Ezra Klein also blogged this article, making the sensible observation that "Capitalism, after all, isn't a state of nature. It's the system that happens when the economic rules and rewards are arranged in a certain way. One of its requirements is that those who gamble on reward also bear responsibility for risk. The question Gleckman asks is whether that rule is still in place, and if not, has anyone really thought through the implications of the change?"

In Ezra's comments, "DivGuy" says "I would suggest, in simple form, that capitalism is that system set up for the protection and expansion of capital, and as such very little real risk to capital has ever been a part of the system. I am, with extreme caution, hopeful that the particularly radical form of corporatism/capitalism practiced in the last two decades in America has lifted something of the mask off of the obfuscation of the protection of capital that has, just about always, been constitutive of the capitalist system."

Later, speaking for unreflective airheads everywhere, one "Anonymous" asserts that "Capitalism is what naturally occurs in modern societies when government is not involved. All other economic forms require the force of government to implement and maintain." Yeah, the concept of the limited-liability corporation and the legal doctrine of corporate personhood just spontaneously emerged from the deep places of the earth. Words fail.

What it really boils down to is that we don't know squat about economics. So each time there's a major f-up, we make a few more rules.

OK, I lied -- the regulators pretend they don't know squat, and the market (cough) forces, bend them as far as they can. To some degree, that's a good thing, because if we can make more money out of less money, everybody wins, right? Like you said, maximize upside.

What we need is to give the regulators weapons they can wield before it gets to crisis state, and go "no" and wap the market puppies with a figurative rolled up newspaper.

But that doesn't work so well because they're not puppies. If we had tens of thousands of small investment companies, we could let one fail, mop up the mess on the floor, and train them to not do it again. What we have is a dozen ten-ton rottweilers that bury their messes in the yard. That's theoretically a good thing too -- the yard is pretty big, and a few messes for each giant dog is "managed risk."

But you think that somebody would have noticed that the rosebushes, the tomatoes, the petunias and the cherry trees all have dead gophers buried under them, and put a stop to it before the subsidence collapses the garden walk.

I know I can't do much except keep paying my mortgage (with which I am not having a problem), and doing my best to stretch metaphors.

Libertarians believe in crap like that the way communists believed in the inevitable triumph of dialectical materialism.

Back when California was resorting to rolling blackouts, a smug bastard on capitalism.com noted that some deluded people were blaming the power shortages on collusion by power companies, which was wrong wrong wrong because the iron law of the market would just not allow that, and it they did believe that then they probably believed that diseases were caused by demon.

Deluded wankers. It would almost be funny if so many of the pricks hadn't found their way into power the last few years.

I have what many people would consider to be very libertarian leanings, and unregulated capitalism scares me silly. After all, an unregulated capitalistic system is basically any black market in the world, given legitimacy, and one thing you'll notice about those is the level of graft and bribery necessary to get anything through.

I do, however, look on the Fed and people watching it with some amusement, because their regulation is not like steering a Titanic, it's like steering an island. And as I've gotten to experience firsthand how much delay there is in steering a 12-foot boat.

Basically, a lot of people exect the Fed to micromanage, when a lot of these folk barely understand what the economy is doing now. They only have a very big lever and they don't always know where to apply it.

(Of course, it also doesn't much surprise me that we're going into a recession; we're long overdue and recessions have been a fairly steady part of this economy since its inception. In fact, they've been part of any country's economy. And it REALLY doesn't surprise me about the credit crunch because there have been people accurately predicting it for years based on the housing loan stats. Numbers can tell you a lot. They may not be able to tell you when, but they can certainly tell you how.)

"I have what many people would consider to be very libertarian leanings, and unregulated capitalism scares me silly" is a pretty good description of my outlook, in fact.

You know what I wish even more than I wish that the nation's MBAs would concentrate on administering businesses rather than diddling with financial instruments?

I wish we, the people, weren't such goddamn suckers. I wish the lure of vacations and new cars wouldn't tempt otherwise solvent people into getting second mortgages. I wish college freshmen wouldn't let a free gym bag or t-shirt tempt them into getting a credit card that will land them (or their parents) into years of payment.

Wanting stuff, now, is like a sick codependency that empowers the bastards.

As any paleontologist can tell you, in ancient times Corporations roamed the earth, regulating themselves by the natural forces of their homely and personable natures. Sure, they occasionally fed on small furry primates, but only the ones who deserved it. But the benefits far outweighed the odd destructive act, as they were also prone to shitting gold bars.

B. Durbin, right-libertarians stole "libertarian" just as the steal anything else that's not locked down tight. But few political parties would pass truth in advertising laws.

Patrick@1 the concept of the limited-liability corporation and the legal doctrine of corporate personhood just spontaneously emerge from the deep places of the earth.

Actually, it was mined out by dwarves. But they dug too deep and awoke a terrible evil...

The final paragraph of your comment, Patrick, made me laugh out loud, in a bitter sort of way... These folks who believe in the "free" market, do they also believe in the Tooth Fairy? The Easter Bunny? The particular airhead Anonymous you quote has never, I would venture to guess, studied the economic history of his or her own country, let alone that of "free markets." Bleeah.

There's this elitist meme going around that derivatives, etc. are just too, too complex for anyone not a professional to understand. I think it's obvious that a) the professionals don't completely understand them either, and b) whether or not (a) is true, we non-professionals can understand the moral nature of what these activities and choices have led to. Compassion, charity, and the common good of the polis are not hard to recognize, and their absence isn't hard to see, either.

One thing that makes reasoned discussion on these topics difficult is that people have hijacked various terms for their own ends (as Will Shetterly mentioned).

For example, free trade. Who could be against it? Economists have shown how everyone benefits from genuinely free trade, and it even has the word free in its name. So people with an axe to grind misapply the term to their own pet schemes which really mean, not free trade, but more of the specific kinds of trade that will benefit them and their cronies.

Or a friend of mine on a mailing list asked why the United States is bent on exporting capitalism to the rest of the world. I asked him what he meant by capitalism, as this term is used with various meanings and they wouldn't all fit in the context. I didn't get a real coherent reply. By capitalism he seems to mean anything that isn't socialism. And that left me none the wiser, because socialism is another of those terms that means many things to many people.

Now moral hazard is still a useful term, because the politicos and the scammers haven't managed to bleach all the meaning out of it yet.

From, of all places, Bloomberg News: how Wall Street (J. P. Morgan; Morgan Stanley) fleeced Pennsylvania school districts for billions of dollars.

These people need to be dragged out of their offices and beaten to death.

Slowly.

