Conservativism Economics Libertarianism Political Philosophy Politics The Opinionsphere

The Limits of the Free Market

George Will:

Trillions of dollars of capital are being allocated sub-optimally, by politically tainted government calculations rather than by the economic rationality of markets. Hence the nation’s prospects for long-term robust growth – and for funding its teetering architecture of entitlements – are rapidly diminishing.

The president’s astonishing risk-taking satisfies the yearning of a presidency-fixated nation for a great man to solve its problems. But as Coolidge said, “It is a great advantage to a president, and a major source of safety to the country, for him to know that he is not a great man.” What the country needs today in order to shrink its problems is not presidential greatness. Rather, it needs individuals to do what they know they ought to do, and government to stop doing what it should know causes or prolongs problems.

One thing that has frustrated me greatly over the past months has been George Will’s apparently unshaken faith in the perfection of the free market. Here he demonstrates this again – speaking of the “sub-optimal” allocation of resources by the government. I have to wonder what he makes of how the financial sector allocated resources over the past few decades. At this point, I think most of us can appreciate the value of  “sub-optimal” investment when compared to the catastrophic investments the “free market” allowed.

It’s not that I don’t think Will has a point. For one, I tend to agree with his anti-royalist attitude towards the executive branch. And secondly, I agree with him that a free market, by distributing resources and power among many actors, can achieve a kind of collective wisdom – and by allowing constant tinkering and creative destruction we allow for the possibility of positive black swans. This is the genius of the market, rooted in the knowledge that no one person or team of persons can know enough to guarantee the right decision. Instead, the best results are obtained by creating many seperate decision-making bodies and creating a structure that allows those that are actually successful to be rewarded.

But Will doesn’t seem to have noticed the serious flaws in the American and worldwide market – or at least, the only flaws he seems to have noticed are those involving government interference.

[digg-reddit-me]Even in the most traditional analysis, bankers got into this crisis largely because they were able to escape regulation. They created shadow banks, derivative products, and other complex financial instruments which were designed to evade any regulations in place. George Will and others will likely point to government-backed organizations like Fannie Mae and Freddie Mac as key causes in inflating the housing bubble – but it is difficult to actually make this case – as these institutions, for their size, weren’t that involved in the subprime mortgage market – and in fact were pushed to become involved by the enormous profits being made by the banks. What Will doesn’t want to acknowledge was that even in this most traditional analysis, the root of the problem is the misalignment of incentives rather than government distortions of the market.

What Will fails to acknowledge is that our markets are constricted by lack of government interference. The freedom of the financial marketplace – especially the distribution of power and decision-making that makes the market work – is severely restricted by the size of our banks. Their size not only makes them too big to fail, it also prevents the market from being free.

Our financial and automobile industries have ended up combining the worst aspects of socialism and capitalism – without the benefits of either – and that is even before the government stepped in.

Think about it – the free market is effective because it prevents any small set of individuals from monopolizing decision-making. Especially in the world today with so much information available and events moving so quickly, the “right” business choices to make aren’t always clear. A free market – by allowing each business to make its own choice – prevents decision-making from falling victim to individual follies. But our current economic system – with it’s enormous corporations – ends up recreating the feudal system in which power is not centered in a single place, but in a handful of powerful “princes.” While these “princes” push for free market reforms, it is not in their interest to actually achieve this ideal free market – as Yglesias points out:

As a market approaches textbook conditions—perfect competition, perfect information, etc.—real profits trend toward zero. You make your money by ensuring that textbook conditions don’t apply; that there are huge barriers to entry, massive problems with inattention, monopolistic corners to exploit, etc.

George Will himself has pointed out that those “reforms” that are passed tend to be of a specific sort, following what Will calls, “the supreme law of the land…the principle of concentrated benefits and dispersed costs.” What free market supporters rarely seem to admit is that the free market exists not in spite of the government, but because of it. And today, our market is far from free because the government has failed to protect it – and has instead allowed the worst characteristics of capitalism (exploitation of labor; externalizing as much cost to society as possible, for eg. pollution) with the worst characteristics of socialism (concentration of power and limitation of competition) to create a kind of modern feudal society. In  this feudal society, freedom is enjoyed by the “princes” of finance and industry while the creative ferment of a real free market is formally protected but effectively quashed.

