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?

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.

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

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.

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.

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.

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???

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.

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.

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.

(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

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.

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..

"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.

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.

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.

"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

"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.

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

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.

thanks for this great blog

"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.

FYI

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.

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.

"who are hostile to abortion, gay marriage"

The denial is SO freaking deep. So-called social conservatives don't oppose same-sex marriage, they oppose same-sex ANYTHING. It's cowardly not to face the facts. That cowardice is what has put your party where it is. You richly deserve the wilderness.

"the appearance of being mean-spirited, out-of-touch" Appearance? see above

But it is important to distinguish between the Republican Party and conservatism rather than to equate them.

cling to that life raft you two.

The GOP hitched it's wagon to conservatism and you don't get to un hitch it when the times get tough.

I agree with BobN. Wrapping it up in a lot of pretty words and calling yourself an intellectual to get yourself out of a jam -- a jam you got yourself into -- doesn't mean you know what you're talking about.

take the obligatory knee-jerk shot at unions, for example. when it's you taking power where power presents itself it's heaven-ordained by lord knows what. when it's others whom you oppose it's stalinism and the end of life as we know it.

conservatives are hypocrites, pretty words or no.

A truly thoughtful and intellectually insightful analysis, Judge Posner.

Isn't it interesting that the genius of America has now produced timely, a new leader who truly personifies this "post-ideological era in which policies are based on pragmatic considerations rather than on conformity to a set of preconceptions rooted in a rapidly vanishing past."

For nearly three hundred years this great nation was shaped by the WHITE men, who at their roots which traces back to European ancestries, are ideological inclined. Mr. Obama is mixed and so is not genetically "chained" by his predecessorial disposition. Moreover, his part black/african influence is one which traditionally non-ideological, hence "freeing" him to be a new era type of leader: pragmatic, non-ideological.

"The Republican Party seemed to have descended to anti-intellectualism--to deriding highly educated people who speak in complete sentences as 'elitists'..."

The GOP made this descent some time ago, as Neal Gabler observed in a recent Los Angeles Times op-ed piece:

http://www.latimes.com/news/opinion/commentary/la-oe-gabler30-2008nov30,0,1009632.story

(cf., Richard Hofstadter's "The Paranoid Style in American Politics," cited by Gabler.)

""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.""

***Uhhhh, FANNIE MAE AND FREDDIE MAC AND THE "COMMUNITY REINVESTMENT ACT" had ZERO to do with "free markets". Repeat: ZERO. Nice try though prick.

"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 don't get it. How is this in any way "a free market failure"? The price of capital was blatantly manipulated downward by government entities to encourage lending and "stimulate" the economy. This distorted the market, and caused risk to be mispriced. The solution is said to be manipulating the price of capital to encourage lending and "stimulate" the economy. One good distortion always begets a bigger badder distortion. This bears no resemblance to a "free market". Who is the prescient "regulator" who saw this coming and would have stepped in to put on the brakes? Fannie and Freddie had an oversight agency with 200 employees. A lot of good that did!

"I would like to see us enter a post-ideological era in which policies are based on pragmatic considerations rather than on conformity to a set of preconceptions rooted in a rapidly vanishing past."

In other words, the fix-problems, pragmatic position of Franz Von Papen. That really worked out well, didn't it?

"A pragmatist . . . turns away from abstraction and insufficiency, from verbal solutions, from bad a priori reasons, from fixed principles, closed systems, and pretended absolutes and origins. He turns towards concreteness and adequacy, towards facts, towards action and towards power."
- William James

At rock bottom, partisanship is as boring and mindless as rooting for your alma mater against an arch-rival school. Or chanting "U-S-A, U-S-A!" at the Olympics. As Mr. Scrooge (and Mr. James) would say, it's all humbug.



And it's all very, very MALE. Where the heck are the female posters on this blog anyway?

"I would like to see us enter a post-ideological era in which policies are based on pragmatic considerations rather than on conformity to a set of preconceptions rooted in a rapidly vanishing past."

Interestingly enough, we could be entering such an era, if conservatives and the GOP choose to come along. Obama has been explicit in describing the problems his administration intends to address, and been careful to emphasize that his appointees “share a core vision” but are likely to disagree on solutions. Liberals focused on ideology as an end-goal itself have seen their influence dwindle for a couple decades, and appear to have reached a low point with Obama’s election.

