enough to accommodate all newcomers without creating dissension in the ranks of existing members, although some religions seem to come pretty close.

nathan

People currently may be disoriented, and the compass is broken. People do not know what direction they are headed.

Alvin

Judge Posner,

Always enjoy reading your comments. You mention things I hadn't thought about.

In your post, you raised the point that conservatives overestimate "the beneficent effects of religiosity". I wish you could dedicate a future post to this subject matter. I would love to read more your thoughts on this matter. Thanks.

Jim

Judge Posner, you are absolutely correct. A pox on both of their houses. But no one ever gets elected by being pragmatic. Can you imagine a speech saying, "I want to be president to solve some problems without regard to ideology".The wingnuts would be spinning wildly.The American people must like the system the way it is, swinging radically between the liberal and conservative screwups. The present swing should be interesting. I figure that Obama's principal intellectual mentors are John Rawls, Saul Alinsky, Cloward-Piven and Zbigniew Brzezinski. How in the world will the conservatives ever counter a bunch like that. Richard Epstein doesn't have a chance.

Dan

This weekend my middle-school aged daughter and I discussed the terror in Mumbai as we walked through a large mall doing our Christmas shopping. She told me how her middle school had started conducting drills to prepare the children for an attack by gunmen. She expressed some skepticism about the main thrust of the school district's strategy: turn off the lights and hide in the shadows.

We talked about Munich, about Virginia Tech, about Chechnya. We talked about differences between delusional gunmen and trained terrorists. We talked about the differences between insect colonies and humans, the differences between political will in Israel and the United States to do "what is necessary." We talked about state police SWAT team response times.

As a pragmatist, I told her that I wondered whether a better strategy might be to lock or barricade classroom doors. She asked me if that would just make the gunmen mad. I said maybe. Then she quickly added, "But maybe it would slow them down and save kids in other classrooms until the police get there."

Imagine pitching a security plan to a school board that contemplates sacrificing a classroom of children for the greater good.

If terroristic violence is abstract for Americans, how much more so environmental issues?
As Professor Becker states, a nonpartisan approach still requires a values framework.

How does one arrive at a consensus values framework to guide social policy in a post-ideological age? A supercomputer? Who will write the Master Algorithm and assign the weights to be inputed into it? (human life val = k*AGE*(IQ + DNA-based health index)/Occupation, etc., etc.

gdgeiss

First let us observe that Mssrs. Posner and Becker are posting on two different issues here. Posner on "political" issues and Becker on "economic". While the two arenas are often related, they are surely not the same.

In a sense Judge Posner's post is the broader of the two, encompassing things (religiosity, abortion, gun control) which are not, strictly speaking, of direct economic interest. In this instance, I pretty much agree with the Judge's conclusion while disagreeing with almost the entirety of his rational.

Preconceived, emotionally fixed ideology is quite a dangerous thing: National Socialism, Communism, radical Islam etc. More often than not, tremendous repression and random violence find their excuse in such fixed emotional ideologies (as we all try to digest and mourn Mumbai). American versions of so called conservatism and liberalism (which, as used today, are the original 19th Century terms stood on their heads) are not really of that character. American politics has always been largely pragmatic regardless of what camp one claims as home base.

But as Professor Becker (and other commentors) have observed, one always needs a metric against which to measure one's pragmatism (with apology to William James, to whose fine American philosophy we do major semantic violence in this discussion). What may be a pragmatic way toward smaller government, less international entanglement, and modern regulated laissez faire economics, may be absolutely anti-pragmatic if one's goals are cradle to grave universal economic security and egalitarian social results. The differences of opinion about our destination, what shore we should be rowing toward, will never disappear and those differences of opinion will be strongly held.

What I would like to see (and what my daughter tells me will be Mr. Obama's direction, and I hope she's right) is the recognition by all sides that the differences of opinion about how hard we ought to be rowing in what direction are honestly held, by people who believe they have the best interest of the Country as a whole at heart.

We need a massive dose of civility in our debates, not to mention a great deal of longer term thinking than we've become accustomed to in our 30 second sound bite age. American politics today is mostly a wildly emotional debat waged just slightly one side or the other of the broad center of the continuum of political perspectives. If we managed to see ourselves as all well meaning and listened with some respect to all views and measured our policy against a more historical timeline, we'd be better off, and probably even more centrist than we normally are.