Allan: "moral hazard" was \born/ with half the meaning bleached out; the idea that it really does apply to the moguls as well as the masses is just starting to leak into the MSM.

Just look at any stockbroker's report, and there'll be a line in there somewhere that says something like "These securities are not FDIC insured, are not bank guaranteed, and may lose value." Anybody who invests in the stock market should know that their investment can disappear at any time.

Mortgage crisis suggestion -- since the mortgage securities are essentially worthless, deed the properties over to the residents. After all, they are the real victims of this particular con game. All of the big funds would pay the penalty for loaning out money for lottery tickets.

Yeah, I know. Somebody mentioned the Tooth Fairy ...

Well, what they actually believe in is karma - the actual, mystical sort. Bad things cannot happen for long because The Market will sort them out. It's interesting how many cracked rightish beliefs are mystical when you look at them: free market = God's will, Unitary Executive = king, class warfare = heresy...

Patrick: the Bloomberg article isn't the only case, although as a school fleecing it may be the most atrocious; in Massachusetts it was the Turnpike Authority that got rooked this way, IIRC for rather more money. The interesting thing is that the Pike is still paying; when it was discovered that the city of Springfield had been sold grossly unsuitable financial instruments, the selling brokerage ended up replacing some of the lost money (IIRC the instruments dropped >75% of their value). Possibly the Pike is stuck because they bought from somebody in Switzerland, not based in the U.S. (IIRC the seller was also not a broker-to-the-general-public; Springfield had the possibility of making clear that all the broker's we-help-you claims were bull.)

What CHip said. Historically, the concept of "moral hazard" has primarily been a tool by which monsters like Daniel Patrick Moynihan explain that if we let any brown people get a dollar of welfare more than that to which they're entitled, societal breakdown will immediately ensue.

The idea that there might be some hazard, "moral" or otherwise, in letting a bunch of well-connected shitheels get away with murder, seems to be creeping up on a few members of our elite media class, on little cat feet. In the long run, I have faith that they'll manage to shake it off.

The extent to which a bailout today affected the likelihood of Bear Stearns taking risks two years ago is the extent to which Bear Stearns could predict the future. That appears to not be very much.

Personally, I put the blame for most of the subprime crisis on the rating agencies. They're the ones who claimed that 80% of a subprime mortgage was AAA credit. Had they been more accurate in their ratings, the securitization arbitrages would not have existed (at least, not to the extent they did).

There were a number of cases last century in which swap dealers got sued (and lost) for various abuses. In some cases, they should have; but when somebody is the Treasurer of a billion-dollar entity, he really shouldn't be doing deals he doesn't understand (or at least not without hiring people to understand them).

Patrick @1: Capitalism doesn't require limited-liability corporations. They're convenient.

B. Durbin @4: Black markets don't have bribery or corruption inherent; if you want to buy a counterfeit watch from a guy on a streetcorner in Manhattan, there's neither bribery nor corruption involved. You negotiate a price and pay it, or not.

Bribery and corruption occur when third parties force their involvement. If you need a license to sell watches, then the issuer of licenses is often corrupt and requires a bribe to issue one.

Lizzy L @10: You're right, most professionals don't understand derivatives. A few do.

Patrick @12: That reporter doesn't know what he's talking about. Interest Rate Swap rates are available on Bloomberg. What difference does it make what other school districts are paying? That's like saying I don't know what prices other computer programmers are paying for Dell stock.

lightning @14: The mortgages aren't worthless; what happened was that the securities were split up, with the first part going to one side, and the remainder to the other. The security that gets the second side is worthless.

The phrase "free market anti-capitalism" is one that could probably use wider currency. Its primary promulgator seems to be Kevin Carson, of the Mutualist blog, and also of The Art of the Possible:

The problem with mainstream libertarianism is its almost total departure from its radical roots. Early classical liberalism was a revolutionary doctrine, which declared war on the most entrenched class interests of its day. [...] From a revolutionary ideology aimed at breaking down the powers of feudal and mercantilist ruling classes, mainstream libertarianism has evolved into a reflexive apology for the institutions today most nearly resembling a feudal ruling class: the giant corporations.

Libertarian here, who promises that he's learned what "capitalism" currently consists of, particularly in the last several years. To shamelessly steal Gandhi's line, I think free markets would be a good idea.

(Of course, I could turn this completely around on the use of the word "regulation", which can cover anything from "make sure no one is getting defrauded" to "'regulate' out of business everyone not in bed with us".)

Over on his blog, David Brin suggests that Paulson, et al, are "Preparing for the Next Big Scam"

"People should open their watchful eyes now to whatever deep preparations that are being made, for the Next Big Scam. After all, many of the regulatory cracks that were exploited by this latest wave of thieves were actually planted years ago, many of them as “reforms” in the wake of the last kleptocratic raid, the infamous Savings and Loan Scandal. (That took place largely under the aegis of our president’s father.) Now that the horses have been stolen, sure, we’ll see the barn doors closed and re latched... while subtle strings are left in place for other doors to be burgled, in times to come.

Let’s give the raiders their due. They think and plan long term. Preparations for our present Neocon Putsch go way back, including the creation of an entire corps of master rationalizers, from Gingrich to Wolfowitz, Perle, Adelman, Nitze and so on, whose agile surface blather covered the real agenda -- setting America up for a blood-draining of epic proportions. Okay, so now, at last, the steer has begun responding to the pain. A passel of engorged vampire bats are scuttling to avoid its hooves. They may even lay low for a while, their greed briefly slaked, while the livestock recover a bit.

But remember folks, that is how they think of us. Would be lords of the right and the left (remember communism?) Only, now and then, these sheep look up."

The moral hazard here is created by having government willing to bail out either the investors or the markets. Otherwise, it might be unstable because people were monkeying around with financial instruments they fundamentally didn't understand (or *couldn't* understand, once they started interacting in a market), but there wouldn't be moral hazard. Bash people as you like, but there's nothing libertarian about government bailouts for business. That would be the Republicans and Democrats you want to talk to.

The great downside of free market ideas isn't their failures (though there certainly are some of those), it's their usefulness to justify socialism for the rich, which has nothing at all to do with free markets. Get people arguing about capitalism and freedom when they're think they're talking about Hank Rearden, and then slip in the subsidies and protective tarriffs for Jim Taggart.

Much the same can be said for ideas of basing political action on Christian teachings, which starts with the gospels, but somehow often ends up with bombing Arabs or bashing gays, but rarely with feeding the hungry or clothing the naked or any of that stuff that actually appears in the gospels. (And there are dozens more examples.)