This stands in stark contrast to today’s conservatism. Ideologically-focused conservatives, including our current president (and yes, to most of the country he is still our most prominent conservative), have seen their influence skyrocket over the past two decades, at the expense not only of results, but of an apparent desire to even achieve them. Instead, they have focused on the same precise “conservative” solutions for all potential problems: lower taxes for the wealthy and less regulation of finance and industry.

This has been so consistently presented as the goal, instead of simply as a means, that much of the public now simply sees it as one of the two purposes of conservatism.

The second purpose, of course, is the government enforcement of religious fundamentalism.

JC, Duhh... If I remember correctly, the Preamble to the Constitution talks of "Promoting the General Welfare", How does "Redlining" promote the general welfare? Unless of course you happen to be free, white, protestant, twenty-one and more than finacially stable. Perhaps we need to destroy the Constitution to protect our God given rights and wealth.

Liberals are wrong to promote unions? As opposed to passively accepting conditions where their low wages qualify them for food stamps, a taxpayer funded anti-poverty program? Or accepting unsafe working conditions that literally put their lives at risk?

Hi Friends iam Ammy ...and i am new to this blog and it is nice i like to post more in the blogs ...

Judge Posner - to assert that we should favor pragmatism to ideology is itself an ideological claim.

The only way we can determine what value we wish to uphold/maximize/etc. is to adhere to some sort of ideology; there is no "pragmatic" way to go about determining whether we should be governed by ends-based or means-based ethics when determining our policy. Your economics background leads you to favor an underlying utilitarian normative theory - one that I and perhaps even most others do not share.

Take the case of libertarian blindness to excessive deregulation of financial markets. Even if we assume that this was the cause of the crisis, one might still argue that it is a necessary price to pay in order to advance the liberty accessible only in a free market environment. To assert that we should only care about some metric like GDP or the Dow Jones averages already presupposes a certain controversial ethic.

Could the reality behind differing ideologies be as embarrassingly simple as self-interest rationalized into belief systems? I’m sorry if this is too obvious, but ever notice that a poor person truly believes taxing the rich more is morally right, and elderly people truly believe that commitment to the retirement entitlement programs is paramount, and plantation owners honestly felt that slavery was ok with god? Nothing wrong with self-interest. It’s stupid to deny it. But who is intellectually honest enough to differentiate this from his ethical holdings? Could ideologies and party affiliations be as simple, predictable and unavoidable as that?

Ahh Yes ...! Ism's and ologies. The last refuge of all "insipid muddleheads"!

Great first paragraph. Wow, Posner tackling a big issue, this will be memorable, I figured.

Then the post was apparently hijacked by the hearts and minds of MSNBC programming directors. How else to explain sentences like; 'As the campaigns progressed, a surprising number of conservatives switched their support to Obama.'

If the post wasn't hijacked, a typical Posner post would have quantified either by number or stature the conservatives he was referring to and noted how many would have constituted an 'unsurprising' total. C'Mon fess up Richie, did you include Christopher Buckley to pad your 'surprising' tally?

I hope, because invoking a deity on this blog is clearly out of bounds, that Posner has not tired of the middle of the road rational approach. The fear is that like Sally Fields and David Souter, he just wants to be liked now.

My concern is whether Posner does any of this writing using government resources at his judge office or if he uses the phone at the judge's office. judging is a full time job perhaps he should quit the sinecure and become a commentator full time.

@ Neilehat:

Neilehat... Nietzsche... Do all philosophers start with an "N"? :-)

Nietzsche's greatest contribution is his belief that the reabsorption of unused sperm is vital to intellectual performance. Probably explains why I became a lawyer instead of a doctor.

@ stevelaudig:
Lay off Judge Posner's internet hobby. Federal judges are entitled to post on the Web in their down time, too. Just ask Judge Kozinski.

Dan, Philosophy was my major, with the intent of going into Law School. Somehow I got diverted and ended up an Engineer. Go figure. Life is strange Huh? ;)

Lawyers? Engineers? Unused sperm? What is the world coming to? I need a drink!!!

It just occured to me that Judge Posner is an appellate judge. He reads, thinks and writes. just like blogging and he doesn't have to put up with oral arguments most of the time. Great!!!