I would like to see George Will take on the limitations of capitalism at some point. As a conservative and an intelligent man, he must see they exist.

[Image by mischiru licensed under Creative Commons.]

Barack Obama Conservativism Criticism Economics Financial Crisis Liberalism Political Philosophy The Opinionsphere

The intellectual deterioration of the conservative movement

Richard Posner has written one of those posts that gets talked about despite it’s lack of hyperventilation – it’s a thoughtful, reflective piece on what he calls the “intellectual deterioration of the once-vital conservative movement in the United States.” Posner summarizes the deteriotion:

[T]he policies of the new conservatism are powered largely by emotion and religion and have for the most part weak intellectual groundings [such that]the face of the Republican Party [has] become Sarah Palin and Joe the Plumber. Conservative intellectuals [have] no party.

Posner sees this decline as a symptom of the movement’s success. I think he’s half right.

Philip Bobbitt posited some time ago his theory of the evolution of the state – from princely city-states to kingly states to imperial states to the modern nation-state. The next step – according to Bobbitt – the one to which we are already evolving – is the market-state. And while a nation-state was legitimized in the eyes of it’s people by ensuring people were provided for (thus setting up the economic battle of the Cold War, as capitalism and Communism competed on this front), the market-state is legitimized by offering the maximum amount of opportunity for it’s citizens. Bobbitt’s theory is interesting – and if not entirely perfect, it is certainly useful. 

Given this structure, you can easily understand how the nation-state liberalism of Lyndon Johnson gave way over time to the market-state liberalism of Bill Clinton and Barack Obama. By this reading, conservatism did not so much win any more than nation-state liberalism “won.” Both were appropriate responses to their times.

Unfortunately for it’s proponents, conservatism (like nation-state liberalism in the 1970s) did not evolve with the times, but remained staticly committed to the principles that worked so well three decades earlier. The innovative ideas of the 1980s have become the brittle orthodoxies of the present. As conservative historian Niall Ferguson explained – “only the left” has a credible response to the issues of our day. The Right is still fighting the battles they won decades ago.

Conservativism Economics Financial Crisis Political Philosophy Politics The Opinionsphere

The Only Credible Response to Globalization

Niall Ferguson in The Telegraph:

Underlying this tremendous growth in financial markets was a fourfold liberalisation of international markets for goods, services, capital and labour. This was not, of course, peculiar to the English-speaking world: globalisation, as its name suggests, is ubiquitous. But its implications for those on the Anglophone Right were distinctive. Unremarked by conservatives in Britain, America and even Australia, these great shifts created a new and much greater trilemma.

Suppose that a government can have any two of the following things, but not all three: globalisation, in the sense of openness to international flows of goods, services, capital and labour; social stability; and a small state. Or, to put it differently, conservatives can pick any two from an open economy, a stable society and political power – but not all three.

Ferguson is extremely articulate (and credible) in his explanation of why conservatives have no “articulate” answers to globalization. He believes that conservatism will be able to once again thrive once it chooses to sacrifice social stability, which he links to social mobility. Although the two concepts certainly are related, it’s hard for me to accept the re-branding of one as the other – and it seems a bit too pat on Ferguson’s part. On the other hand, Ferguson describes the other side of the argument:

Only the Left appears to have a credible response [so far]: globalisation, plus social stability, plus a strong, interventionist state.