#21

Don't forget that one of the current wannabe-presidents was up to the ears in the S&L scandal. They aren't asking that one about a lot of things they should be questioning.

I tend to view capitalism somewhat differently; I think it's a system of social relations that's been worked out to make use of industrial production. Doesn't the "free market" rhetoric come from the dawn of the industrial age, when it was not possible to fund a business--or much of anything--without permission from the nobility? In that sense, and given industrialism, capitalism makes a lot of sense. Regulation also makes sense; the point is to produce stuff for human use, not let people siphon off wealth. I don't regard the abuses we've had since the 1980s as particularly good for capitalism; to me they seem a kind of anti-capitalism--trashing the system of production to feed egos and pocketbooks. And, fairly plainly, they can't be sustained; without regulation the whole system has turned septic, just like an unmoderated net forum.

To me, the best thing in libertarian idealism is its rejection of corruption in economic policy-making. But that seems to have been lost. And rulebook libertarianism has worked about as well as any other sort of rulebook policy or law--fine, until enough people figure out how to game the rules, and then you need to write new rules.

In the long term, production seems to be shifting from centralized and industrial to localized and information-based. I believe new social forms will be needed to make the best use of a localized information-based economy. But that is just beginning, and I do not expect to live to see that system.

Seth @18:

The pea is, we are assured, under one of the shells. My understanding of this mess is that the securities are so mixed up that *nobody* knows who owns what.

Saw an article a while back about a guy in a US$1.5e6 house. When the "owner" tried to foreclose, he said "convince me (and a court) that you really own this house, and I'll leave". At last count, he was still there.

It'll be interesting to see if this meme spreads ...

Basil Exposition: Austin, the Cold War is over!

Austin Powers: Finally those capitalist pigs will pay for their crimes, eh? Eh comrades? Eh?

Basil Exposition: Austin... we won.

Austin Powers: Oh, smashing, groovy, yay capitalism!

Hmmm....

Meanwhile, Rush Limbaugh is dusting off his "class warfare" and "lower class envy" rants, and trying to find a way to blame the recession on Mexicans and people who hate Wal-Mart.

Now I'm a little puzzled, because when it comes to individual, non-institutional-type financial failures, the free-market line is that we must not help those people because a) they would have taken the benefits, so they have to suck up the risk and b) to offer government assistance would create perverse incentives to take risks, knowing there is a taxpayer safety net.

Why do those arguments become meaningless when we're talking about Bear Stearns? Are we supposed to assume that over-extended homeowners are better clairvoyants than the CEO of Bear Stearns?

The real answer, of course, is that the Fed has bailed out f'd-up institutions in the past and there's no reason for the Bear Stearns of the world to think it won't happen again. If BS's stockholders really are better off with a bankruptcy, then surely they'll vote against JP Morgan's acquisition. Any bets on that happening?

lightning - it's not a meme exactly. The existing laws more or less assume one entity holding the mortgage. When that mortgage's elements are split up into different entities, any that don't fit the current legal scheme of "who can foreclose?" are out of luck. Nursing homes are using similar tactics (in advance) to avoid being sued when they neglect the elderly people they care for.

mythago@28: Why do those arguments become meaningless when we're talking about Bear Stearns? Are we supposed to assume that over-extended homeowners are better clairvoyants than the CEO of Bear Stearns?

I think it's because Bear Stearns thoughtfully interlinked itself with so many other holders of "bad paper" (love that phrase) that allowing it to fail might well lead to a whole bunch of things falling over. Figuring out ways to set things up so institutions can't hold a gun to the system's head in this way will have to come later.

I think the thing I liked most about the dot-com boom was the fact that I was able to continually find employment.

"most of whom think the Economist is a voice of reason"

Not sure who, or what, this is sledging. The Economist? Libertarians? A variety of libertarians the author doesn't like?

Don't know anyone who thinks the Economist is a "voice of reason". Know plenty (including myself) who think it's a fine newspaper. Just like this is a fine blog...

...if you ignore the silly little ad-hom morons'n'megaphones stuff that creeps in from time to time.

Shan, for the extended critique of the Economist's failings with regard to both honesty and competency, see the archives of Crooked Timber, with economic, political, and sociological criticism available.

The quote from David Brin hits on something important, and so weird that I'm kind of embarrassed to talk about it. The exploiters do work on a long scale. What we're seeing right now is the culmination of seventy years of dedicated opposition to the New Deal, with the children and grandchildren of the inconvenienced privileged of that era getting their comeuppance. The organizational chains of connection are there. There is a stratum of our society that never did give up its conviction that its members are the rightful lords of all the rest, and they've been at it ever since. Teresa's motto goes here, darn it.

Does anybody have any suggestions for more in-depth reading on this issue [books/blogs/journal articles etc]? About the reason why the 'free market' is a myth, and why we continue to have government regulation in capitalist economies [even when it isn't particularly useful regulation, such as the shadow banking industry appears to have today].

Is there an established economic tradition that is a counter-point to the constant 'free the market' whining of Zombie Friedman and the Neo-Classical economists?

As I posted to Usenet many years ago...

Assume a spherical free market of uniform desity and unit radius.

I suppose you can approximate that with a lot of players in the market, of approximately equal size, but that's now what we have. And, right back to the time of Blaise Pascal, we've known that the bigger players--the ones with more resources--have an advantage, even in a fair game. (BP was doing the math on gambling, and showed that in a fair game the player with more money can survive a longer run of losing plays.)

So government regulation is, to some extent, a counter to the advantage of size.

Another thing about economics which has changed since the classical days of such as Adan Smith is that there is far less friction. There are many mechanical systems, such as a vehicle suspension, where the correct amount of friction is essential. One source of friction in an economy--a slowing of the rate of change--is communication lag. Adam Smith didn't have the telegraph, but even with that it took a few minutes for a buy or sell decision to move from office to the market.

Let's say it takes ten minutes for a wodge of money to go around--a broker buying shares and selling them again--with a small profit. Now it might take ten seconds, with computers. What does that do to the apparent size of the market?

OK, Keynes was all for getting money to circulate. But his system was about getting money to circulate by exchanging it for goods and services.

And one of the things which Keynes knew was that the rich don't recycle their money as fast as the poor. If you only earn $200 a week, it's pretty well all going to have been spent by the end of the week. It's a little bit harder to spend $2000, and do things like mortgage repayments count as spending in the same way?

Not if they feed into the mad tail-chase of the derivatives markets.

"Trickle-down" is Keynes interpreted by a miser.

Bruce, you talk about the Economist's 'failings' as if there is something endemic about them, and as if I should share your view.