I completely agree with Alex when he says "The financial crisis is "largely a consequence of innate weaknesses in free markets"?" and I also equally agree that Fed has hands may be indirect in this economic downturn

Judge,

I agree with the great majority of your post, but I have to agree with many of the other commentators that your "pragmatic" approach cannot be applied without some level of ideology. At some point the ends we are reaching for must be decided upon. You often advocate for legal experimentation. But if we allow such experimentation, how will we measure whether it has been successful or not without the benefit of an ideological framework? However, where I think some of the above posters have been too harsh is in their assumption that there are not already a great number of goals that the majority of Americans share. Effective health care, national security, a high and sustainable standard of living.

Those on capital hill are not arguing about whether or not we should strive for these goals but how best to reach them. Yet rather than look at the great weight of empirical evidence on how to achieve these ends, or looking to the success of failure of state programs, they instead yell from across the aisle in different languages.

I'm having a bit of trouble figuring out how opposition to gun control is supposed to be *opposed* to libertarianism. And the idea that this 'crisis' to the extent it is one, is a result of insufficient regulation verges on the delusional. This is not your best piece of work, by a long shot.

Jim, Don't forget a good cigar with that drink. Oh..., That's right, the "Do Gooders" have banned them in our self interest! Alcohol is next. Ahh ..., what sweet madness.

Scott deB responded (2Dec) to my earlier (1Dec) comment:

"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."

Scott's remarks about the volume of lending reflect the language routinely seen in the "news"papers but are grossly inaccurate. Just check out the St. Louis Fed's FRED database for the volume of bank credit in the fall of 2008 to see that it *went up* rather than down. So did the volume of consumer credit. A longer discussion can be found in Chari, Christiano, and Kehoe's working paper #666, Oct 2008, from the Federal Reserve Bank of Minneapolis. In short, the routine assertion that there was "no lending" is completely wrong.

Discussions of the financial "crisis" and the future of conservatism are not very useful if they are based on extreme misperceptions of reality.

I'm stunned that neither Judge Posner nor the many commentators seem unaware of the government's biggest role in creating the crisis: its aggressive encouragement of sub-prime lending via the Community Reinvestment Act.

The CRA, created under Carter but given bigger teeth in 1993 in the Clinton administration, created de facto quotas for banks to lend to "under-served" (poor and minority) borrowers. Home-ownership rates rose as a result from 64% in 1994 to 69% in 2003, the highest in our history. All these new buyers in the market put upward pressure on housing prices and help feed the delusion that housing prices go only up. To accommodate all those new and financial weak buyers, time-honored lending metrics, such as 20% down requirements and prudent loan-to-value ratios, were junked.

Then there's Fannie and Freddie. I know Judge Posner knows what moral hazard is. Every attempt to reform those creatures of the government (Fannie was spun out of the Federal government in the late 60's) were opposed Congress. In 2005, Greenspan said: "If we fail to strengthen GSE regulation, we increase the possibility of insolvency in crisis." Earlier this year, even a Congressman had the honesty to admit his and his colleagues' role:

"Like a lot of my Democratic colleagues, I was too slow to appreciate the recklessness of Fannie and Freddie. I defended their efforts to encourage affordable homeownership when in retrospect I should have heeded the concerns raised by their regulator in 2004. Frankly, I wish my Democratic colleagues would admit when it comes to Fannie and Freddie: We were wrong." (Cong Arthur Davis, D-Alabama)

In the absence of the role of government programs and creatures of government such as Frannie and Freddie, the housing boom wouldn't have been nearly as extreme, sub-prime CDO's would have been much smaller in quantity, and we would most likely be in a run-of-the-mill recession instead of a "crisis."

Looks to me more like unintended consequences of government programs that innate weakness in free markets, and more like wrong-headed regulation than "deregulation" to me.

Needless to say, "unaware," in the first line, should be "aware." sorry.

I disagree with Judge Posner this week in much of his comment. My disagreement centers on one basic starting point. While I agree that Judge Posner does accurately identify several aspects of conservatism and the different factions bringing a different focus to these various features of modern conservatism, he overlooks and then attacks what I see as being at the heart of conservatism, viz. veneration of a rooted way of life that provides continuity and stability in which to live. This core of conservatism dates back to Edmund Burke’s attack on the decontextualized implementation of classical liberalism in France at the time of their Revolution. Burke correctly predicted the rise of a dictator (who turned out to be Napoleon) to reestablish order after the revolutionaries destroyed many of the institutions and customs that facilitated daily informal living arrangements that had taken centuries to develop. I get the sense that Judge Posner is as tone deaf on these kinds of issues of social complexity as were Keynes and Bentham.