The set-up Ferguson proposes then would be:

The Left

In favor of:

  • Globalization
  • Social stability
  • Strong, interventionist state

Accepting as necessary evils:

  • Government interference
  • Less social mobility


In favor of:

  • Globalization
  • Social mobility
  • Small (but “smart”) state

Accepting as necessary evils:

  • Inequality
  • Booms and busts of the financial cycle
  • Social disorder

Ferguson avoids all the tough questions – such as what “smart” means – and how this would relate to regulation – and just presumes that governmental actions, inequality and social mobility are directly related – and that somehow, more inequality leads to more social mobility. I think perhaps Ferguson is attempting to create a scenario when he can plausibly oppose the man he describes as “the most Left-wing Democrat ever elected to be President of the United States.” This seems to me to be a rather implausible description of the pragmatist that Obama is. But this points to what is distorting Ferguson’s extremely interesting and insightful view of political ideologies and the current world trends. 

Let me propose an alternate party – one that it seems Barack Obama is already leading:


In favor of:

  • Globalization
  • A strong, interventionist state to aid in the creation of and to police the market
  • A state that balances the need for a social safety net and individual incentives
  • A balance between social stability and social mobility

Accepting as necessary evils:

  • Inequality (but not extreme inequality)
  • Government interference
  • A level of social disorder
  • The boom-and-bust financial cycle (but mitigated)

The idea is to maximize certain goods while balancing against the evils that are their side effects. Extreme inequality can decrease social mobility at least as much as government distortions. A social safety net of the right type can act both a great equalizer and as an incentive for individuals to pursue their entrepreneurial ambitions. 

My problem with Ferguson’s critique is that he seems to view the debate between the Left and conservatives as an either/or proposition – which it often is – but given the situation he describes, it’s more an argument of degree rather than kind. The Left that Ferguson is arguing against may favor social equality over social mobility but both sides agree that both goals are worthy. It’s a question of what the right balance is.

Conservativism Foreign Policy Political Philosophy Politics The Bush Legacy The Opinionsphere

Post-Cold War Triumphalism

It’s interesting that former Republican turned Obamacon, Andrew Bacevich cites the classic work of conservatism by Richard Weaver while concluding his essay damnig the so-called conservatives of the neo variety:

Ideas have consequences. Post-cold war triumphalism produced consequences that are nothing less than disastrous. Historians will remember the past two decades not as a unipolar moment, but as an interval in which America succumbed to excessive self-regard. That moment is now ending with our economy in shambles and our country facing the prospect of permanent war.

Barack Obama Conservativism Criticism Liberalism The Opinionsphere

Greenwald’s Rhetorical Tics

[digg-reddit-me]As a regular reader of Glenn Greenwald’s blog, I have come to admire his legal precision, his passion, and his indefatiguable interest in some of the most important issues of our day. I’m sure these account for his now significant blog readership. He is certainly one of the voices I would choose to listen to if I were in a position of power – and I hope those in power do choose to look to Greenwald for advice and counsel. But as a regular reader, I’ve noticed a few rhetorical tics which stand out. I bring this issue up not because Glenn Greenwald’s blog is itself important – although one can make the argument that it is rather influential – but because these rhetorical tics are illustrative of the broader problem of political rhetoric in general. 

See if you can identify the patters I’m talking about by reading these selections of some (mostly recent) posts – all bold emphases are my own:

Rhetorical tic #1

Regarding Marty Peretz:

Objections to the Israeli attack are just “whining.”  Those are the words of a psychopath.

On Right-Wing Bloggers:

There is a reason why those who seek to demonstrate the alleged extremism and hate-mongering in the anti-Bush blogosphere need to go digging for anonymous commenters. And the converse is also true: those who document the extremism and sociopathic mentality in the right-wing blogosphere do so by citing the twisted writings of leading right-wing pundits, not randomly chosen commenters with no connection to the content or theme of the blog.

On Tom Friedman:

One should be clear that this sociopathic indifference to (or even celebration over) the deaths of Palestinian civilians isn’t representative of all supporters of the Israeli attack on Gaza. 

With a picture of Norman Podhertz:

Face of a psychopath: Norman Podhoretz casually calls for the slaughter of countless Iranians, and suggests that they be bombed to “smithereens”.

On Charles Krauthammer:

It is difficult to find someone with a more psychopathic indifference to the slaughter of innocent people in pursuit of shadowy, unstated political goals than Charles Krauthammer – he who lectures today on the evils of associating with Terrorists as a reflection of a person’s character.

