A Refutation of the most Superficially Sophisticated Argument for
Libertarianism
I’m going to excerpt some passages from this article (http://www.nationalreview.com/article/437324/neil-degrasse-tysons-rationality-pipe-dream),
published almost two months ago in the ‘eminent’ right-wing journal known as The National Review,[1] and
then briefly (but decisively) refute them. There are basically two reasons why
I am doing this. The first is that it is a superficially convincing article
which could easily deceive the ignorant or credulous reader: it has a strong
start (with which I completely agree), making some important and correct points
about complexity and chaotic systems and, whilst the reasoning becomes highly
specious when the author actually starts talking about economics and politics, I
have no doubt the argument would be able to persuade those who aren’t vigilant
about the author’s fallacies, sophistries and distortions. The second reason
for carrying out this exercise is that the article’s argument represents one of
the standard, general arguments – probably the least obviously terrible
argument – that Neoliberals, Libertarians and other “free-marketeers” actually
have. This means that, by refuting it, I will be simultaneously undermining a
major support for such ideologies. Basically, the article is an instance of the
classic Hayekian, “knowledge argument” for Neoliberalism, which goes as follows:
1.)
We can’t possibly know enough about our
massively complex society to carry out any effective “central planning” [a term
used to encompass pretty much any kind of regulation, pretty much any kind of
fiscal policy or government investment in health and education (in the Chicago
School/Neoliberal view, the only government economic policy, and the only
government role in directly affecting the economy, should be central bank monetary
policy), and very often used to encompass welfare and social security].
2.)
There’s a real risk that major “central planning”
might seriously backfire, either because: a) the world is chaotic and too
complex for us cognitively limited humans (the justification the article uses)
or b) it’s just basic economics that you
shouldn’t be distorting the market – that will necessarily make things worse by
encouraging inefficiencies and rent-seeking (the view based on Austrian
economics and its religious picture of “free-market capitalism” as a self-equilibrating,
self-correcting, optimal system, which the author almost certainly subscribes
to also).
3.)
The “market”, left alone, is a powerful, dynamic
engine of innovation, growth and progress (see just above), and is capable,
alone, of solving most or all of the big problems that face us as individuals,
and as societies (it can cope with any chaos it doesn’t cause).
Conclusion: we should avoid
all “central planning” and just allow the “market” [whatever that is] free rein.
As I shall demonstrate, this is a
very, very bad argument.
Before I begin my critique, I would
like to clear a few things up about the article. As anyone who has actually
clicked the link would now know, Kevin D. Williamson wrote the piece in
response to a Neil de Grasse Tyson tweet, not directly as a defence of
Neoliberalism or Libertarianism. However, despite strongly disagreeing with the
way Williamson attacks this tweet (obviously), I do actually have my own
problems with the Tyson tweet, and it is certainly not my aim to defend it. The
reason I didn’t like Tyson’s tweet is, naturally, very different from the several
reasons Mr. Williamson didn’t like it. I didn’t like it for the simple reason
that it seems to imply a denial of the is-ought gap: it’s a blatant philosophical
error to think that any society where all policy was based on “the weight of
evidence” alone would necessarily be an ethical, equitable, free, effective
society (and yet this must be what Tyson imagines). Tyson’s “one-line
constitution” would, it seems to me, be compatible with plenty of societies
that are ethically abhorrent and hellish (even if it would also be compatible
with very good societies). Obviously, Tyson thinks Rationalia is just one society – one possible world – but as
I just implied, I believe that, if you take Tyson’s stipulated “constitution”
alone, there are many possible Rationalias. One possible Rationalia would be a
Feudal (or neo-Feudal) society where a small class of barons and warlords
enslaved everyone for their own benefit. I believe such a society would qualify
comfortably to be a “Rationalia” just as long as the ruling class of such a
society was enslaving everyone in a way that reflected the “weight of evidence”
(that is, the weight of evidence as to how to effectively enslave people). The
ruling class in this Feudal Rationalia could make sure they profited off the
exploitation and subjection of millions of peasants in the most efficient and
sustainable way possible, by using their best scientists and intellectuals to
calculate how much land they should use without irreversibly damaging the
environment, how to crush insurrections and rebellions, and so on. Clearly,
this is not what Tyson had in mind, and this demonstrates the problem with his
tweet.[2]
Anyhow, that was an easy way of
repudiating Tyson’s tweet, and yet it was a much better argument than the much
more high-falutin’ one given in the article, which I’m about to destroy.