As Friedrich Hayek pointed out, no one mind or committee of people can process the barrage of complex information that is necessary to understand and then regulate an economy or society. The process that works well in the physical sciences of isolating variables and then analyzing their causes and effects is not appropriate to the social sciences since social phenomena are not reducible to the causal interactions of individual elements. In fact, social or economic phenomena do not function at all unless there are large numbers of actors gathering within certain structures. Only then are the players able to perform their roles within the overarching structure. These interactions are so complex that no one person or small group of persons can ever adequately grasp what is occurring and how it is occurring. In economic relations, price acts to transmit vital information that coordinates individual actors in the system. In a social system, tradition and custom serve to coordinate the actors. As Burke observed, tradition also operates to condense information about the optimal way some common issues should be handled as it synthesizes the collective experience and judgement of many people over time within a certain social environment. As times change, people adjust the tradition accordingly in their daily lives as they respond to shifting factors. The individuals on the spot can make the appropriate determinations of what aspects of their accustomed way of life to adjust much more effectively than can a central planner.

The scientific pragmatism of John Dewey falls into the same problems that Hayek identified with Keynesian and Marxian economics, viz. a social scientist cannot effectively process and analyze the barrage of constantly fluctuating complex social and economic relationships as they open out to even more dynamic relationships. While we can understand some basic general principles that govern human conduct, a judge or a social scientist cannot ever grasp the enormous complexity of the entire web of economic or social relationships even in, say, one neighborhood as James Q. Wilson observes in American judges’ repeatedly failed attempts to alter the racial power balance in neighborhoods they have attempted to socially reconstruct. As G.E. Moore advised us concerning utilitarianism, one should not think as a pragmatist on pragmatic grounds.

I do think that we can learn from Dewey’s very insightful analysis of aesthetics. Dewey sees art as identifying and expressing essences. Aesthetic intuition allows us to identify these essences, which are meanings made more clearly evident. This understanding is heightened in conversation in which we spontaneously cooperate with others to clarify these meanings. Humans adapt natural or social events for the purpose of conversation. The arts provide a forum for conversation that allows us to form common understanding and meaning. Scientific or logical statements can be delivered artistically with greater force and impact. The arts also create a common perceptual field permeated with emotional pulls and repulsions that shape our immediate visceral engagement with our surroundings. Without this aesthetic/emotional sense, we would be unable to function normally in the world. Merleau-Ponty developed a similar analysis demonstrating how a person spontaneously interacts with the environment effortlessly and artfully. When the person cannot move freely in this way, pathologies are sure to follow. In the analytic tradition, Allan Gibbard in his *Wise Choices, Apt Feelings* has argued that feeling appropriate emotions in relation to others’ actions facilitates socially harmonious interactions. So, the claim made by Judge Posner that there is an inherent dichotomy between the emotional and the intellectual is not well founded. In fact, what some aspects of contemporary global capitalism along with the liberal/left are creating is an aesthetic and emotional wasteland for people to live in. Intellectuals and elites have turned from beauty and social harmony to outlandish attacks on the Christian Western tradition.

I would argue that Darwinism and materialism form a key part of creating this social garbage dump that we are being forced to live in. First, the evidence against Darwinism is overwhelming. Niles Eldredge correctly observes “Darwin's prediction of rampant, albeit gradual, change affecting all lineages through time is refuted. The record is there, and the record speaks for tremendous anatomical conservatism. Change in the manner Darwin expected is just not found in the fossil record” (*The Myths of Human Evolution,* 1982, p.45-46). Evolution in the sense of offering an explanation for the origin of life and its diverse forms fails on empirical grounds if nothing else. As I have pointed out previously, the debate on this issue is really one between atomists and teleologists, not between advocates of the scientific method and the superstitious. William James, a pragmatist par excellence, argued that the moral dimensions of a theory must be taken into account in distinguishing various scientific explanations. When we consider the practical effects of Darwinism on the psyches of those who have been immersed in it along with its implicit atheism, (in fact, we can consider Darwinism a creation myth of the atheist materialist), we find a sense of despair, darkness, hopelessness pervading the minds of many today. The insights of King Solomon reflecting on life under the sun in Ecclesiastes came to the conclusion that all is vanity. We are rediscovering Solomon’s conclusions for ourselves today as we experiment in all that this life has to offer apart from the transcendent. Instead of relying on the truth of Christianity as well as the media of our European traditions that include pagan images that have been de-spiritualized, the young have turned to a black nihilism that naturally flows from the claims of Darwin. As Cornell biologist William Provine correctly points out, Darwin drove a stake through the heart of the religion and culture that had shaped the civilization that nurtured him.