Is the Economist wrong? Sure. Who isn't, from time to time, including your present interlocutor?

But their reportage on, for example, dengue fever in Latin America (April, 2007) or correctly putting the boot into the BNP (May, 2006), or their constant championing of externality charges, find few peers in the larger main-stream media.

I don't understand people who clearly want nothing more than to listen only to people they agree with -- a disease of the mind that is rife in Bloggerland -- and only to attack the weakest arguments of their opponents, or worse, straw men.

I'm not saying this describes you, but it does describe some of the features of the last paragraph of Patrick's post. I note with interest that he's already accepting certain criticisms and redefinitions, particularly wrt his use of "capitalism" to mean "a species of crony oligarchy", which is clearly a definition of limited use outside his own head.

Randolph Fritz, #24:

"In the long term, production seems to be shifting from centralized and industrial to localized and information-based."

In the long term, production seems to be shifting to China. Are you under the impression that the world's "production" consists of fewer giant centralized industrial factories simply because you can no longer see them from your back yard?

Does anybody have any suggestions for more in-depth reading on this issue [books/blogs/journal articles etc]? About the reason why the 'free market' is a myth, and why we continue to have government regulation in capitalist economies

Mike Huben's Critiques of Libertarianism has quite a lot of random mud-slinging but there's a lot of good stuff too, and the sheer amount of material makes it a decent starting-point. Ignore the top links and have a troll through the subject indexes.

I don't know why Shan is accusing me of being one of the "people who clearly want nothing more than to listen only to people they agree with," or at any rate claiming that this "describe[s] some of the features of the last paragraph of Patrick's post." Having just re-read that paragraph, I don't see anything in it that addresses the question of who I do and don't want to listen to. The fact that I think the Economist is overrated is hardly evidence that I don't regularly take in material that challenges my beliefs and prejudices. (Including the Economist, to which I've been an intermittent subscriber for years.) With all due respect, I don't see where Shan, whoever he or she is, gets off levelling what is in fact a pretty nasty and personal accusation.

To the larger question, some of the discussion so far has amounted to an argument over what is and isn't, in the words of Ezra Klein's commenter DivGuy, "constitutive of the capitalist system." Observing the tendency of capitalism-that-exists to become a system of oligarchy, some people conclude that the formation of oligarchic elites within capitalistic societies--which is to say, privileged investor and management classes, admission to which is based on factors remote from skill and merit; see also, exactly why do we need to make sure Bear Stearns investors are better-compensated than New Orleans flood victims?--is an emergent result of capitalistic first principles. Other people, like the old leftists who endlessly argued that "pure communism has never been tried," feel that these dysfunctions are the result of factors external to the fundamentals of capitalism: for instance, hangovers from the pre-industrial class system, ill-considered government intervention, or the moral hazards of extractive or monocrop local economies.

It's not actually a simple argument; it's been going on in recognizable form for over two centuries at this point, and large amounts of it are contained in detailed statistical analysis which I have neither the training nor the turn of mind to properly assess. (I may not always agree with, for instance, Brad de Long, but I'm deeply impressed by his ability to find a narrative thread in the thickets of complex numeric fact.)

My own inclination these days is to suspect that the more dire view of capitalism is correct after all--that, absent some kind of countervailing force, international capital really does become an out-of-control Vingean AI inimical to human liberty. But before discussing the matter any further I want to make it clear that I'm not animated by a grudge against "business" or "enterprise"; this would be silly, since I'm a businessman and an entrepreneur. I don't happen to think that the particular system of state guarantees and legal superstructures that we know as "capitalism" is the only model by which humans can build enterprises and thereby better their and others' lot in life, although I do note that a lot of the story capitalism tells itself is a tale of how this is the only world that could ever be. (In this, of course, it's much like every other crusading worldview, right on down to the "Juche" ideology of the DPRK.)

Back when I worked in the City, a broker proudly told me that 'If God hadn't wanted them to be fleeced, he wouldn't have made them sheep.' 'Them?' Us. The other people whose insurance premiums and pension contributions oil the wheels of 'industry'.

Adam Smith is the lauded patron saint of these people. Among the many pithy comments he made was something along the lines of 'wheresoever are two or three suppliers gathered together, they will conspire to defraud the customer.'

The shysters are the regulators are the elected representatives - or their brothers and their cousins and their sisters and their aunts.

What we really need to remember is that, to Them, 'They' are not 'Us'. 'They' are 'We', and we are sheep, fit only to die to give them meat and wool. Comfortable thought, isn't it.

Seth @ 18: "The extent to which a bailout today affected the likelihood of Bear Stearns taking risks two years ago is the extent to which Bear Stearns could predict the future. That appears to not be very much."

People base their predictions of the future on their experience of the past. What in the last thirty years of history would have suggested to Bear Stearns that they wouldn't be bailed out? The large financial institutions rely on the unconditional support of the federal government like a child relies on a mother's love.

Well, what is a ruling class for except to make the rules? And what good is it to make the rules if you can't exempt yourself from them? As some dangerous un-American radical said "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants."

I don't know how it would be enforced, but just as a newly developed drug has to be tested and approved by the FDA, I would think that a newly developed financial technique (derivatives, for example) should be vetted* before getting released in the American marketplace.

* How, and by who? That's what I mean by 'I don't know...'

Shan, I don't know what you're reading in some of these messages. I answered your question about the Economist by pointing at the source of the most useful critiques of it I'm aware of. I am not expecting you to agree with me or Patrick or anyone else now, since (I presume) you haven't read them. Nor do I expect that you'll read those critiques and agree with them all. I am expecting that you may find informed commentary on the history of its management and recurring weaknesses (and strengths) within its story structuring and the like worth considering, and at at the least additional input into your own appraisal of it.

Patrick, I'm still pretty sure that every institution goes bad sooner or later. What's changed since my libertarian days is my sense of who's really got most concentrated power now, and what they're doing with it, and therefore what it takes to offset them with power elsewhere in the system. I've also become much stricter in what I will accept from people with histories of self-aggrandizing lying, even when they're saying things I'm tempted to believe.

It's not so much that free markets or Marxism haven't been tried, as that they've never been *successfully* implemented. So we don't really know what would happen if they were, but there's reason to suspect any ostensible attempts to do so again (because it might turn out like the last time and the time before that).

It would take a lot of regulation to make a free market (busting trusts, for example; why is it that unions are sometimes busted today but trusts never are?) but then how do you keep the regulators from being corrupted by the people with gobs of money? Any system that relies on the existence of incorruptible and/or superintelligent people for its proper operation is doomed to operate improperly.

