The Invisible Hand is Dead. Long Live (Smart) Regulation.
klunk
http://www.huffingtonpost.com/david-sloan-wilson/the-invisible-hand-is-dea_b_128030.html
I hope that our economy recovers, but the time has come to declare its
guiding metaphor dead. This is the metaphor of the invisible hand, which
makes it seem as if the narrow pursuit of self-interest miraculously results
in a well-functioning society.
The invisible hand metaphor originates with Adam Smith in The Wealth of
Nations (1776). Bernard Mandeville made a similar point with his Fable of
the Bees (1705), which fancifully describes human society as a wondrously
productive bee hive, even though each bee is as selfish as can be.
Smith was critical of Mandeville and presented a more nuanced view of human
nature in his Theory of Moral Sentiments (1759), but modern economic and
political discourse is not about nuance. Rational choice theory takes the
invisible hand metaphor literally by trying to explain the length and
breadth of human behavior on the basis of individual utility maximization,
which is fancy talk for the narrow pursuit of self-interest. For the general
public, unfettered competition has been turned into a moral virtue and
"regulation" has become a sin.
The collapse of our economy for lack of regulation was preceded by the
collapse of rational choice theory. It became clear that the single
minimalistic principle of self-interest could not explain the length and
breadth of human behavior. Economists started to conduct experiments to
discover the actual preferences that drive human behavior. The field of
experimental economics was born and two of its founders (Vernon Smith and
Daniel Kahneman) were awarded the Nobel Prize in 2002.
Actual human preferences are all about regulation. A microcosm of America's
economic collapse can be created in the laboratory in a single afternoon.
Yank a group of people off the street, give them a task that requires
cooperation, and most of them will play along as solid citizens.
Unfortunately, a few will game the system if there is any way to cheat. Once
the solid citizens realize that they're being ripped off, they withdraw
their cooperation as their only defense. Provide them with an opportunity to
punish the cheaters, and some (but not all) punish with zeal. Even the
cheaters punish other cheaters with zeal! Once the capacity for regulation
is provided in the form of rewards and punishments that can be implemented
at low cost, cooperation rises to high levels. Regulation is required or
cooperation will disappear, like water draining from a bathtub.
These social preferences go beyond our own species. Cooperation and cheating
are behavioral options for all social species, even bacteria, and
cooperation survives only to the extent that it is protected against
cheating. The eternal conflict between cooperation and cheating even takes
place within our own bodies, in the form of genes and cell lineages that
manage to game the system at the expense of the organism upon which they
depend. We call them diseases, but they are really the failure of a vast
system of regulations that enable us to function as organisms as well as we
do.
Mandeville could not have been more wrong about actual nature of bees. There
is a difference between self-organization and self-interest. Beehives and
other social insect colonies are indeed self-organized. There is no single
bee commanding the troops, certainly not the queen. Each bee plays a limited
role in the economy of the hive, just as a single neuron plays a limited
role in the economy of the brain. The intelligence of both can be found in
the interactions among the parts, which have been shaped by natural
selection operating over countless generations. But bee behavior cannot be
reduced to a single principle of self-interest, any more than human
behavior. There are solid citizens and cheaters even among the bees, and the
cheaters are held at bay only by a regulatory system called "policing" by
the biologists who study them.
Why are we so different from all other primate species? Because we are so
cooperative. Why are we so cooperative? Because it is so easy to regulate
each other's behavior in small face-to-face groups. It happens so naturally
that we don't even notice it. Alexis de Tocqueville, the great French social
theorist who wrote Democracy in America (1835, 1840), also said this about
small human groups: "The village or township is the only association that is
so perfectly natural that...it seems to constitute itself." This
self-organizing ability to function as cooperative groups is "so perfectly
natural" because it evolved by a long process of natural selection, in
humans no less than bees.
By the same token, functioning as large cooperative groups is not natural.
Large human groups scarcely existed until the advent of agriculture a mere
10 thousand years ago. This means that new cultural constructions are
required that interface with our genetically evolved psychology for human
society to function adaptively at a large scale.
These constructions can work well or poorly. They can arise by a raw process
of cultural evolution--many inadvertent social experiments, a few that
succeed-- or by a less wasteful process of intentional planning. Tocqueville
marveled at the vitality of the American democratic experiment planned by
the founding fathers, compared to French society as an inefficient accretion
of history. He also perceptively observed that America's vitality could not
be attributed entirely to intentional planning. Mexico copied the United
State's constitution, but the results were not the same. Something more
contributes to America's vitality that we vaguely call "culture" but must
study to understand. Tocqueville also speculated that the American
democratic experiment could unravel in an eerie premonition of our current
turbulent times.
