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Source link: http://archive.mises.org/18748/occupation-anarchy-and-greed/

Occupation, Anarchy, and Greed

October 17, 2011 by

This Chronicle of Higher Education piece on anarchism and its influence on the Occupy Wall Street protests is a pretty interesting read that gets at some of the complexities of a movement that’s obviously much more than spoiled rich kids upset that they don’t have the cash to upgrade to the new iPhone but obviously much less than a thoughtful criticism of systematic distortions in the banking system.

To emphasize a theme I wrote about on Friday, mere contempt for “Wall Street Greed” is ineffective and unhelpful. In this morning’s FEE “From the Archives” feature, Nicholas Snow suggests getting back to David Hume’s assumption that “all men are knaves” and focus our analysis on how institutions direct that knavery for good or ill. Nobel Laureate Joseph Stiglitz makes this important point about current institutions on which economists from across the ideological and intellectual spectrum can agree: “There’s a system where we’ve socialized losses and privatized gains. That’s not capitalism; that’s not a market economy. That’s a distorted economy.”

The comments on the Chronicle article are interesting. At least one comment plays right into the hands of the Occupiers’ critics: the comment’s author complains that her dreams as “an academic, poet, and scholar” are hampered by the student debt she incurred in graduate school. Student loan debt is the issue on which it is hardest to take the Occupiers seriously, and no doubt this is why the critics have seized on loan complaints as a reason to dismiss the movement as (again) a group temper-tantrum by spoiled kids who don’t realize how good they have it. There are a lot of college degrees out there that represent real investments in human capital. There are a lot of others that are great fun and very fulfilling, no doubt, but they are consumption goods. Most people will tell you that financing consumption with borrowed money isn’t a very good idea.

The Occupiers appear to lean left, for the most part. Let’s go back over the last couple of decades and think about the policies that have helped create the crisis (summarized in Thomas Sowell’s The Housing Boom and Bust) and Peter Wallison’s excellent Wall Street Journal article). As I wrote in Friday’s Forbes article, our current bind is an unintended consequence of yesteryear’s allegedly enlightened housing policies.

Suppose the banks had said “no, we can’t do this because these are unsustainable and unwise policies that will create serious problems down the road.” My guess is that Wall Street would have been occupied by many of the same people carrying “People Before Profits” signs. The great irony is that a lot of the current mess is due to a policy regime that encouraged financial institutions to put “people before profits” with an array of carrots (like a liquid market for what would become Troubled Assets provided by Fannie and Freddie and backed by an implicit government guarantee) and sticks (HUD pressure to pursue political goals). Sowell (pp. 40-41) discusses how activist groups were able to use their political connections to pressure banks into making loans they wouldn’t have otherwise made.

The problems in the housing market also illustrate the perils of focusing on the short run. Policies aimed at expanding home ownership looked like free lunches when in fact they were contributing to an unsustainable boom that has left a lot of the purported beneficiaries of the policies with ruined credit scores. I’ve seen a handful of comments in recent weeks talking about how this policy or that policy has “worked” even in spite of warnings from economists and other analysts. Triumphant proclamations focusing on the short run should be taken with a few grains of salt. As we saw with the housing market, today’s policy triumph could very well be tomorrow’s financial crisis.

{ 19 comments }

Tyrone Dell October 17, 2011 at 6:20 pm

Now would be a good time for you guys to brush the dust off of your copies of Eric Hoffer’s The True Believer.

TJ October 17, 2011 at 8:26 pm

“Student loan debt is the issue on which it is hardest to take the Occupiers seriously…”

It’s hard to take Occupiers seriously who want their debts forgiven, because it’s such a childish thing to think that they should get something for nothing. I graduated from college debt-free because I made wise choices and was willing to sacrifice to avoid taking out a loan. No one is forced to go into debt. It’s a freedom of choice which comes with consequences, positive and/or negative. Also, those who do take out loans do so on the understanding that they, and no one else, will eventually pay for the loan and the interest on it. For them to demand otherwise now is completely dishonest. When they say “forgive debt,” they essentially mean taxpayers should cover the bill for them. It is ironic they should talk about “corporate greed” and “selfishness.” What is more greedy and selfish than borrowing someone else’s money to get an education, and then demanding a total stranger pay for it when you don’t like the outcome of your choices?