I wonder if anyone who pointed out flaws in the previous Gilded Age was also attacked as anti-capitalist. Probably. But *correctly* identifying the flaws in a system is a *good* thing - see the thread below.

mythago @ 28:

The real answer, of course, is that the Fed has bailed out f'd-up institutions in the past and there's no reason for the Bear Stearns of the world to think it won't happen again. If BS's stockholders really are better off with a bankruptcy, then surely they'll vote against JP Morgan's acquisition. Any bets on that happening?

This article ("Interview with a Hedge Fund Manager") has some interesting comments on the Bear Stearns case. The HFM speculates that the shareholders of Bear Stearns -- many of them company insiders -- were forced to accept the JP Morgan takeover, even though they probably could have been better off with a bankruptcy:

... The reason the Fed didn’t want Bear to go through bankruptcy is that there are all kinds of interconnections between Bear and other banks. There’s counterparty risk, it could lead to panic, it could lead to a whole mess in the financial market, so the Fed just wants the problem to go away, the Treasury just wants the problem to go away. But if I am a shareholder it’s not my problem. "Let’s go bankrupt, let’s see, maybe we can do better than 2 dollars!" So everyone here was puzzled that Bear would agree to that kind of a deal.

Now Bear Stearns is unusual in that a lot of the shares are owned by insiders in the company, and the theory we had at the desk here is that the Treasury Department—not the Fed, the Fed’s not so tough, but the Treasury Department went to the top guys at Bear and said: "Either a deal gets done that saves Bear and calms the financial system by the end of this weekend, or we will find some reason to put you in jail." And I think one of the things that every officer of a public company is very sensitive to, post-Enron, is jail. There has been a criminalization of failure.

and

If you really look at what the Treasury and/or the Fed was doing, they know that they have to protect the financial system from grinding to a halt, but they don’t want to create a moral hazard as a result of people thinking they’re going to get bailed out no matter what. So yes, there was a bailout of the counterparties, but they needed to take Bear out and shoot it in front of everybody. So they took it out, at a 2-dollar offer, all the senior management is gone, and that’s the financial equivalent of taking the shareholders out and shooting them.

Most of the comments on the Glickman article are World of Warcraft spam. The next bubble, I guess.

Except that, hasn't it now been increased to a $10-per-share offer? At least, last I heard.

I do recognize that sometimes it's more important to keep the world turning than to make sure everyone is perfectly punished for their failings. I do wish that this logic would occasionally occur to those who have conniptions over, for instance, the possibility of some poor person getting a smidgen of a handout to which they weren't perfectly entitled. But it doesn't.

albatross @ 22: "The great downside of free market ideas isn't their failures (though there certainly are some of those), it's their usefulness to justify socialism for the rich, which has nothing at all to do with free markets. Get people arguing about capitalism and freedom when they're think they're talking about Hank Rearden, and then slip in the subsidies and protective tarriffs for Jim Taggart."

Free-market capitalism is, like pure anarchy, a logical impossibility to sustain. People, and markets, are self-organizing systems--some sort of order will emerge. The only question is what sort of order? I find that advocates of free-market capitalism fall into one of two categories: on one side are those who dislike the emergent complexity of evolutionary systems, preferring to fantasize about the elegant mathmatical purity of a supply curve and a demand curve intertwining, minus the messy complications of human innovation.* On the other side are those who get that free markets inevitably develop into complex systems, are really just trying to prevent markets from developing beyond the most primitive form of organization: rule by the strongest.** Much like anarchists who stockpile small arms, their version of "fair play" is skewed to their strengths.

*I call these the Auditors. Milton Friedman is the Auditor-General.

**I call them the Aristocrats.

Patrick Nielsen Hayden @ 39: "My own inclination these days is to suspect that the more dire view of capitalism is correct after all--that, absent some kind of countervailing force, international capital really does become an out-of-control Vingean AI inimical to human liberty."

Given the caveat "absent some kind of countervailing force," I'd agree with you. Capitalism, like any other great power source, works best when harnessed and closely monitored, not when exploding across your backyard. I'm happy to harness its power to generate wealth and progress for the human race; I'm less happy to enslave myself to its every whim--no more than I would be to do so for the internal combustion engine. It is a tool; tools must be used wisely.

(I'd also make the argument that capitalism is better for itself when harnessed. Left to its own devices, it tends to burn itself out in an orgy of destruction.)

Not just World of Warcraft spam, but spam hawking WoW gold farmed by underpaid Third Worlders, as depicted in Cory Doctorow's "Anda's Game." Cory still gets people telling him what a brilliant invention that was, and who don't believe him when he says he didn't invent it.

Peter@46: "Either a deal gets done that saves Bear and calms the financial system by the end of this weekend, or we will find some reason to put you in jail."

Too bad this isn't the norm.

Peter@46: "Either a deal gets done that saves Bear and calms the financial system by the end of this weekend, or we will find some reason to put you in jail."

Plenty of skyscrapers.

No easy-to-open windows?

Patrick @ 48:

Yes, I think the offer has been upped to $10/share. The "Interview with a Hedge Fund Manager" article I linked to actually mentions that change; it's not clear how much that weakens the "taking the shareholders out and shooting them" analogy (though apparently Bear Stearns stock used to trade up around $170/share, so even $10/share is still a relative pittance).

I do wish that this logic would occasionally occur to those who have conniptions over, for instance, the possibility of some poor person getting a smidgen of a handout to which they weren't perfectly entitled. But it doesn't.

Agreed. I sometimes think that this attitude is partly (though only partly) a holdover of the old Puritan mentality: if you're poor, it's somehow your fault, and it's God's will that you suffer the consequences of your failings.

Speaking of adjustments to our captital-ist system AND being a tester, do check out today's patch notes for the World application.

Yes, this really is on topic.

Mostly.

Patrick: some people conclude that the formation of oligarchic elites within capitalistic societies ... is an emergent result of capitalistic first principles.

It's not? Basic positive feedback!

Peter, interesting link, but Hedge Fund Manager seems to reiterate the party line: okay, grumble, it is sort of a bailout but it doesn't count because Bear Stearns stock is now dirt-cheap, plus the whole system would have exploded.

(When that kind of system failure happens to consumers we call it "market correction" and go on reading our Wall Street Journal.)

Also, his quote about jail is really misplaced. The Enron guys didn't go to jail because they made bad investments; they went to jail because they committed crimes. HFM, being a Wall Street guy, displays the expected attitude about regulations (Sarbanes Oxley = Tool of Satan), and his exaggerated response is an enlightening preview as to exactly why we aren't going to get any better regulation anytime soon.