Here’s an extract from near the
start of Mr Williamson’s article, the bit I agree with:
“Drawing from sources as diverse as the works
of Henri Poincaré and mathematical biologist Robert May, scholars of complexity
have disassembled Isaac Newton’s machine-like, deterministic model of reality
that gave scientists the dream of a perfectly predictable world. As Melanie
Mitchell put it in her indispensable Complexity: A Guided Tour: Newtonian
mechanics produced a picture of a ‘clockwork universe,’ one that is wound
up with the three laws and then runs its mechanical course. The mathematician
Pierre Simon Laplace saw the implication of this clockwork view for prediction:
in 1814 he asserted that, given Newton’s laws and the current position and
velocity of every particle in the universe, it was possible, in principle, to
predict everything for all time. With the invention of electronic computers in
the 1940s, the ‘in principle’ might have seemed closer to ‘in practice.’
That hope turned out to be a false one. Some complex systems (weather patterns,
markets, animal population groups) turn out to be extremely sensitive to tiny
variations in initial conditions, which we call, for lack of a better term,
chaos. You can have a theoretically perfect model of the behavior of a system,
but that behavior remains unpredictable — even in principle — because of
variations that are beyond our ability to measure. Phillips again: The presence
of chaos in a system implies that perfect prediction à la Laplace is impossible
not only in practice but also in principle, since we can never know [initial
conditions] to infinitely many decimal places. This is a profound negative
result that, along with quantum mechanics, helped wipe out the optimistic
nineteenth-century view of a clockwork Newtonian universe that ticked along its
predictable path. That is pretty heady stuff, but the unpredictability and
fundamental unknowability of many aspects of reality are familiar enough,
particularly when it comes to human social interactions (meaning, among other
things, the whole of politics and economics), human beings being notoriously
unpredictable creatures. Soldiers, entrepreneurs, and fashion designers all
know that all of the best planning and research that can be done often goes up
in a flash when actual events start to unfold. Never mind the failed
businesses; go back and read the initial plans of some of our most successful
firms, and you’ll get a good laugh.”
This is a basic primer on stuff
that everyone should know. Nothing to disagree about. This completely sensible
start is why this article has some rhetorical power, even if what’s about to
come is somewhat insane. Here’s a much longer extract, coming just after in the
article, in which he begins making his argument:
Politicians like to tell simple stories about social problems,
preferably stories in which their friends wear white hats and their rivals wear
black hats. The 2008–09 financial crisis is an excellent example of that: The
Left says that the problem is that we deregulated finance (never mind that we
didn’t actually do that) and that “greed” caused bankers to trick tens of
millions of Americans into taking out mortgage loans that they couldn’t really
afford, with the result that wicked banksters such as Dick Fuld managed to
cleverly . . . lose themselves billions of dollars. It’s a
dumb story.
Some conservatives tell a pretty dumb story, too: that the bankers and
mortgage brokers were in reality good, public-minded, upstanding types, who
were viciously strong-armed into making loans to poor people, especially black
and brown ones, who schemed to enrich themselves by . . . getting
themselves foreclosed on, ruining their credit, losing their investments, and
being put out of their homes.
The reality is that regulations, regulatory reforms, and economic
incentives interacted in ways that no one foresaw — or could foresee —
producing results that no one wanted. Securitization (bundling and chopping up
mortgages into financial instruments that could be easily traded among firms)
was intended to distribute risk among investors and institutions, but it ended
up concentrating that risk. Everything from public-school failures to advanced
mathematics contributed to the housing bubble and meltdown.
Many of the policies relevant to the housing bubble go back to the
1930s. No one in the Roosevelt administration could have foreseen what their
policies ultimately would contribute to, nor could the deregulation advocates
of the Reagan and Clinton years, or the regulators who helped shape housing and
financial markets from the Great Depression until the current day. There’s a
case to be made (I made it in National Review on December 15, 2008) that the
invention of photocopying played a role, with credit-rating agencies switching
from an investor-pays business model to an issuer-pays model once the easy
replication of their reports made it more difficult to get paid for their work.
These things happen all the time. Protectionist measures taken by the
United States against Japanese automakers ended up contributing to those firms’
technological innovation (especially with smaller four-cylinder engines) and
allowing domestic automakers to forgo improvements in quality and performance;
this ultimately made Japanese cars more attractive rather than less attractive
to U.S. buyers. Agriculture policies that kept sugar prices artificially high
led to the popularity of high-fructose corn syrup. The Islamic State emerged
from our war on al-Qaeda and its supporters. Etc., etc., etc.
The first paragraph is very odd.