Walt D. October 17, 2011 at 9:10 pm

“borrowing someone else’s money”
More than likely, the money they borrowed was created out of thin air.
It should come as no surprise that the US Government has no intention of paying back any of the money it has borrowed.
Rather than a balanced budget amendment, what we need is an amendment prohibiting the issuing of non-amortizing debt.
Why not balance the playing field an let student loans pay 0.005% interest only.

TJ October 17, 2011 at 10:49 pm

Walt D: You make a great point. The government has no right to look at these people and criticize them for wanting their debt paid for. Their behavior is merely a reflection of what they see their government doing. And the sad fact is that our government will probably, at some point, default on its debt. I’d like to be optimistic, but I cannot see how our country will be able to pay off $14 trillion dollars, when we can’t even get Congress to balance the federal budget for one year without people screaming of “draconian cuts.” It is a crime for the Federal Reserve to, as you said, create money out of thin air. I would have no qualms with them lowering the interests rates for student loans. I know a lot of people who took out loans and have been hit hard by this economy, but they can pay them under those circumstances. But someone ultimately has to pay for the loans, and there is no way anyone can logically explain why someone who did not take out a loan should pay for someone else who did.

Phinn October 17, 2011 at 10:39 pm

>>>” Student loan debt is the issue on which it is hardest to take the Occupiers seriously, and no doubt this is why the critics have seized on loan complaints as a reason to dismiss the movement as (again) a group temper-tantrum by spoiled kids who don’t realize how good they have it. There are a lot of college degrees out there that represent real investments in human capital.”

I would have thought a true Misesian would take a different position on the issue of student loans. This moralizing about debtors sounds more like mainstream conservatism rather than enlightened market anarchism.

As with housing loans, this educational debt didn’t come about as the result of market calculations. It exists ONLY because of government (i.e., violent) interference in the education market.

If Mises taught us anything, it’s that this type of violence deprives people of the INFORMATION necessary to make a rational economic calculation. No one really knows what the real investments in education are, and which are wasteful, and to what extent, because the price signals are hopelessly distorted.

In addition to sponsoring the debt itself, government also mandates that to enter certain fields, one must have a particular government-approved college degree, which may or may not be related to actual performance in that field. Most forms of professional licensing requires specific educational backgrounds, which may or may not be totally arbitrary. There’s no way to know in the absence of market information to tell us.

For example, lawyering was practiced for a few thousand years in Europe without licensing, but now one needs an undergraduate degree to even apply to an ABA-approved law school, and you need an ABA-approved law degree to even apply to take the government’s law license exam. All so you can appear before the government’s monopoly courts!

Is $200,000 of educational debt really a sound investment to know when to tell people to take antibiotics when they have an ear infection? To remove ingrown toenails? To laser off an unsightly mole? Maybe, but only if that same government doesn’t let anyone without the $200,000 degree compete for customers!

Is the price one pays for the educational services one gets under these conditions economically rational and justified, and thus truly profitable? Such that the debt is then profitable? Who knows? There’s virtually no market left to tell us.

carriejoy October 17, 2011 at 11:49 pm

Interesting comments about student loans.

I was only 16 when I took out my first student loan. I had NO IDEA how bad it was. Absolutely none. And I came from a fairly “no debt” household. I knew to stay away from credit cards, auto loans etc. But truly, there was no way for me to pay for an education w/o going into debt in the traditional time frame. And of course, I see the caveat now as “the traditional time frame”. I was very much pushed into college as the next logical step. There was a very real fear that kids who took a year or two off to work, travel etc would “never go to college” and that was almost as bad as being a teen mom or drug addict. Crazy. In total, I borrowed 25K over 5 years. I have paid all but about 8K of that back. And am no longer in a position to make those payments. I may be some day. But not now, and not for quite a while. I am not whining at ALL. I realize that I am responsible for my ignorant decisions as well as my informed decisions.

I find the housing market crybabies to be a reall head scratcher. When “easy money” was forth coming, my husband and I tried to build a house on a lot we already owned, free and clear. But the only loan we could get was an ARM and I just KNEW better than to sign on to anything I didn’t know the actual terms of from the beginning. So, we never built the house. Still living in our trashy, disintegrating doublewide and trying to figure stuff out.

I DO think that the gov’t should get out of the student loan business, the bank (or any other industry) rescuing business and if they’re NOT going to, then all debt should be treated the same as far as ability to bankrupt, refi etc is concerned. I have absolutely no hope for the future of our country, or world, truth be told. None. I’m going to continue to do the best I can and fight the fight as it comes. It’s enough to make me hope I never have grandkids.