Peter @ 46 quotes "Interview From a Hedge Fund Manager", which contains this disturbing passage.

And I think one of the things that every officer of a public company is very sensitive to, post-Enron, is jail. There has been a criminalization of failure.

My understanding was that Enron was a criminalization of y'know, crime.

Patrick, #36: I've worked for a firm that designed LCD panel factories in China--huge buildings--, so I'm very well aware that China has become a major industrial nation. (We had a drawing up that showed 10 747s on the floor of one of those factories.) There's a huge revolution in manufacturing techniques, however, and it seems likely that, not in this generation or the next, but perhaps in three or four, much production is going to be local. And possibly very large products like transportation equipment or very difficult products like LCD panels will still be made by industrial techniques, but there seems every reason to believe there is going to be less industrial production as a percentage of overall production, rather than more, possibly much less.

unleash the throbbing engines of capitalism.

Yeah, it is a form of pron, isn't it? Some sort of sexual obsession on the part of the capitalists. If they'd only use a condom, we wouldn't all be getting social diseases when they screw us.

Tina, #33: Kuttner's Everything for Sale is a good place to start, though a bit dated.

With a billion dollars, anyone you can't bribe -- however decorously or indirectly, often by letting them in on the scam -- you can have killed.

This will inevitably and systemically produce an oligarchy.

Any system you want to have in the hopes of not doing that, you have to create so it doesn't matter who is bribed or killed. This is very tough. (Possible in principle, but very tough to implement against opposition.)

Is the economy a means of ensuring the general prosperity, or is it a means of protecting and enhancing existing wealth?

The latter position has the advantage of being very simple, and scaling very well when relying on simple, basic primate social mechanisms.

The former position has the advantage of producing orders of magnitude greater absolute wealth, and such a system can, under competent leadership, stomp an oligarchical system. The trick is keeping it despite human social hardwiring for hierarchy.

(Hierarchy being absolutely required to co-operate in a group of any size, of course we're hard wired for it.)

I heard that one 'economist' was talking yesterday morning about manufacturing moving to other countries, suggesting that the workers who lose their jobs should move to one of those countries where the manufacturing jobs went and get a job thre. No apparent recognitions of the difficulties involved. Implied message: 'Of course everyone can afford to move halfway across the world, to a place where the local language is different and they stand out among the locals as outsiders, and just get a job doing whatever they did before.'

Graydon #61:

ISTM that this is an underlying source of instability and tendency toward aristocracy of most economic/social systems.

a. If we have huge imbalances of wealth, which happen in free market economies, then we get some people with unbelievable amounts of money. If you've got the wealth of a transcontinental railroad in 1890, it's *hard* for that not to become corrupting; you've got so much money that you can buy anyone you want, and simultaneously, any regulators, legislators, judges, etc., with anything you want may try to demand some of that money to get it.

b. When we have government agencies with tremendous power and money to spend, again, we get a source of corruption. It's often a different kind of corruption, but look at how much money is available from the US government in terms of grants, Homeland Security funds, and defense funds. And look how that skews the marketplace, what is researched and taught in universities, etc.

And once we have people with great power in either sphere, human nature leads them to *use* that power. Eliot Spitzer was a bane to Wall Street, but he wasn't a nice guy.

P J Evans @ 62: ...and of course, if, say, thousands of unemployed American steelworkers applied for work at Japanese steel mills, the Japanese immigration authorities would be unlikely to welcome them with open arms.

Isn't it great how the modern system of "free trade" lets capital flutter like Tinkerbell from one country to another, while labor is stuck holding the bag?

PJ Evans at @62, that was my big problem with NAFTA a few years ago, when people stated that the losses in things like textile mill production would be made up by increased production in other parts of the economy, completely ignoring the fact that many of those increases would occur geographically nowhere near the textile mills workers who were being made redundant. No one seemed to be addressing the social costs involved to persons and communities from industrial closings.

The current housing crisis is a pretty good example of how unregulated free markets create crises: it was in large part due to simple interactions of supply and demand forces.

Cheap credit led to a moderate oversupply of buyers, so the sellers sold their houses at a moderate profit. Unlike other commodities that get used up, lose value, or are hard to sell, almost every single one of those sellers then turned buyer, who were willing to pay a slight premium compared to previous years sales, since they had a tidy profit, and access more cheap credit, partly based on the increased value of the asset they were buying.

So far, not much monkey business, and a fairly linear system. However, as you iterate this scenario, you notice that housing prices continue to inflate in a way that isn't connected to the other supply-demand cycles in the economy. Then it became obvious that the only way to stay in the game (where winning = getting to live where you want) was to keep playing, and keep making bigger gambles. People worried that they couldn't afford to live in SF, or the Valley, or NYC, so they were willing to take bigger risks. "Gee, I think I can stretch to afford this."

If the mortgage industry had toed the line, and stuck with 30% down, and 30 or 15 year loans, then housing prices would have hit a ceiling much sooner, and the differential would have been small enough that most gamblers homeowners wouldn't be automatically underwater.* I'm guessing the reason why they didn't was they were caught in their own supply-demand cycle, and the ridiculously low rates being set by the Fed weren't giving the banks the return they wanted? I recall a 3.75% ARM offer from the height of the mania. Can you even make money on that without a secondary market trading mortgages like poker chips?

Anyway I think the whole thing was doomed to go nonlinear once you had those two (mostly) linear supply-demand systems interacting. Could one of you math minded types confirm that this is so? (Bruce, Greg, Abi?)

*e.g.: if you bought a 100k house, with 30k down, and the market tops out at 120k, you can "afford" to drop the price on your house to 90k in order to move somewhere else for a better job. Yes, you lost 10k, but you don't have to pony up cash you don't have in order to move. If you placed a bet on buying a 200k house, with 20k down, and you can only sell for 175k, you are hosed. Part of it is the law of large numbers thing: a 15% loss on a very expensive house is a huge amount of dollars in absolute terms.

Lightning @#25, you said 'a guy in a US$1.5e6 house'. That should be 'a stock-market kiter who got out of his company just before a prosecution would have been initiated, who is a past master at the use of the courts for delay and obfuscation'.

Small wonder he's managed to tie up the courts over the provenance of his mortgage. That's the only thing he's any good at!

Shan #35- the Economist is pretty good when it comes simply to news. It just has a tendency to be a cheerleader for free market capitalism (whatever that is) at every opportunity. Or rather, its unexamined world view is that more of its kind of free market capitalism would be great, and this gets in the way of some perfectly good stories and articles on all sorts of interesting subjects.