In just one sentence, he makes more howlers than there are grains of sand on
the planet: “The Left says that the
problem is that we deregulated finance (never mind that we didn’t actually do
that) and that “greed” caused bankers to trick tens of millions of Americans
into taking out mortgage loans that they couldn’t really afford, with the
result that wicked banksters such as Dick Fuld managed to
cleverly . . . lose themselves billions of dollars.”
Let me now explain, in
numbered-point form, just what is wrong with this sentence (apologies in
advance for the length):
1.)
The claim about “The Left” is a colossal Straw Man. Talk about “dumb
stories”; this one about “The Left” is about as dumb as they get (unlike
Williamson, I shall now seek to justify this caustic remark). Here, Williamson
quite unashamedly suggests everyone who might conceivably be regarded as ‘Left’
(from Paul Krugman to Slavoj Zizek) belongs to one homogenous entity with a
hivemind that thinks the two things he suggests, in exactly that straightforward,
black-and-white way. Presumably, he doesn’t quite think of the left in quite
such black-and-white terms, but that’s really beside the point: an intellectually
honest person who disagreed with the ‘Left’ account would at least cite one or
two people from this (massive) group, including at couple of quotes from their published
works.
Now, to be fair to Williamson (which is not a favour
I can imagine him returning), there may well be another place in his
journalistic oeuvre where he has actually tried to justify his contempt for these deregulation- and greed-based
‘leftist’ accounts of the causes of the GFC. Nonetheless, as I shall show under
headings 2.) and 3.), what he writes here is enough for me to conclude, safely,
that he has absolutely no clue what
he is talking about.
A different point is that, even if Williamson has elsewhere written a
not-completely-idiotic, (partly) empirically founded criticism of the ‘leftist’
accounts of the causes of the GFC, it would still be intellectually dishonest
of him to construct the laughable Straw Man that is on display in this article.
Lectures about the nature of chaotic systems and the complexity of human
societies do not suddenly give you licence to summarily dismiss (and smear)
every single one of your ideological enemies (in this case, literally millions of people). That would seem to
be – how shall I put it – rather simplistic.
Now, I realise that, if I were trying to defend the viewpoint of a right-wing Hayekian (for
whatever reason), I would probably do exactly what Williamson does here: ignore
all the specific arguments of ‘leftists’ and the facts they marshal in support
of them, and instead just try to make every single ‘leftist’ look like an idiot
with a few empty, sarcastic jibes. If I didn’t do that, I’d worry that ‘the
Left’ might end up looking slightly less childish and naïve than I was seeking
to portray them. My biggest fear would be that my readers might even come to see
that many on ‘the Left’ back up their arguments with substantial historical
evidence, telling economic and financial data, and some even with sophisticated,
dynamical models of debt build-ups, like Steve Keen (perish the thought). I’m
not saying, of course, that Williamson himself is thinking in this highly
calculating, cynical way; I think he probably does believe that ‘the Left’ have
“a dumb story” that can be reasonably dismissed in one sneering and sardonic
sentence. But, regardless of your sincerity, you can’t just sneer away the serious thought of millions of people,
including probably hundreds of thousands of academics and scholars – economists
(mostly heterodox), historians, anthropologists, etc… Even if you do think that
the general truths of “complexity” decisively rule against the arguments of
these ‘leftists’, you still have to explain exactly how. Given that I can use
similar considerations of social complexity to make the argument that Hayekians
or Libertarians who want to deregulate finance don’t understand the chaos of
financial dynamics and financial instability (which is an argument I shall
later elaborate), one clearly needs more than a facile appeal to complexity to
refute the ‘leftist’ explanations of the GFC.
2.)
Williamson claims that “we didn’t actually
[deregulate finance]” and then doesn’t cite any support for this claim. One
doesn’t usually expect blatant, unambiguous falsehoods in major journals, but,
by my lights, this comes pretty close. It sits in uncontroversial conflict with
trivial facts that are completely open in the public record (in fact, the three
deregulatory acts I’m about to mention have their own Wikipedia pages) and
which have been written about in innumerable books. For the ignorant, there
were two major deregulatory reforms that took place between 1980 and the GFC
(the period of massive financialisation of the US economy, when financial
instability also rose markedly (as determined by the lower period of the boom
and bust cycle)): The Depository Institutions Deregulation and Monetary Control
Act of 1980, which repealed the sections of the Glass–Steagall Act pertaining
to retail banking interest rate regulation; and the infamous, Orwellianly named
“Financial Services Modernisation Act” (“Gramm-Leach-Bliley Act”) of 1999
(ratified under Wall St’s favourite Neoliberal president, Bill Clinton), which
repealed the part of the Glass-Steagall Act separating commercial from
investment banks. In 1982, there was also the Garn–St. Germain Depository Institutions Act, which deregulated savings and
loan associations and allowed banks to provide adjustable-rate mortgage loans.