Miguel October 18, 2011 at 12:56 am

Interesting that collectivist anarchism is somewhat under the surface here. The article doesn’t mention Bakunin or Proudhon, who, despite being wrong, are well known for their concept of what society should be. I wonder how much of that was studied and/or desired by some of the more ardent protesters.

I get the impression most of the protesters are just unemployed and bored students. Another commenter mentioned something about Eric Hoffer’s True Believer, and I think that fits some of what’s being seen.

I’ve seen videos of a few kids there that understand economics, but most of them have no concept of it or even reality. I hope they snap out of it and get properly educated. If they’re stuck on anarchism, I hope some day these kids pick up some Spooner, Rothbard, or David Friedman, because their current knowledgebase is very lacking.

freeman October 18, 2011 at 1:06 am

The occupiers do not merely “lean left”; I have personally observed that Occupy Charlotte organizers are almost entirely self-identified card-carrying socialists. I have no reason to believe that Occupy Wall Street is any less directed by socialists.

The rest of the attendees are all over the spectrum, including libertarians such as Cptn Midnite, who has gone viral with his End the Fed rant, but do tend to “lean left.”

Ryan October 18, 2011 at 8:50 am

Mr. Carden, you make some good and very valid points, but I think it is a serious mistake to reach out to the OWS crowd and attempt to build bridges. They are not “mostly” left-leaning, they are a living, breathing AdBusters campaign.

What libertarians will inevitably discover is that the socialists have been playing this public-outrage-lynch-mob game a lot longer than libertarians have. Any bridges built between OWS and libertarians is a loss of liberty under the guise of a promotion of liberty.

Rothbardian libertarians would do well to remember that Ayn Rand wasn’t completely out to lunch. She made some pretty good points, such as when she wrote, “In any compromise between food and poison, it is only death that can in. In any compromise between good and evil, it is only evil that can profit.”

Joann October 18, 2011 at 4:31 pm

I think the student loan issue in OWS is a very relevant one. Universities have produced billion ++ endowments but they frequently fund raise on the premise of the poor, needy student, yet our bottom economic quartile rarely sees the inside of a college classroom. Tuition sticker prices have risen in parallel and no one effectively questions to what use tax exempt endowments are put with respect to education. It really is a big game with unwitting consumers shopping for degrees (education) and being offered bank loans to be able get it.

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Meredith October 19, 2011 at 1:23 pm

“There are a lot of college degrees out there that represent real investments in human capital. There are a lot of others that are great fun and very fulfilling, no doubt, but they are consumption goods. Most people will tell you that financing consumption with borrowed money isn’t a very good idea.”

Would you consider education to be a consumption good? It’s fun and fulfilling, but you know, it pays dreadfully, is poorly funded and is rarely supported by the government or consumers (parents). So, yeah, you’re right — not a good idea. Let’s do away with schools entirely — it’s a consumption good, and financing consumption with borrowed money isn’t a good idea. Training teachers is not creating real human capital in this enconomy.

The Arts are EDUCATION. They are just as important. They are psychology, intellectual, and creative development, and yes, they can be fun (and not so fun) too. Experiencing the arts makes you better at your job and your life. Creating the arts is not easy, and it’s not always pleasant, but it is an essential service that is provided to people, just like healthcare is. And creating good art takes a proper education, just as becoming a financial analyst does. Education in the arts is an investment in real human capital. To say otherwise is ignorant and arrogant.

Lemmywinks October 20, 2011 at 7:32 am

I agree that learning about the arts is important and fulfilling, but it doesn’t logically follow that society should pay for high level liberal arts degrees. I love literature….so when I went to college I majored in science, and read books in my free time. It’s ridiculous to assume that people need to pay thousands of dollars to be told by a professor to go out and read books that can be bought for less than $10, and it’s worth noting that a very small percentage of famous writers majored in English in college. The same goes for painting.

As it is now, college is a messy, subsidized institution which has sadly become a requirement for almost any decent job, but that doesn’t change the fact that liberal arts degrees are largely a luxury for wealthy people, and it’s not society’s fault that there isn’t a job market for them.

Meredith October 20, 2011 at 8:30 am

Liberal Arts education is not a luxury degree. Ther IS a job market for them, and it is a huge industry and it heavily impacts numerous other industries. Broadway, for instance (and this is excluding off-Broadway and all other theatre, music events and museums in NYC), brings in a total impact of 9.8 Billion in revenue for NYC alone. That includes both direct and indirect spending. Someone comes to see a Broadway show, they stay in a hotel, they eat at fancy restaurants, they pay for parking, they buy souvenirs, they book on airlines and trains to come. Anyone who knows anything about real estate knows that areas surrounding artistic centers are prime locations to invest, that’s how SoHo became SoHo, it’s how DUMBO in NYC has sky-rocketed in prices. You feed the artist and you yourself get fed.

