Jacob Weisberg explains how stupid and ideologically blinkered libertarians are for not recognizing the meltdown as a failure of “unregulated markets.” Yes, yes, I know we’ve heard this all before, but it’s almost kind of funny how someone can write a whole article about this and never once — as in not one time — mention central banking.
Jake, buddy, central banks are an intervention into the economy. They also have a teensy weensy bit to do with the financial situation right now.
Professor Jake teaches us that there’s a “natural tendency of lending standards to turn permissive during a boom.” And we’re the ones who supposedly lack an explanation of what happened. A “natural tendency.” It just sort of happens. It has nothing to do with all that cheap credit the central bank is flooding the economy with.
So here’s my question: is Weisberg a moron who thinks monetary central planning is the only brand of free-market thinking that exists, or is he more sinister, deliberately portraying phony free-market thinking as the real thing in order to make a better case for interventionism? Seems unlikely, though not impossible, that the editor of Slate could be just an ignorant blockhead, so I’m not sure where I come down on this.
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Weisberg’s first book was called ‘In Defense of Government’.
Go figure.
I think there’s a tendency in mainstream economics for people like Jake to blame the government. Amongst the less principled economists of the world, there’s an incentive to defend the government, and gloss over the problems of central banking and government intervention, because it creates mroe jobs for economists.
When you have a centrally planned economy, or just an economy in which the government has some regulatory authority, you need economists who can plan the economy, or write the regulations. So what is unfortunately a majority of economists push for more government regulation, and blame the free market for the problems created by government intervention.
When I talk to people about the sad Keynesian consensus in the field, I like to give them a quote from Winston Churchill, who said, “Whenever you have two economists in a room, you are bound to have two distinct opinions, unless one of them is Lord Keynes, in which case you will have three.” I then ask people if they can identify the most important word in that quote. When they’ve failed to give the answer I tell them that the word “Lord” explains it all. As a member of the landed gentry, Keynes had a specific incentive to push for more government control of the economy and specifically the money supply.
Modern economists are much the same way. Could Bernanke or Paulson had as much financial success as economists if they had said, “I’m sorry, but I don’t believe in government intervention in the market, I can’t take this job.” The obvious answer is no. In their current positions they make a small fortune and control a much larger one. That power is very alluring to the non-Austrians who are offerred it.
I think there’s a tendency in mainstream economics for people like Jake to blame the government. Amongst the less principled economists of the world, there’s an incentive to defend the government, and gloss over the problems of central banking and government intervention, because it creates mroe jobs for economists.
When you have a centrally planned economy, or just an economy in which the government has some regulatory authority, you need economists who can plan the economy, or write the regulations. So what is unfortunately a majority of economists push for more government regulation, and blame the free market for the problems created by government intervention.
When I talk to people about the sad Keynesian consensus in the field, I like to give them a quote from Winston Churchill, who said, “Whenever you have two economists in a room, you are bound to have two distinct opinions, unless one of them is Lord Keynes, in which case you will have three.” I then ask people if they can identify the most important word in that quote. When they’ve failed to give the answer I tell them that the word “Lord” explains it all. As a member of the landed gentry, Keynes had a specific incentive to push for more government control of the economy and specifically the money supply.
Modern economists are much the same way. Could Bernanke or Paulson had as much financial success as economists if they had said, “I’m sorry, but I don’t believe in government intervention in the market, I can’t take this job.” The obvious answer is no. In their current positions they make a small fortune and control a much larger one. That power is very alluring to the non-Austrians who are offerred it.
Weisberg makes an analogy between the communists’ defense of their philosophy in the face of the collapse of “communist” countries, and libertarians’ defense of their philosophy in the face of the financial crisis.
The key difference is that the communist countries were actually trying to be communist, even if, it is true, they were not completely matching the ‘ideal’. Our countries involved in the financial crisis are not at all libertarian, and are not even pretending to be libertarian.
So while it is possible to argue that the communist countries we ended up with are the inevitable result of the application of communism in reality (i.e. the ideal just can’t be made to work in practise), the same cannot be said of libertarianism. It hasn’t had a shot, and no-one has even purported to give it a shot, so in what way can it take the blame for what has happened?
Central banks are about as far from a free-market system as you can get.
Perhaps I missed something. When were the libertarians in power?