While I won’t, as yet, defend the (necessarily difficult) claim that these
deregulatory reforms were definite,
clear-cut factors in the causation of the GFC, it is important to make
clear just how utterly mendacious Williamson is being.
Of course,
he can’t be talking complete nonsense, and if I were to make a guess as to what
exactly he is talking about, it is perhaps that he thinks that the major
deregulatory reforms aforementioned were counteracted by the not-explicitly-deregulatory
Financial Institutions Reform, Recovery and Enforcement Act of 1989,
enacted in the midst of the savings
and loan crisis of the 1980s and 1990s. Since this seems the most likely
hypothesis as to why he doesn’t think Wall St had really been deregulated
before the GFC, I will now very briefly review the savings and loans crisis,
and the nature of the reforms included under the 1989 act.
The most
interesting thing to note about the savings and loans crisis of the 1980s and
1990s is that, though the industry was in trouble before the deregulation that
took place in 1980 and 1982 (indeed, the 1980 and 1982 acts were largely
motivated by the mass insolvency of the industry),[3]
this deregulation, combined with a significant increase in regulatory
forbearance, ended up worsening the crisis – allowing it to deepen and spread by
artificially pumping up the beleaguered institutions, and fostering fraud and
financial chicanery. I honestly don’t know what Mr Williamson thinks about the
deregulation explanation in this case, but my guess is that he thinks it’s
false (if he is happy to controvert the mainstream scholarly view of the GFC, I
think he would be happy to controvert the mainstream scholarly view of this
crisis). If he does think this, however, he’s definitely wrong, as we shall
see.
Anyhow,
I’ve l jumped the gun here. It is highly likely that most (if not all) of my
readers won’t know what a savings and loan association is. So, for those too
lazy to go on Wikipedia, a savings and loan association, also known as a
“thrift” association, is a financial institution which “accepts
savings deposits and makes mortgage, car and other personal loans to individual
members (a cooperative venture known in the United Kingdom as a building
society)” (https://en.wikipedia.org/wiki/Savings_and_loan_crisis). Thankfully, the Wikipedia page I just
linked has a fairly solid (albeit poorly structured and very clearly composite), well-cited account of the
nature of the crisis and of its causes. I enjoin my readers to skim through
this now, so that I don’t have to properly review the crisis myself.
Along with
the work of the financial historian Kenneth Robinson, this Wikipedia article
draws heavily from the writings of the well-known former regulator, regulation
advocate and white-collar-crime-fighter William Black in his 2005 book The
Best Way to Rob a Bank is to Own One: How Corporate Executives and Politicians
Looted the S&L Industry.[4]
It’s worth talking a bit more
about Bill. He was a man with a privileged view on the crisis, holding
three important regulatory offices during the 80s in which he oversaw S&L
activities: he was litigation director for the Federal Home Loan Bank
Board (FHLBB) from 1984 to 1986 (leaving in the year that Charles Keating started
to strangle and then hijack the board), then deputy director of
the Federal Savings and Loan Insurance Corporation (FSLIC) in 1987
(which was administered by the FHLBB and insolvent throughout the crisis), and,
finally, Senior VP and the General Counsel of the Federal Home Loan Bank
of San Francisco from 1987 to 1989 (which had, the year before, completed
a damning investigation into Charles Keating’s Lincoln Savings and Loan
Association, and whose members Keating called “homos”). Black ended up being a
central figure in exposing Congressional corruption during the crisis, and his
blistering testimony at the United States House Committee on Financial Services
(also known as the House Banking Committee) in 1989 helped bring about the
Senate Ethics Committee’s investigation into the Keating Five (https://en.wikipedia.org/wiki/Keating_Five)
and the resignation of the post-1987 head of the FHLBB, Danny Wall. His
testimony was largely based on notes he took at a meeting with the Keating Five
in April 1987. Anyhow, the point is that he knows what he is talking about, and
he blames deregulation and regulatory forbearance for the huge amplification of
the crisis. He saw first-hand the way deregulation and regulatory forbearance
allowed fraud to metastasise and poison the industry.