On the Bush movement:

It is hardly possible for us to lose that “war” more devastatingly than we are losing it, and the obvious cause is the twisted, bloodthirsty and sociopathic mentality – shared by Osama bin Laden and the Bush movement alike – which was laid out with such ugly nakedness by the Vice President yesterday.


Rhetorical tic #2

On Susan Estrich:

Few things are less relevant than Susan Estrich, but this is still worth examining because it is the dynamic that predominates in our political process…

On Eric Holder:

Everyone can decide for themselves how much weight to assign to that eight-year-old episode.  It doesn’t substantially alter my view of Holder’s nomination, which I still view as being, on balance, a positive step.  The reasons for that conclusion raise some points that are well worth examining – not so much about Eric Holder, but about the Washington establishment.

On Ruth Marcus:

I want to re-iterate, [Ruth Marcus’s logic] is worth examining only because it’s the predominant mentality in the Washington establishment.

On Tom Daschle:

Just to be clear:  I didn’t write about Tom Daschle’s sleazy history in order to initiate a crusade to defeat his nomination.  I wrote about Daschle because the ways in which he is sleazy are illustrative of how the Washington establishment generally works.  Daschle is noteworthy only because he’s marginally more tawdry and transparent than the average Beltway operative…

On Peggy Noonan:

What a stupid and vapid woman this is, but respected and admired by our media class because she fits right in with them – endlessly impressed by her own sophistication, maturity and insight while drooling out platitudes one never hears except in seventh-grade cafeterias and on our political talk shows. As always, this isn’t worth noting because the adolescent stupidity on display here is unique to Noonan, but precisely because it isn’t. This is how our national elections are decided: by people like her, spewing things like this. 

These tics are rather prominent. One of the great strengths of blogging is that the reader gets a sense of what exists beyond the public face of an individual, as the sheer volume and relative lack of editing that define the medium make it hard to hold back one’s deeper feelings. When reading Greenwald’s more polished works or when seeing him speak in public, these tics are not as prominent or as repetitious as they are here, for example. 

I am not going to argue that Greenwald is wrong when he states that any of these individuals are sociopaths or pyschopaths – or that this or that individual person deserves to be castigated because their ideas are representative of a broader trend which is abhorrent. He very well may be right in his judgments – I do not know these people well enough to judge. What I want to respond to though is the pattern which I think reveals a less than objective view of those he is criticizing. 

Politics is essentially visceral and personal. Greenwald clearly is passionate about politics – and these tics reveal two things about his passion: that it leads even a nuanced and rational political thinker such as Greenwald to demonize his opponents; and that it leads him to realize this to some extent, thus his repeated need to qualify his personal attacks by rationalizing them as part of a broader problem. 

I have a theory about politics and history – and though I am sure it is not unique, I am not aware of which thinker I should credit it to – that we determine our political affiliation almost entirely based on who we empathize with in historical settings. Post World War II, for example, the dominant struggle of the time saw almost all Americans serving as or rooting for our soldiers fighting in an existential struggle. Thus, as long as their war remained the most prominent national memory, America remained largely united. After the struggles of the sixties became the dominant national memory, America fractured – as some who empathized with the police took a certain view; others empathized with hippies, etcetera. The hodge-podge of policies that make up the so-called “liberal” and “conservative” parties in America can be better explained by historical sympathies than any ideological underpinning. Our reaction to these national memories though are – in a large part – visceral – at least after we have been introduced to them as children.

It is due to this baseness of emotion that so much political debate seems to involve individuals speaking past one another. Obama’s solution to this has been civility and the avoidance of stereotypes (or perhaps the conflation of stereotypes). Obama sought to deflate the escalating moral outrage of his supporters rather than to stoke it, sometimes even scolding his supporters saying, “You don’t need to boo: you just need to vote.”