Darwinism is a key part of today’s Zeitgeist that conservatives are rebelling against. Intellectuals can fall prey to a “group think” among themselves that denies basic tenets of Western civilization that includes an adherence to atheism, materialism, scientism, internationalism ( in the sense of superseding nation states or regionalism with a super-state), pluralism, inclusivism, moral nihilism (on the individual level), and equality of result. We need to find allies wherever we can. Certainly, they can include intellectuals who have escaped the materialist paradigm, but a conservative alliance can include average people who simply have the good sense and courage to fight for their traditions. Nowadays, average people with common sense are more likely to be reliable stalwarts against the onslaught from the atheist left.

What we need to restore is not the Republican Party per se, but the Western tradition that has brought us unprecedented freedom, prosperity, spiritual and intellectual enlightenment, health and longevity, art and science, civility, and a more humane and beautiful way of life for centuries. We should not be partisans about this decline and threat to our way of life. I was brought up in the South and so I naturally gravitated to the Democratic Party and until recently always voted for conservative Democrats for offices other than President. I am encouraged by the recent influence of Jim Webb in the Democratic Party. So, the issue is not a partisan one for me. It is a matter of life and death for us all, and that life and death struggle is to be won in conserving the truths that have evolved in our collective understanding through centuries of experience that we have been in the process of foolishly discarding en masse for the past few decades.

Chris, Welcome to the wonderful world of Epistlemology. Where all try to impose some form/ degree of order and meaning to an otherwise un-intelligble world. Hence the rise of Ism's and Ologies. Moore's attempt rests on a linguistic and Common Sense approach. While Russell/Wittgenstien went cartwheeling through the Logical approach. Developing the Analytical School. As for Pragmatism, it's basis lies in the desire to establish Epistlemology on the practical consequences of thought/action as the basis of knowledge.

Conservatism and Liberalism are attempting to do the same in the Socio-Political realm. The end result is an ossification into Ideology and the creation of an otherwise un-intelliglble world. Hence the need for a move to Pragmatism to break the deadlock.

Remember, its come time "to think anew and act anew".

Thanks for the welcoming comments, neilehat. I am very much in agreement with a certain variety of pragmatism but very much opposed to another. The version of pragmatism that I accept is a blend of rationalism and empiricism along the lines Kant articulated. As Kant observed, "Thoughts without content are empty; intuitions without concepts are blind." So, to function effectively in the world one needs both concepts and sensory experience. Or as William James said, without conceptual categories experience would be a "blooming, buzzing confusion." At the same time, Kant observed that we need to adjust our theories to reality since "what is true in theory is not always true in practice." There has to be a reasonable, contextual modification of what our conceptual analysis predicts would be true in certain cases in light of what we actually experience. For these reasons, some have labeled Kant a pragmatist of a certain sort, and this is the sort that I am in sympathy with.

I think we could say something similar of Edmund Burke. He was guided by principle, but he argued that the application of abstract principles must be adjusted to a certain time, place, and people. In the opening pages of *Reflections on the Revolution in France,* Burke accepts the classically liberal political theory the French revolutionaries are operating from. He very much disagrees with the wooden, ideological way that they imposed theory on people from the top-down without regard to French religion, culture, history, temperament, or common sense.