Albatross #63- which is why my general political outlook can be summed up in something along the lines of "SPlit up the power". Nobody should be able to gather so much power to themselves. Power has to be shared, and vulnerable. If the only way to do this is tax the multi-millionaires heavily and have regular nationwide plebiscites for the politicians and suchlike, then so be it. Of course the newspapers won't have quite such juicy scandals, but it will help prevent certain small sections of society taking the rest of us for rides every few years.

I submit a neologism of my own, which I was just about to submit to another list entirely: “cartoon economics”, analogous to cartoon physics.

(Responding to a person who insists, absolutely and completely, that in the "California energy crisis" of a couple of years ago, there was zero chicanery, manipulation, or dishonesty; only the pure workings of market forces . . . )

heresiarch @ 49

You are mis-applying the term "anarchy", using the propagandistic-fnord version.

Anarchy is exactly that self-organized order people create when they aren't under external pressures (political, brute-forceful, or psychologically-conditioned). "No boss" does not mean "no order" -- only the bosses would have you think otherwise.

The answer to the question "what sort of order?" is "many".

Martyn44 #40: Adam Smith is the lauded patron saint of these people. Among the many pithy comments he made was something along the lines of 'wheresoever are two or three suppliers gathered together, they will conspire to defraud the customer.'

The exact wording is:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.

Looking at it in context, I can see some support for either reading. I think it's a mistake to apply 20th-century notions of the traditional roles of labor and management to a work written in the 18th century.

As usual, your insights are dead on, and your rhetoric and tone are clear and concise. Thanks for the link to the article.

I wish I could be as clear headed, and clear tonged when I post about stuff like this. I usually end up peppering it with explicatives and the like, and sounding like a madman.

I have an occasional conversation with my friend the economics professor about the level of mathematical sophistication of economists in general (he's quite sophisticated for an economist). From what I've seen, few economists really understand feedback in linear systems, and there are very few who even realize the systems they talk about* are analytic nonlinear systems, or that there's an assortment of mathematical formalisms for describing these systems, and tools for analyzing their operation and predicting their behavior. And that completely ignores the fact that any analytic description will hold only as long as new structures and behavior haven't self-organized and emerged onto the playing field.

ITSM that much of what economists talk about is based on folklore and folk economics**, with a thin candy shell of mathematical rationalization. But by pretending to mathematical rigor they justify 6 impossible and contradictory things before breakfast to a public which hasn't the training to see behind the curtain.

Frankly, most of what's been said about the economy in the last few months reminds me of the patter that physicians used to use before the advent of the germ theory, asepsis, and mechanical theories of physiology: "Bleed the patient sufficiently and his humors will realign themselves."

* As opposed to the systems they see in the real world; I'm not at all convinced that their models bear much relationship to the real thing.

** Using the term in the same sense as "folk psychology": it may be a useful description for a limited range of application, but maybe not.

On Bear Stearns, a more relevant price comparison than the $170 peak is that the stock was still trading at about $70 a week before the forced merger with JPMorgan/Chase. The current $10/share offer is more than $2, but it's still not a lot.

The deal was in part a bail-out, not of Bear's stockholders, but of Bear's counterparties in its various option deals. (In addition to arranging the buy-out, the Fed seems to have put itself on the hook to keep up Bear's end of deals that constituted a lot of Bear's remaining portfolio.) But even at $10 a share, the shareholders got skinned. And most employees were shareholders --- including a lot of rank-and-file who weren't at all rich, at least by Manhattan standards. Like Enron before it, Bear encouraged employees to keep most of their retirement funds in the company's own stock; those guys are now out almost all of their nest egg, and quite likely a job on top of that.

Bruce, FWIW, I've got a couple of posts up on what look to me like naive mathematical modeling in finance over the last few years, and the consequences. For example, it's a lot easier to justify the AAA ratings that rating agencies (Standard and Poor's, etc.) were giving to pools of subprime mortgage payments if you assume that the default of each loan is an independent event, and don't bother to think about whether anything could make a lot of them fail all at once. A rise in interest rates, for example, on adjustable-rate mortgages that were issued at times of historically low rates...

Kate @33: I highly recommend The New Industrial State, by John Kenneth Galbraith. Brilliant economist, notable for observing the world as it actually works rather than beginning from ideology.

The New Industrial State was where he laid out the ways in which the American economy is in fact planned and regulated and not at all like Adam Smith's 'free markets'.

He writes in dry, formal academic prose, so it can be hard to adjust to at first. But there are some wonderful dry zingers as he skewers the accepted propaganda.

Shan@35: I'm not saying this describes you, but

That's a Flamer Bingo card for the big list.

Patrick Nielsen Hayden@17: monsters like Daniel Patrick Moynihan

I did a little light googling on DPM and discovered that fellow mongster Ralph Nader got his start in politics by being one of his staffers.

Peter, #53: Yes, that's a very large part of it. And the corollary is that if you're rich, then it's God's will that you remain rich because you deserve it.

Mythago & Ronit, #56-57: I have a dark suspicion that the chain of reasoning here runs as follows:

1) The Enron guys were doing shady stuff and got caught.

2) A lot of other people are doing similar shady stuff, and could get caught at any time.

3) Ohshit, that could happen to ME!

4) So in order to keep people from thinking I'm a criminal if I get caught, it's important to reframe the Enron thing.

5) Okay, let's call Enron "a criminalization of failure". That way if I get caught, it doesn't mean I did something wrong, just that something happened to me that could have happened to anyone in the market.

IOW, this is not an over-reaction, but a deliberate attempt at obfuscation/redefinition in anticipation of potential future legal problems.

Bruce, #59: I'm glad I'm not the only one who caught that.

P.J., #62: AKA "Let them eat cake!"

Neil, #71: I think that's why heresiarch used the term "pure anarchy". This is a philosophical ideal, like a mathematical point or line; in the real world, anarchy inevitably reorganizes to some level of order, precisely because you can't have a social system without it. The most common type of reorganization is well-illustrated in The Lord of the Flies.

Charles, #75: This suggests (to me at least) that pressure from a company on its employees to hold most of their retirement money in company stock should be taken as a severe warning sign. The more pressure, the closer the company is to going glub.

75, 79

This is why, even though I work for a stable, well-run company, one that (probably) won't be disappearing in the next dozen or so years, I have most of the 401K not in company stock. (The company matches that part of it, though, so I end up with a bigger proportion of stock every year. It's at least asymptotic.)

PJ Evans, #62: I wonder what the person you are citing thinks of Mexican immigrants?