On the economic front a similar lengthening of thought process would be beneficial. The most striking failures of modern, regulated laissez faire economics are almost all from short term thinking and short term corporate governance concepts: the pump and dump, fraudulent stock analysis, compensating CEO's, etc. for short term performance measured by stock price, and chasing maximum short term profit with maximum leverage (among others).

To suggest the current crisis (as the learned Judge always does) is most a failure of regulation is myopic in my opinion. Our current situation was a co-operation between short sighted political policy (get everyone their own home without regard to ability to afford it while letting quasi-governmental insurers "guarantee" it) and short term corporate leveraging. But the leveraging of these instruments (now fondly refered to as "toxic assets") does not ever occur without the first political step to demand such instruments (the sub-prime mortgages themselves) be written. So let us not quite yet annoint government planning/regulation as our last best savior.

It's possible to see plenty of failures, public and private, in this current situation and to argue for not more but just better regulation, along the lines that government needs to regulate markets, not business, and that politicians ought not be allowed to run private enterprises with political agendas. Opposing views can point to strong evidence in their favor. Each side simply has a different metric and both believe the Country as a whole would be better off rowing in their chosen direction.

Anyhow, ideas are always the basis for our most serious political differences and, in fact, our most intractible conflicts of every kind and will always remain so. But I think we can root for and expect better of our processes for working through such differences, and while I'm writing up my list for Santa, how about just a touch less "spin" and a tinch more forthright honesty from our politicians???

Richard

Judge Posner correctly notes that parties cannot be equated with ideologies. But the American parties are more ideologically aligned than they used to be. After New England Republicans became Democrats, and Southern Democrats became Republicans, we moved closer to having a Liberal Party and a Conservative Party in the U.S. (and not just in New York State). An Arlen Specter in the Republican Party and a Zell Miller in the Democratic Party have become endangered species.

He mentions “excessive deregulation”. There has probably been some ill-advised deregulation. But some regulation was at fault, as well. Much of the regulatory framework regarding mortgage lending was geared toward increased lending to the poor. Then, when lenders did just that, they were labeled “predatory”. Can’t have it both ways, it seems to me.

As to becoming “post-ideological”: I agree that a substantial amount of pragmatism should guide decision-making. But, as I see it, if we go too far in that direction, public policy will be reduced to narrowly-defined self-interest. Now, people can, and do, dress up self-interest in ideological clothing. But I think the general interest is better served when policy is linked to some anchor of principle.

Anonymous

Dan, The most effective strategy for the schools to defend against violence of the kind you discussed would be to have a 12 gauge shotgun loaded and locked in a gun cabinet in the classroom and make training to use it mandatory for the teachers. It has been demonstrated over and over again that the police only show up after innocent people have been killed. At least if the gunman got "mad" because the door was locked, you would have a fallback position. Otherwise the question is do you want to be victimized under your desk or running away from some nut.

Cobb

Once upon a time, a young fellow named Ralph Reed was an indispensable commentator on the scene with whom all television news folks were familiar. You couldn't talk about the direction the Republican Party was headed without input from this fellow, who by all accounts was very intelligent and reasonable. Today there are no such individuals regularly on the scene and Rush Limbaugh is being touted as our great intellectual.

It seems to me that Conservatism is not being taught as anything more than a cult of personality for Ronald Reagan. People have been thinking with their guts because we have stacked the Republican political leadership with men such as Tom DeLay. Why would anybody think of Oakshott, Hayek and Burke today, if we are told to believe that shooting moose and approval ratings are the stuff of which the best Republicans are made?

There is a demographic electoral horse-race gaming of the public vote which says 'values' are the appropriate talking point. That's entirely different from injecting some intellectual discipline into the political process. In an age when reactionary 'Bush Derangement Syndrome' has characterized the strategy of the Left and 'change' is good enough to win majorities everywhere, it is no wonder that smart Republicans are defecting.

Jeremy goodridge

(Sorry for the absence of carriage returns -- mine are removed after posting).

Judge Posner:

You say:

financial crisis is "largely a consequence of innate weaknesses in free markets and of excessive deregulation of banking and finance, rather than of government interference in the market. "?