Reading Glenn Greenwald, one can clearly see the dynamic of escalating moral outrage at work. While one can make the case that any particular individual is a psychopath, it seems conventient when so many of the people you are disagreeing with turn out to be psychopaths. Greenwald demonstrates a clear contempt for these individuals – which they are often times deserving – but which nevertheless clouds his judgment. 

Seeing this at work in an intelligent and eminently rational writer such as Greenwald helps one to appreciate the serendipitous nature of Obama’s rise at this moment – with his unflagging civility and his desire to deflate the escalating outrage of his supporters as well as oppionents.

Barack Obama Conservativism Domestic issues Health care Political Philosophy

Health Care’s Place in Obamanomics

This tidbit from James Pethokoukis’s blog over as USN&WR makes me want to read Douthat’s and Salam’s new book:

Another interesting healthcare reform option is highlighted by Ross Douthat and Reihan Salam in the book Grand New Party. Uncle Sam would require individuals and families to put 15 percent of their income into health savings accounts. If you run out of money before year-end, the government steps in. If you don’t, you get the money back or it rolls over into a retirement account.

This idea seems to have promise – though without seeing the ancillary details, there are some glaring issues with it on process grounds, even as you can see the proposal working out ratehr well under most circumstances in the world. It seems to penalize those with families, by reducing their retirement funds; those without an income would not have to face the trade-off that seems essential to their system working – choosing between retirement savings and health care; and preventive medicine would seem to be discouraged, although it is seen by most wonks as the surest way to reduce overall health care costs. Why get a regular check-up if you’re depleting your retirement savings to do so?

The plan seems designed mainly to tackle two political problems – the lack of health insurance for many Americans; and the moral hazard of having unrestricted access to health care. It’s rather ingenious, even if I’m not sure that the second factor should be taken too seriously. People want to avoid going to the doctor – or at least I do. This policy almost seems designed to create a massive sociological experiment. Aside from short-term medical emergencies, people would be forced to create health care and retirement strategies that balanced their long-term financial needs with their short-term health care decisions. Should I get the botox, or save more for retirement? Should I schedule this regular check-up? Should I spend money on these various preventive steps and live longer – or save more so I can spend my fewer years in a splendid retirement?

I’m sure it’s worth checking out the book just to see what other ideas Salam and Douthat have to reinvigorate conservatism.

But for now, Obama’s plan – or some variation between the rather similar Clinton, Obama, and Edwards plans – is the right way to go. It’s the shortest route to improving our current mess.

The core problem we need to solve though isn’t that our health insurance system as currently instituted is flawed, but that health insurance as the primary means of dealing out health care is flawed. Politically, the Obama/Clinton/Edwards path of patching up the current system is the only feasible one at the moment – to improve the status quo marginally. But there are far too many perverse incentives – for health insurance companies, for patients, for doctors in a health insurance system.

Of course, James Pethokoukis has greater things on his mind than our rotten health care system. He seems to be concerned that if Obama is able to pass a program that actually gives substantial benefits to Americans, it will move America to the left. Which is why he has now declared that it is the responsibility of the Republicans to stop this idea or face destruction. After all – the average American hasn’t seen much improvement in their lives as a result of the government in a long time. His theory is, once a competent liberal is able to pass a plan that substantially improves a problem in the lives of many Americans, then people will abandon the anti-government rhetoric of the conservative movement and abandon the program of incessant and regressive tax cuts.

The fear of socialism lingers like a spectre.

So, Pethokoukis proposes Republicans do anything they can to stop “Obamacare,” in order to save themselves. His little speech reminds me of a football coach trying to psych his team up for the game. But he’s playing with fire.

In light of this market disaster, this financial earthquake, some necessary changes are required to be made to our grand social bargain. Free trade is a good thing – but it creates chaos in it’s wake. The financial crisis is just the latest symptom. Obamanomics is a pragmatic, liberal approach to treating the core disease – which is not free trade or globalization, but destabilization. Obamanomics does not ideologically prescribe government intervention as Reaganomics proscribed it. Rather, it is a series of pragmatic first steps. It does not have as it’s goal the creation of some Great Society as previous versions of liberalism did; and it also does not merely try to find a Third Way between the Left and Right as Clinton did.