You may not have used your liberal arts degree, but that doesn’t mean that there aren’t millions of others using their own. And to disregard the value of the arts as viable careers is ignorant. We can talk about how expensive education is, how everyone is perceived to require a degree now, but that is a different issue. When it comes to the value of liberal arts degrees, it is irreposible and inaccurate to declare them luxuries that do not create consumer goods.

Lemmywinks October 21, 2011 at 8:12 am

I don’t have anything inherently against arts degrees, I think people should choose to spend their money how they wish. If someone uses their liberal arts degree to get a well paying job, that’s fantastic, but there is a large number of people who go into extreme debt, while attending private arts schools, and then post on websites such as this: http://www.huffingtonpost.com/2011/09/06/majoring-in-debt-college-_n_951129.html#s345530&title=Laquinda_Settles_New.

My whole argument was basically with your point that “creating the arts is not easy, and it’s not always pleasant, but it is an essential service that is provided to people, just like healthcare is.” Art is a essential part of society, but that doesn’t mean that society has some sort of collective obligation to make sure art keeps being created. Strangely, all of my artists friends find creating art extremely pleasant, and paint and sculpt, regardless of external incentives.

Meredith October 21, 2011 at 6:07 pm

On the contrary, society does have a collective responsibility to provide for the creation of art, just as it has the responsibility to provide education and healthcare. And, most of the modern world already publicly supports the creation of art and education of artists because they recognize our inherent need for it. It’s not a luxury, it’s a necessity.

(And on a different note, talk to your artist friends again. I doubt it’s all sunshine and lollipops. Sometimes it’s grand, and sometimes it’s relentlessly exhausting and frustrating. But it’s work — just like any job.)

Christy October 19, 2011 at 1:34 pm

Dear Art Carden: I am a supporter of OWS. And one of our issues IS STUDENT LOAN DEBT. Where did you get this information from?
Private (commercial) student lenders have been ripping off students for years. They were lending at rates as high as 15%. THESE ARE PRIVATE LOANS- NOT STAFFORD. Private lenders are corporate GIANTS. These loans have now ballooned. Due to the current job prospects, many of us are not able to pay off these loans.
I know someone that committed suicide due to his private student loan debt. Not everyone goes into a high-paying field.

John October 19, 2011 at 2:21 pm

Socialised losses and privatised gains indeed! That was a term i just heared about at the LSE Hayek vs Keynes debate. And it is so true.

Josephus P. Franks October 21, 2011 at 10:26 am

Regarding the CSM’s mistaken re-titling of your post: “Student loan debt: ‘Occupy’ movement’s weakest talking point”

I was expecting to read an article arguing that the calls for student loan debt forgiveness or amelioration are misplaced due to… well… something. But this article is missing an argument. Please point out the location therein where something approximating an argument can be found. There is an offhand statement that studying to achieve a degree in the humanities does not represent an economically wise investment. (Eureka! Uh, I guess…) And then some incoherent complaints about irresponsible lending in the housing market.

If you would like to counter some of the cogent and convincing arguments from the student loan justice folks, I would be most interested to read an article that does that. Until then, I am fully convinced that the United States’ uniquely perverse system of financing higher education, and laughably unsustainable mountain of student loan debt, is a grievous problem that demands a society-wide response and a radical break from the past.

If anything, from the perspective of libertarians (more accurately called “poorly-read anarchists” for idiotically and inexplicably – or, suspiciously – leaving corporate power out of their focus), the solution is pretty damn simple: take away the special interest exemption from bankruptcy for student loans. Those who made a dumb decision have to file for bankruptcy, have their credit rating screwed for the next decade, but get a fresh start. Banks may start to realize that lending out hundreds of thousands of dollars for a degree in comparative literature might not be such a hot idea. Universities will start to realize that they need to cut administration and stop growing like a cancer every year, and start to economize.

But that’s the free market solution that eludes so many “libertarians”. Jesus people, really? You’d pop a vein if there were a national flag patch on each of a bunch of armed and uniformed thugs who broke down your door one night to detain you, but if it were a corporate logo patch, well then…

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