I agree market participants are partly to blame but I would put things at about 50% government and 50% market not 'largely' market.

Here are the important issues:

Leverage combined with risk produced this crisis. And because virtually all banks are limited liability firms, there is a real problem of excessive leverage and risk. The borrowers want to take on more leverage and risk to obtain upside. On the other hand, lenders who do not benefit from upside do want that risk. So lenders become the primary source of discipline in a free market/limited liability system. But what if government does things to REDUCE this discipline. Then you have serious risk/leverage potential. I believe over the last century many things have been done to increase financial risk and that these things have only been counter-acted by further government regulation making. So, as usual government creates a problem that requires more regulation to remove.

So what government interventions existed to increase risk and leverage?

(1) short-term interest rates are set by the fed. If short-term rates are set too low for a long period, a situation of excessive credit is created which reduces lender discipline. It's clear this happened with Greenspan in 2001-2. This affects both investment banks and commercial banks.

(2) the Fed and all central banks have a policy of 'lender of last resort'. This further reduces the discipline of borrowers who believe they will always be able to get money. This will affect mostly commercial banks.

(3) Selected rating agencies have been explicitly written into risk requirements imposed on banks. This means that competition between rating agencies is reduced because there is a severe punishment to a bank taking an alternative view of risk than what's provided by the selected risk agencies. And rating agencies have much less of an incentive to get things right about than a bank who puts up the money, so it's a bad thing moving too much burden of risk assessment to the agencies away from the commercial banks. This affects investment banks and commercial banks.

(4) FDIC insurance covers a significant percent all deposits in the US, further weakening lender discipline. the lender in this case is the depositor. This affects only commercial banks.

(5) Expectations of bank bailouts are everywhere. The immediate crunch in the credit markets following Lehman's bankruptcy proves this. The reason, I believe that credit markets froze up so much at this point is that EVERYONE WAS EXPECTING THE government to bail out the lenders. But they didn't and THAT made the credit markets very nervous. When LTCM went under we bailed out the lenders -- and reinforced this lesson.

(6) Fannie Mae/Freddie Mac bought roughly 25% of all subprime mortgages (Washington post article) and bought/guaranteed roughly 50% of ALL mortgages in the US. This affected both investment banks and commercial banks who originated these loans -- they were effectively encouraged to do it by the govt.

(7) there is a massive subsidy of housing borrowing in the form of the deductibility of interest payments. This affects any buyer/originator of mortgage debt.

I agree with you that no one forced Lehman or Bear Stearns to hold onto these loans they made. Notice: I say 'hold on' -- that was their true mistake -- originating them was not the problem, if they could have sold them quick enough. In fact, if they had successfully sold them before the crash, it would have been others that went bankrupt.

And further no one forced Citibank or other European banks from BUYING the mortgage-backed securities.

But they were encouraged to do it by govt and given the means by creditors whose discipline has been reduced.

So, all in all, I would give the government 50% of this and market participants 50% of this.

And so now the market is finally belatedly punishing the participants who made these terrible bets. But what do we do? We are so afraid of the spillover effects that we don't even allow the market to impose the proper discipline. We bail out all lenders except those who lent to Lehman. And since, as argued above, lenders are the source of leverage discipline, this will just lead to the need for even greater govt regulation.

My conclusion -- if lenders to banks are never punished, there will always be excessive risk and leverage. The only solution: more government regulation to try and 'simulate' what the market is able to do itself.

Jeremy Goodridge

Jim

Two points:

If you read Bob Woodward's book, "The Agenda", you will quickly realize that this recent campaign and its outcome is a absolute duplicate of Clinton's first campaign. Same people, same rhetoric, same actors and the result 4 years from now will be the same. The oscillations between liberal and conservative are very small. The goal is to get power and keep it. For what I don't know. I guess that is the way they make their living.

Let's take a concrete example; Assume that we need a universal national health care plan. There is absolutely no one who thinks that this can be implemented without some form of both hard and soft rationing (micro and macro allocation). Further, many thinkers believe (I think rightly) that the public and the politicians will have to accept that reality before any health care system can be rationalized, designed and implemted. THAT would be pragmatic. Let us see if any of the liberals or conservatives have the cajones to broach the subject in a pragmatic leadership way. Don't hold your breath.