“a global economic meltdown made possible by libertarian ideas”
What a ridiculous article. It purports to discuss the explanations made by libertarians for the current financial crisis and it does not even mention the words “federal reserve” or “central bank”. The author is an ignorant buffoon.
Also, the slate.com method of browsing comments is extremely annoying, but if you take the trouble to read them, they are as ludicrously uninformed as the article.
Don’t worry too much about what this statist crackpot has to say. The libertarian view of central banks has caught on with a large portion of the population (especially among the young). If the left-statists (a group I was part of until I saw the light thanks to a certain doctor) delude themselves into thinking that libertarianism is finished, we’ll be in a stronger position to oppose them.
Obviously, we have more educating to do, but the reality is that most people recognize that there has been no “deregulation” and that the economy as it stands today is definitely not “laisse-faire.” Its entertaining to watch the statists making absurd claims to defend their favorite brand of statism, but we do need to do everything we can to ensure that the people who don’t pay attention don’t fall for this nonsense.
Fortunately, there is that story today about the Neo-Classical economists who calculated that FDR prolonged the Great Depression by 7 years. We need to do everything in our power to make sure that Barack Obama, Joe Biden, John McCain, and their other statist allies aren’t able to do that again.
Try to analyze these kind of people and their (more or less) systematic ideas and lines of thought as (secular) religious ones. I predict that the most plausible explanations will logically follow from that.
Crackpot realism, as Higgs calls it, has long ago spread to people who in no way whatever have ever achieved anything… at all. And that’s sad for mankind.
@ Henry, the “a global economic meltdown made possible by libertarian ideas” quote seems to point to a misunderstanding of the concept of market fundamentalism as conceived by George Soros in his interesting book “Globalisation”. Market fundamentalism means that governments are managing the business climate in such a way that their country becomes more attratcive for multinational companies than their neighbors. This seems to me a paradigm shift of the middle-of-the-road social-democratic policy stance towards state and economy, also called neoliberalism (which has been associated with neoconservatism as well).
Of course this has nothing to do with libertarianism but the words seem alike and it lets liberalism (in the ‘modern’ Anglosaksian sense) disassociate itself somewhat from this megalomanic and “high blow-back potential” policy philosophy.
In general neoliberalism and neoconservatism embrace the notion of the economy being complex and selfregulating, but they cannot conceive of the idea that this complexity rules out effective management and selfregulating actually is the only possible solution/equilibrium (to speak in game theory terms) without offending fundamental human rights and intervening with results that fit subjective wants of individuals best (given the wants of all other individuals). Of course the attainment and safeguarding of political power has something to do with this as well.
“Perhaps I missed something. When were the libertarians in power?”
If it ever happened, it’d be a performative contradiction.
“natural tendency” ranks right up there with “irrational exuberance” as a highly technical mainstream economic explanation. But you have to have an economic degree to understand, or at least trust the person with the degree who’s stating it.
Well if this fascist administration is “Libertarian” and it is Libertarian Philosophy that caused this financial mess then I suppose that Zimbabwae, Switzerland, the UK, Iceland, Sweeden, et al are more “Libertarian” than the US.
The whole premise is nuts. It is as if by magic people manage to get loans that they can’t afford from bankers who are trying to get them into a position to default as if by magic. It is as if credit was hard to come by in the first 8 years of this century.
What is worse is their “solution” which is the complete take over of the financial system by the government and expand the money supply to keep the government owned lenders lending like crazy.
If no one is criticizing you, you are in the wrong camp. It is human nature to ignore what poses no threat and attack your most potent opposition.
Painting this as a failure of Libertarian free market failure is a preemptive attempt to poison the well before being thrown down the well and drowned. The Statists attack us because they fear us.
As well they should (fear us at least).
This Slate guy really is idiotic. He confuses Soros’ word “fundamentalist” to characterize analysts of “fundamental market data” with the word used to define religious fanatics like Bin-Laden. Libertarians seem very moderate on the countrary, not fanatical. They are not advocating the use of any centralized violence, even though free-market is being crushed in all countries every day for centuries. Marxism shows no similarities.
What bothers me is why Soros is so square politically and his former chief analyst Rogers so much more “consistent”. Both made money out of the same world view I thought. The British pound devaluation for which they became so famous was clearly a good appreciation of central banking politics and what it does to money… How come Soros can be advocating so much the State intervention now?
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