#79: A less "oppressive" but still hierarchical (those who can manipulate the system, do) anarchical society is in LeGuin's Dispossessed.

As the old man said, "everyone's guilty of something". Tell me you can support a QA-like investigation into your business or personal affairs and not find a hole. Now raise it to the point where entire life savings' worth of money is being involved, and mistakes, even innocent ones, become fraud.

Enron, sure, they were deliberately falsifying information - sorry, rephrasing it so that it looked better on the stockholders' glossy that doesn't have all the information. Tell me that doesn't happen to one extent or another with a double-digit percentage of public companies. And remember, it was the Treasury Department that took down Capone.

"Do it our way, or we'll find something wrong", from them, probably means exactly that.

Remember Paul O'Neill? This Paul O'Neill?

Paul H. O'Neill was sworn in as the 72nd Secretary of the Treasury on January 20, 2001.

O'Neill was chairman and CEO of Alcoa from 1987 to 1999, and retired as chairman at the end of 2000. Prior to joining Alcoa, O'Neill was president of International Paper Company from 1985 to 1987, where he was vice president from 1977 to 1985.

O'Neill's unique experience transforming an old economy firm into a new economy success has been chronicled as a study by the Harvard Business School, and studied in business schools across the nation. O'Neill has gained valuable insights into international finance and the global economy as head of a major corporation with 140, 000 employees spread across 36 nations.

O'Neill's mastery of federal budget details and process stems from his tenure at the US Office of Management and Budget. He joined OMB in 1967, and was deputy director of OMB from 1974 to 1977. He began his public service as a computer systems analyst with the US Veterans Administration, where he served from 1961 to 1966.

He received a bachelor's degree in Economics from Fresno State College in California, and a master's degree in Public Administration from Indiana University. Mr. O'Neill was born in St. Louis, Missouri, on December 4, 1935.

He was fired in 2003 for disagreeing with Mr. Bush about the usefulness to the economy of tax cuts. He wrote a book, called "The Price of Loyalty," which I have not read. In it he discussed Bush's lack of understanding of economic issues, as well as exposing Mr. Bush's desire to invade Iraq eight months before 9/11.

After he was fired, he was asked if he feared some kind of (presumably political) retaliation for having told the truth. His response (I paraphrase) was: "What can they do to me? I'm old and I'm rich."

What does this have to do with capitalism, you ask?

Ah, you know...

It's a good story.

#82: But still better than the neighbouring planet, even though they're both (compromised) utopias...

There is a longer version of the Smith quote:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is im-possible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and jus-tice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

http://www.adamsmith.org/smith/quotes.htm

And you can find the entire text of the book online. The questions of the nuances of what Smith meant and if he was correct or not are beyond the scope of this message.

Mycroft, Enron's executives got into a routine of transactions they knew couldn't work. Not just that were risky, but they knew in advance would not generate the necessary revenue. This is not a thing every business does. They also got into a variety of complicated speculative ventures they weren't qualified to evaluate the odds for, and when presented with knowledgeable evaluations, they set about suppressing both the information and the people involved. Kurt Eichenwald's Conspircy of Fools is one of several good books and documentaries about this. Insofar as anything major they did is routine, it's because people like their bosses forced changes in the regulatory and legal environment to make it so; nothing in the nature of their business required it or even benefitted very long from it.

Fred #86 -- Yes, I know you can find the whole book online, because I linked to an online copy of the whole book. Specifically, to the chapter that contains the passage in question And I talked about "looking at in in context", which ought to imply to the careful reader that I knew the passage alone was inadequate.

Is there some weird Internet disease that causes people to adopt a corrective tone without actually, y'know, correcting?

#84 Lizzy L: [Paul H. O'Neill] was fired in 2003 for disagreeing with Mr. Bush about the usefulness to the economy of tax cuts. He wrote a book, called "The Price of Loyalty," which I have not read.

I've read it. Read it at the time. It's quite good, and will be included in the many, many, many contemporaneous histories of the Bush administration that will constitute history's final damnation of this man (Bush) to the hell of America's Worst President Ever.

That would be "hell" in any reasonable person's mind, of course. As we can see from Feith's interview on "60 Minutes" last night, there's nothing in the Known Universe that could make these *ssh*l*s grasp what they've done to this country.

And on the subject of Capitalism, I am quite a committed Capitalist. Part of what I know about it, I've learned from Capitalists themselves. For example the right-wing, libertarian lawyer who listens to Rush Limbaugh and expresses contempt for anyone or anything (who) (that) strays from the guiding American principles of Traditional Values and Liberty... you know, the guy who smokes in his office even though Building Management has told him it's against the law, the same lawyer who smokes dope in his office after hours even though this strikes the rest of us as something he shouldn't even *need* to be told he oughtn't do, the same Committed Capitalist guy who uses the Women's Restroom after hours because it's closer even though this is another of those things he ought to have the grace to not do in a public building where the business of Capitalism is conducted.

He hates faggots and feminists because they don't get what America is all about.

Capitalism: Great idea. Hard to do.

Mycroft, not following you here. Are you arguing that everybody does it, so it's OK? Or that we shouldn't expect much out of people who move large sums of money around, particularly if they are entrusted and empowered to do so?

Your argument is like saying that because a layperson probably doesn't have all their legal affairs (will, power of attorney, etc.) 100% in order, it's OK for me as a licensed attorney to commit malpractice.

"My own inclination these days is to suspect that the more dire view of capitalism is correct after all--that, absent some kind of countervailing force, international capital really does become an out-of-control Vingean AI inimical to human liberty."

What this, I think, is an indicator of a need for a world economic regulatory system, which implies a world government of some power.

Randolph #91: ...which will then become an out-of-control Vingean AI inimical to human freedom....

re McCain: I'd like to see someone (say Obama) hammer him on how he'd make solve this mess, in such a way as to not lead to a reprise of the S&L meltdown; with reminders that, in light of his experience in it he ought to have a good understanding of what went wrong, and so some ideas on how to prevent a third instantiation.

I forget where I read it, but both Holland and England saw some interesting things happening when they fell from dominance.

1: The forms of energy they had mastered (and used to make things happen) were supplanted (wind for coal, coal for oil).

2: In the course of things they had switched from making/moving things in favor of moving money.

Oil is going. If nothing else the pressures of price will (finally) convince people to find ways to make solar/wind/geothermal/somthing, efficient enough to topple it from it's present position of dominance.

We've (as a nation) been using Oil to prop our economy. The value of the dollar has been related to oil for more than fifty years, so people were working to get dollars to spend on oil.

That's gonna change.