David Brooks Wises Up (A Bit)

the crisis in US conservatism is fascinating.

http://www.nytimes.com/2009/01/16/opinion/16brooks.html?th&emc=th
(logon: helmsthingy/photonic)

<quote>
Markets tend toward efficiency. People respond in pretty straightforward 
ways to incentives. The invisible hand forms a spontaneous, dynamic 
order. Economic behavior can be accurately predicted through elegant models.

This view explains a lot, but not the current financial crisis — how so 
many people could be so stupid, incompetent and self-destructive all at 
once. The crisis has delivered a blow to classical economics and taken a 
body of psychological work that was at the edge of public policy thought 
and brought it front and center.
</quote>

<quote>
  Most important, people seek relationships more than money. If behaving 
a certain way helps a stock trader or a regulator fit in with his crowd, 
he’s likely to keep doing it without too much rigorous self-examination.

A thousand mental shortcomings contributed to the financial meltdown. 
Republicans have tried to explain it by pointing to irresponsible 
policies at Fannie Mae. But that only explains a piece of what’s happening.

This crisis represents a flaw in the classical economic model and its 
belief in efficient markets. Republicans haven’t begun to grapple with 
the consequences.

For years, Republicans have been trying to create a large investor class 
with policies like private Social Security accounts, medical savings 
accounts and education vouchers. These policies were based on the belief 
that investors are careful, rational actors who make optimal decisions. 
There was little allowance made for the frailty of the decision-making 
process, let alone the mass delusions that led to the current crack-up.
</quote>
0
Kirt
1/16/2009 2:40:37 PM
embarcadero.off-topic 3759 articles. 1 followers. Follow

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"Kirt Grubbs" <Kirthatesspam@acsplus.com> wrote in message 
news:68456@forums.codegear.com...
> the crisis in US conservatism is fascinating.
>
> http://www.nytimes.com/2009/01/16/opinion/16brooks.html?th&emc=th
> (logon: helmsthingy/photonic)
>
> <quote>
> Markets tend toward efficiency. People respond in pretty straightforward
> ways to incentives. The invisible hand forms a spontaneous, dynamic
> order. Economic behavior can be accurately predicted through elegant 
> models.
>
> This view explains a lot, but not the current financial crisis - how so
> many people could be so stupid, incompetent and self-destructive all at
> once. The crisis has delivered a blow to classical economics and taken a
> body of psychological work that was at the edge of public policy thought
> and brought it front and center.
> </quote>
>
> <quote>
>  Most important, people seek relationships more than money. If behaving
> a certain way helps a stock trader or a regulator fit in with his crowd,
> he's likely to keep doing it without too much rigorous self-examination.
>
> A thousand mental shortcomings contributed to the financial meltdown.
> Republicans have tried to explain it by pointing to irresponsible
> policies at Fannie Mae. But that only explains a piece of what's 
> happening.
>
> This crisis represents a flaw in the classical economic model and its
> belief in efficient markets. Republicans haven't begun to grapple with
> the consequences.
>
> For years, Republicans have been trying to create a large investor class
> with policies like private Social Security accounts, medical savings
> accounts and education vouchers. These policies were based on the belief
> that investors are careful, rational actors who make optimal decisions.
> There was little allowance made for the frailty of the decision-making
> process, let alone the mass delusions that led to the current crack-up.
> </quote>
>
David Brooks is too nice of a boy to be a true free marketer. What he is 
pointing at as the failure of the free market is in fact the failure of the 
government intervention. Yes, Fannie Mae explains just a part of it, but 
this is a part of a broader approach - the one of the forced, continuous 
economic expansion. It is being done by the government through its monetary 
policy and is entirely foreign to the free market principles. The purpose of 
the human enterprise is not a jobs' creation - the latter come upon a 
success of the former, but if you confuse consequences with the purpose, 
then the troubles ensue. Eventually the ability of economic system to renew 
itself is lost, and we all wind up like in the former communist countries - 
everybody has a job, and those who don't are considered to be criminals :-).
ml
0
Michael
1/16/2009 8:10:05 PM
Michael Lehrman wrote:

> David Brooks is too nice of a boy to be a true free marketer. What he is 
> pointing at as the failure of the free market is in fact the failure of the 
> government intervention. 

seems to me he says he is pointing out a failure in our fundamental 
*theories* about free markets. a bit self evident at this point, i think.