Let us now talk about the thing we promised to talk
about several paragraphs ago: the Financial Institutions Reform, Recovery and
Enforcement Act of 1989. Once again, there’s a good Wikipedia page on this that
I would recommend examining (https://en.wikipedia.org/wiki/Financial_Institutions_Reform,_Recovery,_and_Enforcement_Act_of_1989).
Since there is this page, all I want
to say is that the changes implemented by this act are not, overall, strongly
regulatory: there are elements that one would describe as clearly adding regulatory
oversight, but the FHLBB ad FSLIC were abolished by the act, and weren’t
properly replaced by the institutions put in their place: the Office of Thrift
Supervision and the Federal Housing Finance Board. Indeed, the Office of Thrift
Supervision ended up being captured by Wall St to the point that, by the 2000s,
it had adopted “an aggressively deregulatory stance towards the mortgage
lenders it regulated” (http://www.washingtonpost.com/wp-dyn/content/article/2008/11/22/AR2008112202213.html).
Thus, to put it simply, Williamson is talking nonsense.
Of course,
something that Mr. Williamson says later in the extract does shed some
light on how he could have made such a mendacious remark about deregulation and
still preserved a modicum of self-respect. It is this – “Many of the policies relevant to the housing bubble go back to the
1930s. No one in the Roosevelt administration could have foreseen what their
policies ultimately would contribute to […]”. He seems to think that the regulations enacted, and regulatory
agencies created, as part of FDR’s New Deal from 1933 to 1934 were at least as
important (perhaps more) than the deregulation
(a deregulation which he does actually acknowledge with the noun phrase: “the
deregulation advocates of the Clinton years”). Again, Mr. Williamson doesn’t bother providing any evidence for
this suggestion about New Deal reform (I guess when the world is as complex as
he claims, there’s no point bothering with evidence; you can just say whatever
shit you want[5])),
and, personally, I have literally no clue what he’s talking about (surely he
doesn’t think regulation and deregulation both
played a role, but that’s what his sketchy remarks seem to imply…). Does he
really think the establishment of the Federal Deposit Insurance Corporation (or
“FDIC”) (the most important Glass-Steagall reform to survive), contributed to
the GFC? Does he really think the Securities Exchange Act of 1934, which created
the (impotent and acquiescent) Securities and Exchange Commission, contributed
to the GFC? Or is it some other part or parts of the two New Deals that he
thinks might have contributed to the GFC? Honestly, I have no fucking idea.
The more general mistake he makes here (as part of
his general Straw Man strategy) is to ignore the fact that, at least from my
reading (on the GFC, I’ve read the work of Satyajit Das, Joseph Stiglitz,
Michael Hudson and Steve Keen), “Leftists” see the roots of the GFC not in
financial deregulation, per se, (certainly not merely in financial deregulation), but in the general rise of financial instability (savings and loan crisis, dot-com
Bubble, then the Subprime crisis) through the neoliberal period as Wall St’s entire regulatory apparatus – all its
checks on criminality and fraud – essentially collapsed, and various kinds of
financial chicanery, corruption and outright fraud were allowed to proliferate like
algal bloom. He also misses out regulatory capture (including ratings agency
capture (Standard and Poor, Moody’s and Fitch)) and Wall St lobbying, which
“Leftists” always bring in when they’re talking about deregulation. These were
other crucial factors that allowed complex, packaged junk (CDOs and the like)
and toxic mortgages to proliferate throughout the market, jeopardising the
whole circus.
3.)
The
last part of this sentence – the sarcastic words about “wicked banksters”,
finishing with an elliptical adjunct that seems to decisively undermine this
left-wing idea that Wall St was dictated by greed – is just as stupid as what
precedes it. Obviously, Mr Williamson thinks this entire narrative about greedy
bankers is absurd, which explains his very sardonic tone. Honestly, I don’t
know what to say about this attitude. Mr Williamson and I clearly have very
different value systems; indeed, this probably helps to explain why he’s
writing for The National Review in
the first place, whereas I’m somewhat of a “leftist” who despises everything The National Review stands for, and regards it as dimwitted,
sociopathic propaganda. As shocking as this may sound to Mr. Williamson, I think
that the responsibility for the financial crisis should indeed lie with the
avaricious fraudsters and crooks who created it, not Ma and Pa Kettle, and the
kind of vulnerable and desperate people targeted with NINJA loans (“No Income,
No Job, No Assets”) and adjustable-rate mortgages (delayed extortion bargains). Like many of the ‘leftists’ who care about
legal precedent and the importance of respecting law and order, I do actually think
Wall St’s most fraudulent bankers should have been brought to trial for their enormous
embezzlement and larceny; indeed, this seems to me trivial for anyone who
believes in a universal moral principle of fairness. But, as it happened, not one of them was. Not a single one.