Contemporary political scientist, Kenneth Minogue, has made a clarification that we need to take advantage of here and that is between philosophy and ideology. In his book *Alien Powers: The Pure Theory of Ideology,* Minogue argues that ideology as such is not philosophy. It is an all encompassing attempt to reduce the entirety of human experience to a simple set of presuppositions. For example, Karl Popper observing that Marxists can take anything and everything from the trivial to the grand and reduce whatever they observe to class interest. Radical feminists reduce even the most innocent comments or body language to sexism and male oppression. Nazis reduced any and all social problems to the nefarious influence of Jews. In contrast, philosophy seeks to understand what we directly experience by identifying relevant principles that govern reality, whether social or natural. Philosophy is closer to science in that it attempts to rationally and objectively identify governing principles in the universe as does science without restricting itself to what can be empirically verified.

So, a full-blown pragmatism a la William James and John Dewey as well as less obvious pragmatists David Hume, Richard Rorty, and Ludwig Wittgenstein reject the view that reality is rationally structured. They argue that nature and human action are inherently structureless and unpredictable. There is no rational foundation to reality, so anything and everything might happen. There is no rational framework that shape experience or an independent reality. We can only know what is before us at this moment (phenomenalism). Therefore, the course of action that we can "reasonably" expect to take can only be short-run and then deal with ramifications from each short-run decision as they come. In effect, they undercut the entire enterprise of science and philosophy. The full-blown pragmatic view is very similar to Lucretius' atomic swerve. You never know when it is coming or where it is going. Judge Posner seems to buy into this view of human existence as inherently changeable and radically unpredictable. I just cannot accept this view. While I do agree that things do not always turn out as expected, as Kant observed, or no one can simply impose a rationally consistent theory on a rooted culture and not disrupt a complex order that cannot be reduced to a limited set of propositions (as intellectuals are prone to wanting to do), I do not see everything in capricious flux. I do not think human nature or social relationships are in open-ended, erratic process of mutation. Contrary to Darwin, I do not see the natural world that way either.

Again, I think that we have to grope for a balance here between aspects of reality and human capacities to grasp where we are in that reality. We need ideas and reflection as well as experience and reality testing. There is a rational order to life, but at times, we cannot find our bearings on the compass. We are thrown into a particular time and place with its own idiosyncrasies, but yet there are universal truths that can give our personal experience meaning and purpose.

I for one was hopeful when George W. Bush proclaimed in his first (I think) State of the Union address that the debate over "more government, regardless of the cost" and "less government, regardless of the need" was to be relegated to the last century. That was the last I heard of it - bummer.

Pragmatism is fine, but we don't all agree on what "works". For some, it's preventing murder, and for others, it's being rid of the unwanted responsibility of a child incontinently conceived. The ideologues themselves are not just spinning their wheels to make life hard for those who disagree with them. They are after a particular world order that "works" as they see fit.

I am an unapologetic capitalist, because I believe down to my toes that each individual's toil is a primary life-lesson (and to expose once and for all the meaning of life, we are here to learn). It is appropriate to our experience in this time that we take individual responsibility. On the day that we all feel a presumptive universal love for one another, like a family, communism will be appropriate.

Above all other American blessings, I cherish the environment of freedom wherein I can accumulate wealth to whatever degree I choose, or live stupidly if it happens that my lessons lie there. If that makes me a conservative and / or libertarian rather than a consequentialist, then I must doubt that conservatism shall disappear in my lifetime.

"Epistlemology"

Hmm... is that the tendency to post over-long and self-indulgent posts/personal manifestos on blogs?

Epistemology, maybe?

Nice try. You can't blame this on the free market because there is no free market. This collapse was 100% caused by the government. How can you know about the roles of the Federal Reserve's irresponsible currency inflation, the GSEs, the FHA, the CRA, the underwriting rules imposed by the government, and the mark-to-market rule and still argue that the free market caused this?

The attempt to see things as non-ideological, pragmatic, or "Third Way" is nothing but a cynical con game designed to support the irrational ambitions of people who want to have their statist cake and eat it too. The latest prominent example of this is Krugman declaring that The Great Society wasn't actually Keynesian policy. It was Keynesian policy. Just stop with the B.S., people. Just admit that government interference in the private sector is causing our problems.

Judge Posner,

I enjoyed your commentary as usual. I saw a documentary a little while back about Barry Goldwater made by his grand-daughter. I was heartened by the fact that he seemed to be praised more by people on the left than on the right. I think the true center of the country is slowly shifting to a world-view that describes itself as socially liberal but fiscally conservative. I hear more and more people describe themselves in this way. A person thusly described does not really fit into the Democratic or Republican party. Maybe the established parties have some catching up to do.