The key factor in understanding Obamanomics is that it does not force it’s values in the hoped for end result, but instead in the processes of getting there. Rather than imagining a perfect world and attempting to bring America to this goal, Obamanomics tries to improve what is already here, especially by instituting processes that inherently reflect core values like transparency, accountability, fairness, a long-term strategic orientation, and an aversion to government coercion.

Conservativism Politics The Opinionsphere

Honoring William F. Buckley Jr.

When one declares oneself to be a conservative, one is not, unfortunately, thereupon visited by tongues of fire that leave one omniscient. The acceptance of a series of premises is just the beginning. After that, we need constantly to inform ourselves, to analyze and to think through our premises and their ramifications. We need to ponder, in the light of the evidence, the strengths and the weaknesses, the consistencies and the inconsistencies, the glory and the frailty of our position, week in and week out. Otherwise we will not hold our own in a world where informed dedication, not just dedication, is necessary for survival and growth.

William F. Buckley Jr., Feb 8, 1956, National Review, as cited by Kathryn Jean Lopez at The Corner yesterday without a hint of irony.

On this day after what would have been William F. Buckley Jr.’s birthday, it’s worth reflecting on the man’s legacy. I am not the proper individual to evaluate Buckley’s legacy completely – but I think it’s accurate to say that Buckley is one of the dozen intellectuals who has most influenced my life. I take from him lessons both positive and negative – from his wonderful, timeless, definition of conservatism as standing athwart history shouting, “Stop!” to his determined resistance to Brown v. Board of Education.

There are a number of things that struck me about Buckley – his confidence, even arrogance; his style, almost delicate; his incredible life – from spy to magazine publisher; his magazine – brash, often wrong, generally provocative; his intellectual force, especially in that book which introduced me to him, Up From Liberalism. But what struck me most of all was that he was sensible. I mean that as the highest compliment.

He opposed Brown v. Board of Education, as poor of a decision as that might have been, for sensible reasons – in an attempt to preserve a system of federalism and social harmony. He opposed liberalism for sensible reasons – preferring the status quo to attempts to remake humanity. When liberalism became overripe and overreached – he was there condemning it. When conservatism became corrupted and overly ambitious, he was a voice of warning.

Buckley was not always right – but he was generally sensible – and it’s hard to expect more in a public intellectual.

Conservativism Political Philosophy Politics

The Downfall of the Conservative Intellectual

Mark Lilla described the downfall of the conservative intellectual movement in last week’s Wall Street Journal, describing how conservative intellectuals in the 1960s had originally and self-consciously understood themselves to be elites, trying to educate the public, as the public overwhelming supported liberal politicians. Lilla describes the changes as the sons and daughters of these thinkers took over the institutions of the conservative movement from The Weekly Standard to The National Review, just as conservative politicians began to win elections. This generation – Bill Kristol, Jonah Goldberg, Rich Lowry, and the rest was different:

Over the next 25 years there grew up a new generation of conservative writers who cultivated none of their elders’ intellectual virtues – indeed, who saw themselves as counter-intellectuals. Most are well-educated and many have attended Ivy League universities; in fact, one of the masterminds of the Palin nomination was once a Harvard professor. But their function within the conservative movement is no longer to educate and ennoble a populist political tendency, it is to defend that tendency against the supposedly monolithic and uniformly hostile educated classes. They mock the advice of Nobel Prize-winning economists and praise the financial acumen of plumbers and builders. They ridicule ambassadors and diplomats while promoting jingoistic journalists who have never lived abroad and speak no foreign languages. And with the rise of shock radio and television, they have found a large, popular audience that eagerly absorbs their contempt for intellectual elites. They hoped to shape that audience, but the truth is that their audience has now shaped them.

Today there are a few conservative movement intellectuals left – George Will for one. One could make a case for David Brooks and David Frum. Most of the rest are party hacks – or intellectuals who happen to be conservative, rather than members of the conservative movement and it’s institutions.

This isn’t a healthy result for a two party system.