Mr. Williamson’s
last flourish in the sentence is to introduce Dick Fuld, and his loss of
billions of dollars, as some kind of sarcastic take-down of this notion that
bankers were acting out of reckless self-interest. Huh? People like Fuld couldn’t
foresee the crash, so they weren’t being greedy? What? (Weren’t you the guy
sermonising about complexity and the limits of human prediction? Why do you
expect Fuld to be omniscient here?) Even leaving aside Mr. Williamson’s total failure to make any sense, it’s
important to stress that in bringing up Dick Fuld, he’s picked on basically the
one unlucky CEO of any of the major investment banks: the CEO of Lehmann
Brothers, the only major investment bank that was actually allowed to go
bankrupt by the state, rather than being bailed out by a collusive treasury almost
entirely beholden to its favourite constituency in the middle of New York. Yes,
it is true that the CEOs of Bear Sterns, Merrill Lynch and Citigroup were
forced to resign, but they gifted themselves very generous retirement packages
on the way out, and the banks themselves were very quickly back to business as
usual).
So, once again,
Williamson is talking complete nonsense.
Finally, we have finished taking apart that single sentence. Let’s quickly
take apart some others from the same extract. First, this sentence about
securitisation: “Securitization
(bundling and chopping up mortgages into financial instruments that could be
easily traded among firms) was intended to distribute risk among investors and
institutions, but it ended up concentrating that risk.”
This sentence is what we, in the
business of rational argument, call a “lie by omission”. It is true that this idea
that securitisation distributes risk is an important one on Wall St (though, of
course, the fundamental reason this “financial engineering” takes place is to maximise
bank profits), but it is certainly not the
case that investment bankers and hedge fund managers had no clue what was going
on. Quite the contrary. It was known to all the big players on Wall St that
CDOs were toxic, and that the ratings given to them were fraudulent. The whole point was to sell the tranches to
gullible investors – and they did this with a great amount of success, until
the music stopped.[6]
Warren Buffett was just one of many who identified the danger in the new financial
“innovations” when, in 2002, he described
CDOs and the other new derivatives as "financial weapons of mass destruction,
carrying dangers that, while now latent, are potentially lethal" (http://www.fintools.com/docs/Warren%20Buffet%20on%20Derivatives.pdf).
One big player who actually decided to get out of the market before the crash
hit was Angelo Mozilo of Countrywide Financial, who had the foresight to sell
$406 million of his own stock, and protect his $100 million-plus salary and
bonuses from the (predicted) claws of future prosecutors. The other big players
were more rash, but it’s not like they really thought the amount of toxic waste
sloshing around Wall St was going to end well (they were gambling), and they
also knew they had friends in high places, which made them feel, justly, pretty
much invincible.
Williamson’s subsequent
speculation about photocopying is a perfectly sensible one, and it gives me an
opportunity to reiterate that I don’t think that explaining the causation of
the GFC is at all simple (it’s just that it is clear that the fraud and
chicanery enabled by deregulation was key). About the next paragraph, however,
I have a few things to say. Obviously, Williamson doesn’t much like
protectionism; I wonder if he knows that America, like every other prosperous country
in the world, was built on protectionism. Anyhow, that’s somewhat of an
irrelevancy; I accept that I can’t say anything about his first two examples, which
are fair. About his third example, though, of the disastrous intervention to “defeat
Al-Qaeda and its supporters”, I will say this: nobody, except rabid American
hawks and demonic neocons, thought that applying a sledgehammer to Afghanistan
and Iraq, killing hundreds and thousands of civilians, and trying to establish,
by force, “democracy” (somehow forgetting the inherent paradox here) would actually
help reduce or eliminate the terrorist organisations in the region. If you
really thought that was the aim of the war, and you had any intelligence at all,
you would not have endorsed it. It is as simple as that – and millions of silly
‘leftists’ can back me up on this. Williamson’s biggest mistake here is accepting
the naïve assumption that the war really was just about destroying terrorism; other
motives were at play within the US military-industrial complex, not least, control
over oil.
Let us now move
onto another big extract:
The epistemic horizon is not very broad. We
do not, in fact, know what the results of various kinds of economic policies or
social policies will be, and there isn’t any evidence that can tell us with any
degree of certainty. The housing projects that mar our cities weren’t supposed
to turn out like that; neither was the federal push to encourage home-ownership
or to encourage the substitution of carbohydrates for fats and proteins in our
diets. A truly rational policy of the sort that Tyson imagines must take into
account not only how little we know about the future but how little we can know
about the future, even if we consult the smartest, saintliest, and most
disinterested experts among us.