Thomas Brownback

This post seems heavily influenced by "The Right Nation," by Woolridge and Micklethwait, a fine book for anyone interested in reading more about the history of Conservatism in the U.S..

Luca

"The financial crisis has hit economic libertarians in the solar plexus, because _the crisis is largely a consequence of innate weaknesses in free markets and of excessive deregulation of banking and finance, rather than of government interference in the market._"

I confess that I have yet to read a word beyond this; however, Sir, this seems to me conjecture. That is, an opinion. And it is an opinion that a certain Doctor Hayek would hardly agree with.

Luca

Another point, Sir.

"Concretely, there is a range of perfectly respectable economic theorizing, at one end (the interventionist) typified by Paul Samuelson and at the other end (the libertarian) by Milton Friedman, but it would be a mistake to commit to one or the other end since neither can be proved to be correct."

Sir, I am told by one of my economics professors that one of Milton Friedman's greatest intellectual triumphs was to disprove the interventionist principles of Keynes incorrect on the gentleman's own terms. The New Deal, when considered in hindsight, seems to have prolonged the Great Depression (i.e. unemployment), and 'cartelized' the economy, in the words of an Austrian commentator.

Sir, you will correct me if I am mistaken in hazarding to assert that Milton Friedman's ideas have been proven correct, or at a minimum that those of his greatest intellectual opponents seem to have crumbled into dust under the metaphoric weight of their profound emptiness.

neilehat

Just as an aside, Conservatism and Liberalism are both cut from the same cloth. But, alone, either one by itself makes a poor jacket.

Welcome to the polarized modern world of "isms" and "ologies". Too bad that dialectic has been dropped from the curriculum. Hegel, you were wrong. There is no synthesis.

usufruct

"The financial crisis has hit economic libertarians in the solar plexus, because the crisis is largely a consequence of innate weaknesses in free markets and of excessive deregulation of banking and finance, rather than of government interference in the market."

That "educated" opinion can believe this tripe merely testifies to the parlous state of economic literacy among most "experts." It's enough to turn one to drink. Instead of explaining it here, I simply refer the interested reader to this link:

http://mises.org/story/3165

John Seater

"The libertarian end of the range failed to grasp the danger of deregulation of financial markets and underestimated the risk and depth of the current economic crisis--an economic shock that appears to be severe enough to trigger a genuine depression."

Mostly baffling.
(1) Deregulation. The only deregulation of banking in the last 20 years has been Gramm-Leach-Bliley that repealed part of Glass-Steagall to allow investment & commercial banks to be owned by the same holding company, a change that actually eased the current turmoil by allowing one type of institution to buy another. Sarbanes-Oxley hardly constitutes deregulation. Eliot Spitzer was not engaging in deregulation. Basel II and the SEC's 2004 change in net capital rules was not deregulation. Some of these may have been bad ideas or badly executed, but none was deregulation. Precisely what acts of deregulation does Judge Posner have in mind that were so destabilizing?

(2) The economic "crisis." What crisis? There has been much turmoil, but calling it a crisis is hard to justify. Except for extremely short-term interest rates over a period of about two or three weeks, interest rates stayed below the levels they had reached earlier in the previous 12 months. The newspapers talked about a credit freeze, but credit flowed at high levels. Mortgage rates actually fell, being lower in October than they had been two or three months earlier. We seem to be in a recession. Indeed, the NBER just declared one earlier today. So far, though, it bears little or no comparison with what we had in 1982, much less the Great Depression. We have had recessions before, so what's the big deal now? The main risk is that policymakers, both Republican and Democrat, seem bent on acting in ways that really could cause things to get really bad, but only by undertaking policies that libertarians - and probably President-elect Obama's economic team - oppose.

The Judge's discussion of libertarian views seems based on routine preconceptions not well grounded in facts and not corresponding well to many libertarian views. True, there extremists who oppose the existence of the Fed, etc., but it is inappropriate to use the lunatics to tar all libertarians.