> Yes, Fannie Mae explains just a part of it, but 
> this is a part of a broader approach - the one of the forced, continuous 
> economic expansion. It is being done by the government through its monetary 
> policy and is entirely foreign to the free market principles. The purpose of 
> the human enterprise is not a jobs' creation - the latter come upon a 
> success of the former, but if you confuse consequences with the purpose, 
> then the troubles ensue. Eventually the ability of economic system to renew 
> itself is lost, and we all wind up like in the former communist countries - 
> everybody has a job, and those who don't are considered to be criminals :-).

i'd say a big cause of the current mess is govt overstimulation 
(especially but not exclusively through tax policy) of the supply side 
of the economy. some balancing stimulation of the demand side would have 
been needed. remember, 70% of the economy is consumer driven. at 70%, it 
seems to me that stimulating consumer demand should have some role in 
addition to stimulting supply, should stimulus be needed. instead, 
consumer demand was stimulated (propped up) mainly by the private 
sector, not by wages, but by promoting consumer debt ("oh no, lost 
another loan to ditech!", "being in over your head: priceless", "low, 
low 0% introductory rate!"). this helped feed a bubble in the financial 
sector, along with the usual massive fraud that accompanies investment 
frenzies.

*pop*

and of course, lots of collateral damage to people and businesses who 
had no part in any of it.
0
Kirt
1/16/2009 8:41:06 PM
"Kirt Grubbs" <Kirthatesspam@acsplus.com> wrote in message 
news:68633@forums.codegear.com...
> Michael Lehrman wrote:
>
>> David Brooks is too nice of a boy to be a true free marketer. What he is
>> pointing at as the failure of the free market is in fact the failure of 
>> the
>> government intervention.
>
> seems to me he says he is pointing out a failure in our fundamental
> *theories* about free markets. a bit self evident at this point, i think.
>
The failure Brooks is talking about may apply to some fundamental theories, 
but those are not of the true "free markets". It is obviously a case of 
misrepresentation.
>
>> Yes, Fannie Mae explains just a part of it, but
>> this is a part of a broader approach - the one of the forced, continuous
>> economic expansion. It is being done by the government through its 
>> monetary
>> policy and is entirely foreign to the free market principles. The purpose 
>> of
>> the human enterprise is not a jobs' creation - the latter come upon a
>> success of the former, but if you confuse consequences with the purpose,
>> then the troubles ensue. Eventually the ability of economic system to 
>> renew
>> itself is lost, and we all wind up like in the former communist 
>> countries -
>> everybody has a job, and those who don't are considered to be criminals 
>> :-).
>
> i'd say a big cause of the current mess is govt overstimulation
> (especially but not exclusively through tax policy) of the supply side
> of the economy. some balancing stimulation of the demand side would have
> been needed. remember, 70% of the economy is consumer driven. at 70%, it
> seems to me that stimulating consumer demand should have some role in
> addition to stimulting supply, should stimulus be needed. instead,
> consumer demand was stimulated (propped up) mainly by the private
> sector, not by wages, but by promoting consumer debt ("oh no, lost
> another loan to ditech!", "being in over your head: priceless", "low,
> low 0% introductory rate!"). this helped feed a bubble in the financial
> sector, along with the usual massive fraud that accompanies investment
> frenzies.
>
> *pop*
>
Consumer driven percentage of the economy may also be used as an indicator. 
The government sees its duty to maintain that figure, while the free market 
would allow it to float, so that the saving and spending parts of the cycle 
succeed each other without any intervention. That would prevent the economy 
from developing such irregularities like we can see today.
>
> and of course, lots of collateral damage to people and businesses who
> had no part in any of it.
>
Those, who leveraged themselves highly, did have a part in it. And those, 
who avoided the temptation, will pull through just fine.
ml
0
Michael
1/17/2009 1:27:51 AM
Michael Lehrman wrote:

> Those, who leveraged themselves highly, did have a part in it. And those, 
> who avoided the temptation, will pull through just fine.

not necessarily true. one's employer may not have avoided the 
temptation. or too many of one's customers may not have avoided it. or 
one's retirement investments may get clobbered by the general market 
meltdown.

we've got collateral damage all over the place.
0
Kirt
1/18/2009 8:13:06 PM
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