That is part of the case for limited
government and free markets. Government can do some things, such as guard
borders (though ours chooses not to) and fight off foreign invaders. There are
things that it cannot do, even in principle, such as impose a “rational” order
on the nation’s energy markets, deciding that x share of our electricity supply
shall come from solar, y share from wind, z share from natural gas, all
calculated to economic and environmental ideals. That is simply beyond its ken,
even if all the best people — including Tyson, from time to time — pretend that
it is otherwise. Free markets go about solving social problems in the opposite
way: Dozens, or thousands, or millions, or even billions of people, firms,
organizations, investors, and business managers trying dozens or thousands of
approaches to solving social problems.
Consider the relatively straightforward
question: How do we move people around to the places they need to go? Even the
most simple-minded among us would realize that there isn’t a single answer to
that question: Some trips are best done in a 747, some in a Honda Civic. What
is the ideal mix of walking paths, bicycle routes, rickshaws, Hindustan
Ambassadors, airliners, private jets, trains, hyperloops, spacecraft,
sailboats, Teslas, hot-air balloons, zip lines, etc., for the world’s 7.125
billion people? And what will it be 20 years from now? Would you really trust a
group of politicians to figure that out?
This section is
what one might call a “red herring” orgy. First, this sentence: We do not, in fact, know what the results of
various kinds of economic policies or social policies will be, and there isn’t
any evidence that can tell us with any degree of certainty. This is an extreme, preposterous overstatement, and in it lurks
our first red herring: “with any degree of certainty”. Is he seriously trying to claim that the government doesn’t know
that lowering interest rates will increase investment (assuming the private
sector isn’t massively indebted)? Is he seriously trying to claim that the
government doesn’t know that implementing a stimulus package will stimulate the
economy? Is he seriously trying to claim that those who implemented the New
Deal couldn’t really have known that it would have had great success creating
millions of jobs (even though you literally can’t help creating millions of
jobs when you begin thousands of infrastructure projects at once)? Is he
seriously claiming that when the government funds hospitals and schools, it can’t
know that funding will go to hospitals and schools, and that they’ll most
likely be improved (barring misallocation)? Is he seriously claiming that if
the government implements environmental controls, it doesn’t know that they will
protect the environment? If he’s not making batshit crazy claims like these,
then this “with any degree of certainty” phrase must be doing a lot of work.
Maybe he means Cartesian certainty. I accept we don’t have that (lol)…
The three
examples that follow this sentence are fair, but if you’re going to make a case
that the government should basically do nothing (which is what he’s about to
do), then you need to show that the government can’t help but fuck up a lot of the time, even when it has the
best of intentions (or you have to
have some kind of extreme religious faith in the magical powers of “the market”);
three little examples of counterproductive policy ain’t going to do it.
The next passage
I’d like to target from that extract is these two sentences: There are things that it cannot do, even in
principle, such as impose a “rational” order on the nation’s energy markets,
deciding that x share of our electricity supply shall come from solar, y share
from wind, z share from natural gas, all calculated to economic and
environmental ideals. That is simply beyond its ken, even if all the best
people — including Tyson, from time to time — pretend that it is otherwise. I’ve
really only got one thing to say about this passage: RED HERRING ALERT. Who
the fuck has ever said that the government can impose such an order on the
nation’s energy markets? Who? Give me one person. Give me at least one citation from some
of these “best people”. No? Oh…
One thing the
government can definitely do is subsidise renewable energy technologies, and impose
taxes on carbon. That doesn’t mean imposing the kind of rational order
Williamson sketches above, and I don’t see any reason to think it would be
nefarious. I’m sure Williamson thinks there is something terrible about this,
but he hasn’t given a reason in the text, and I, personally, struggle to
imagine one.
Next,
this extract: Dozens, or thousands, or
millions, or even billions of people, firms, organizations, investors, and
business managers trying dozens or thousands of approaches to solving social
problems. This sounds nice, doesn’t it? All these little people, and these
little organisations, working independently, to solve the world’s problems.
Beautiful image.