Jake

Laden with facile stereotypes, this post by Posner is an extreme disappointment.

blake

first great posts becker and posner, hope you don't mind me commenting once in a while.

second
"Leverage combined with risk produced this crisis. And because virtually all banks are limited liability firms, there is a real problem of excessive leverage and risk. The borrowers want to take on more leverage and risk to obtain upside. On the other hand, lenders who do not benefit from upside do want that risk. So lenders become the primary source of discipline in a free market/limited liability system. But what if government does things to REDUCE this discipline. Then you have serious risk/leverage potential. I believe over the last century many things have been done to increase financial risk and that these things have only been counter-acted by further government regulation making. So, as usual government creates a problem that requires more regulation to remove."

I don't actually think heads should roll for this, but I'd say a bit of vindictive "piercing the corporate veil" would be in order, pocketing 500 million dollars and walking off to stick the government with billions in liabilities should not be subsidized.

third
"But no one ever gets elected by being pragmatic. Can you imagine a speech saying, "I want to be president to solve some problems without regard to ideology".The wingnuts would be spinning wildly.The American people must like the system the way it is, swinging radically between the liberal and conservative screwups."

I really think the best cure for this would be an overhaul of our election system involving
http://en.wikipedia.org/wiki/Range_voting
this really seems to be a giant step forward for democracy if it's as much of an improvement as i think it would be.

programs2010

thanks for this great blog

celticdragon

"Let's take a concrete example; Assume that we need a universal national health care plan. There is absolutely no one who thinks that this can be implemented without some form of both hard and soft rationing (micro and macro allocation). Further, many thinkers believe (I think rightly) that the public and the politicians will have to accept that reality before any health care system can be rationalized, designed and implemted."

How is that different from the health care I have now, which limits how much will be payed and what procedures will be covered in the first place? I already have rationing and exceedingly poor care as it is, and pay quite a bit for it. I have already had to declare bankruptcy for medical bills I could not cover. In contrast, the one year I had access to Medicaid was fantastic. Procedures were covered with no questions asked, and the bills were actually paid.

Matthew Kelsey

FYI

tee-hee

Believers in a strong foreign policy have been hurt by the protracted and seemingly purposeless war in Iraq (the main effects of which seem to have been discord between the United States and its allies, increased recruitment of Islamic terrorists, and the strengthening of Iran and of the Taliban in Afghanistan and of al Qaeda in Pakistan)...

And social conservatives have been hurt by the stridency of some of their most prominent advocates, who all too often give the appearance of being mean-spirited, out-of-touch, know-nothing deniers of science ...

The efficiency gap between the competing presidential campaigns created the appearance of a competence gap between the parties.

Excuse me, but what's with this "seems" foolishness? You mean Iraq only seems to be purposeless war? It only seems that WMDs were never found? That Saddam Hussein only seems to have had nothing to do with 9/11? And that the guy who did, bin Laden, only seems to have gotten clean away with it while we caused the deaths of a million Iraqi civilians while insisting we were saving them from something far worse?

The social conservatives who nodded when their movement's leaders told the world the drowning of New Orleans was God's wrath for what consenting adults do in their own damn bedrooms do not merely give the appearance of intolerant mean-spiritedness, they are intolerant and mean-spirited. These people who insist the earth is 6,000 years old and demand creationism be taught alongside science do not just give the appearance of being know-nothing deniers of science, they are know-nothing deniers of science.

And how can you mean the party that cheeered when a social con -- exactly such an ignorant, know-nothing denier of science -- who was plucked from a literal podunk Alaska to run as their #2 person only gave a mere appearance of incompetence in doing so? You mean the same party that botched the warnings of bin Laden's attacks, botched both wars, botched New Orleans, and botched the handling of the economy? Yes Mr. Posner, this party, whose leaders told us over and over again the economy was fine until it collapsed on us like a neglected highway bridge -- yes this only gave the appearance of a competency gap between the parties.

Sheesh. The future of conservatism can be seen right in your own post. A cogent analysis of what the Republican party is about without being hampered by any sort of understanding that might result from accepting what that reality is.

Scott de B.

The economic "crisis." What crisis? There has been much turmoil, but calling it a crisis is hard to justify. Except for extremely short-term interest rates over a period of about two or three weeks, interest rates stayed below the levels they had reached earlier in the previous 12 months.

This is precisely the problem. Akin to what Japan experienced in the 90s. Rock-bottom interest rates yet no lending. A very bad situation to be in.

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Become a Fan

March 2014

Sun Mon Tue Wed Thu Fri Sat
            1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31