Wednesday, March 30, 2011
It Ain't Invisible Rocket Science
I know everybody has already done to death Alan "I Am John Galt" Greenspan's latest delusion in the Financial Times, but I don't feel like grading so I might as well, too. Because I hate grading. And Randian bullshit.
First, this gem:
The problem is that regulators, and for that matter everyone else, can never get more than a glimpse at the internal workings of the simplest of modern financial systems.
This comforts me as much as, say... hearing a former NASA administrator tell us that engineers can't see much of the internal workings of the Space Shuttle. Oh, wait.
Today’s competitive markets, whether we seek to recognise it or not, are driven by an international version of Adam Smith’s “invisible hand” that is unredeemably opaque.
Since Uncle Alan brought him up, I think I have implicit permission to quote Uncle Adam:
[B]y directing [individual] industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it.
The context of this, of course, was in the preference of doing stuff domestically instead of foreign importation. And Mr Greenspan might have noted that pursuit of economic self-interest does not guarantee a good outcome for society. In fact, Mr Smith also observed:
[T]he proposal of any new law or regulation of commerce which comes from [those who live by profit], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.
[T]hose exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments; of the most free, as well as or the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty, exactly of the same kind with the regulations of the banking trade...
To sum up: the Invisible Hand only goes so far, and humans being what they are also require some amount of restraint. As James Madison wisely said, if men were angels, no government (regulation) would be necessary.
Too Opaque To Be Regulated is as much dangerous folly as Too Big To Fail. The Invisible Hand does not obviate the need for a Quite Visible Regulating Hand--society incorporates the latter to mitigate those "notably rare exceptions" when the former starts grasping too much and causes significant clusterfucks.
March 30, 2011 | Permalink
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I should think it would suffice to say the man helped shepherd our national economy through a series of bubbles and collapses that have left our economy more hobbled than anytime in more than a century, except the Great Depression. Which was only marginally worse than the Greenspan recession.
And taking advice from him is akin to taking investment advice from Bernie Madoff. That Greenspan has the chutzpah to consider himself credible even now is not really arrogance. It's delusional. He needs treatment. As do every editor and publisher who prints his babblings without the disclaimer that his illness is still untreated and how sad it is when he actually has good health insurance.
Actual merits of his arguments? Please, what does logic mean in a debate with someone too ill to recognize his dementia?
Posted by: Kevin Hayden | Mar 30, 2011 10:40:28 PM
I am not near as erudite as NTodd and Kevin. Therefore, my only response is: Fuck Alan Greenspan.
Posted by: Nancy in Detroit | Mar 31, 2011 10:10:09 AM