There’s just one,
teeny weeny problem with this vision: IT
HAS NOTHING TO DO WITH THE WORLD WE LIVE IN. Is there any evidence that
private, profit-making entities have ever solved any major social problems? No,
there isn’t. Corporations and investment banks never have, and never will, solve
our massive problems with inequality, or poverty. Corporations and investment
banks are not going to help protect our natural environment and defend national
parks (some of the biggest are, of course, doing the opposite). Corporations and
investment banks are not going to uphold the grand tradition of liberal arts
education (in fact, the corporatisation of the university system is the central
reason for the decline of the grand tradition of liberal arts education,
replaced by the ‘university as vocational training’ model). Corporations are
not going to help impose a fairer corporate tax regime, or prevent corporate
tax evasion (this one’s fairly straightforward). Corporations are not going to
reduce crime (in fact, private prisons foster it).
Corporations are
internally tyrannical profit-making machines; they are not accountable to the
people (unlike the state, which is at least still a tiny bit accountable) and
they have no reason to be community-spirited. Even if government planning is
hard – even if many well-intentioned policies end in disaster – the burden of
proof is colossal on someone who thinks that a neo-Feudalist plutocracy would
be better. What kind of lunatic wants a world without public healthcare, public
education, financial regulation or environmental regulation, and democracy? In
2016, while the world is heating up faster than ever, this kind of vision for
society would seem to me, well, a little FUCKING
CRAZY.
Finally, there’s
this passage: What is the ideal mix of
walking paths, bicycle routes, rickshaws, Hindustan Ambassadors, airliners,
private jets, trains, hyperloops, spacecraft, sailboats, Teslas, hot-air
balloons, zip lines, etc., for the world’s 7.125 billion people? And what will
it be 20 years from now? Would you really trust a group of politicians to
figure that out? This is, of course, another red herring, very similar to
the previous one about energy. Who the fuck seriously thinks that anyone knows
the “ideal mix” of all these transportation technologies? OF COURSE NO-ONE KNOWS THIS. The problem is that, if you leave
transportation options to the private sector, the options are reduced, not increased. There has never been a train company started by an
entrepreneur. There has never been a railway built by a corporation. The
politicians don’t have to figure out the “ideal mix”, but perhaps they do have
to try their best to figure out what might be best for the people of their
constituency. Yes, that is somewhat of a challenge, but it doesn’t suddenly
make funding public transport a mistake. What kind of fucking nutcase would
believe that?
In the rest of
the article, Williamson mentions one other example of a failed government
policy: Obamacare. Naturally, he fails to note that ‘leftists’ also didn’t like
that policy, and expected it to end quite badly, since it involved massive acquiescence
to corporate power.
Ultimately, what
Williamson fails to realise is that his argument can be used against him. If
there are limits to human prediction in the social and economic sphere because
of the immense complexity of the social and economic world, and the millions of
variables at play, you’d have to be pretty fucking insane to say, “Oh, don’t
worry, let’s just deregulate everything, destroy the fucking state, and
corporations and investment banks will clean up the mess”. Ultimately, this
whole view relies on a religious faith in “market” efficiency.
Now, tell me, Mr.
Williamson, do you realise that markets are an invention of the state, and that
the government creates the conditions
for competition to flourish by regulation, taxation and monopoly control? Do you realise that, though destroying it may
help fatcats in the short run, welfare is ultimately necessary to keep profits
high by keeping poor people consuming? Do you realise that Department of
Defence investment is the origin of most of the technological innovation
shaping the world today? Do you realise that state-funded science is the basis
for the cutting-edge products of all those celebrated Silicon Valley companies?
No, of course you don’t; if you did properly assimilate these facts, they would
be fatal to your treasured ideology.
[1] I
read it just after it was published, via a link posted on Twitter by Nicholas
Nassim Taleb (that nasty and demagogueish (intelligent) rooster), and I started
thinking about this essay the day I read the article.
[2]
Now, of course, Tyson was only making a tweet, not expounding a serious thesis
about politics, so it’s probably unfair to be so captious and pedantic about
it. But, anyway, it’s still a point worth making.
[3]
The seeds of the crisis lie in the stagflation of the 1970s (which famously
brought an end to the Keynesian Golden Age, already doomed by the disintegration
of the Bretton-Woods system), since Paul Volcker’s attempts to control it by
hiking up the federal funds rate was what catalysed the S&L insolvency
(higher interest rates spelled doom for their business of issuing long-term
loans at fixed interest rates).
[4] Oh
no, I’ve played my hand! Obviously, I could never convince Mr. Williamson or
people like him that they’re wrong. If Mr. Williamson were to ever read this
essay, I’m sure he’d find some way of dismissing it as leftist lunacy.
[5]
Ok, perhaps there’s some loonie right-wing book somewhere where he tries to
defend these claims, and he’s assuming his audience has read it.
[6]
But then they were bailed out anyway.
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