Theories and metaphors are the cultural equivalent of genes. They influence
our behaviors, which have consequences in the real world. Mother nature
practices tough love. When a theory or a metaphor leads to inappropriate
behaviors, we suffer the consequences at scales small and large. To change
our behaviors, we need to change our theories and metaphors.
For those who wish to learn more about how economics is going beyond
rational choice theory, I recommend a book titled Moral Sentiments and
Material Interests: The Foundations of Cooperation in Economic Life (2006),
edited by Herbert Gintis, Samuel Bowles, Robert T. Boyd, and Ernst Fehr.
Gintis, Bowles, and Fehr are eminent economists while Boyd is an eminent
evolutionary anthropologist, illustrating how integrative the new economic
theory has become. I have also written an essay titled "The New Fable of the
Bees" that explores the theme of this blog in more detail.
New theories are not good enough, however. We also need to change the
metaphors that guide behavior in everyday life to avoid the disastrous
consequences of our current metaphor-guided behaviors. That is why the
metaphor of the invisible hand should be declared dead. Let there be no more
talk of unfettered competition as a moral virtue. Cooperative social life
requires regulation. Regulation comes naturally for small human groups but
must be engineered for large human groups. Some forms of regulation will
work well and others will work poorly. We can argue at length about smart
vs. dumb regulation but the concept of no regulation should be forever laid
to rest.
Eddie Haskell
"klunk" <kl...@theothershoo.org> wrote in message
news:Pkaon.3938$iu2....@newsfe15.iad...
> The Invisible Hand is Dead. Long Live (Smart) Regulation.
>
> http://www.huffingtonpost.com/david-sloan-wilson/the-invisible-hand-is-dea_b_128030.html
> The collapse of our economy for lack of regulation
Yawn, why do you continue to posit this LIE when you know that it was in
fact REGULATION that caused the financial crisis?
Greed?
Envy?
Government employee?
Nigger?
Gay?
Loser?
Retard?
Pedophile?
On welfare?
Transvestite?
Cock sucker?
Food stamps?
Faggot?
Hud?
Criminal?
Chick with a dick?
Moron?
Union member?
Member of some other mindless democrat constituency group?
"In 1992, Congress mandated that Fannie and Freddie increase their purchases
of mortgages for low-income and medium-income borrowers. Operating under
that requirement, Fannie Mae, in particular, has been aggressive and
creative in stimulating minority gains."
"The two companies are now required to devote 42% of their portfolios to
loans for low- and moderate-income borrowers"
"Although Fannie Mae actually has exceeded its target since 1994, it is
resisting any hike. It argues that a higher target would only produce more
loan defaults by pressuring banks to accept unsafe borrowers."
http://articles.latimes.com/1999/may/31/news/mn-42807
"The Bush administration today recommended the most significant regulatory
overhaul in the housing finance industry since the savings and loan crisis a
decade ago."
"Under the plan, disclosed at a Congressional hearing today, a new agency
would be created within the Treasury Department to assume supervision of
Fannie Mae and Freddie Mac, the government-sponsored companies that are the
two largest players in the mortgage lending industry."
http://www.youtube.com/watch?v=Lr1M1T2Y314
http://www.youtube.com/watch?v=_MGT_cSi7Rs
"McCain Letter Demanded 2006 Action on Fannie and Freddie"
"Sen. John McCain's 2006 demand for regulatory action on Fannie Mae and
Freddie Mac could have prevented current financial crisis, as HUMAN EVENTS
learned from the letter shown in full text below."
http://www.humanevents.com/article.php?id=28973
Unlike Bush and McCain, as senator, Obama did nothing, other than earn the
distinction of becoming the second largest recipient of F&F contributions in
the entire congress, even in his short stint there.
Bill Clinton himself said it best:
"I think the responsibility the Democrats have may rest more in resisting
any efforts by Republicans in the Congress or by me when I was President to
put some standards and tighten up a little on Fannie Mae and Freddie Mac."
-Bill Clinton
''These two entities -- Fannie Mae and Freddie Mac -- are not facing any
kind of financial crisis,'' said Representative Barney Frank of
Massachusetts, the ranking Democrat on the Financial Services Committee.
''The more people exaggerate these problems, the more pressure there is on
these companies, the less we will see in terms of affordable housing.''
-Eddie Haskell
klunk
"Eddie Haskell" <sb...@akot.com> wrote in message
news:32bon.120771$5T6....@unlimited.newshosting.com...
lol... more trimming out of the shit that scares the shit out of you...
iow... no retort... you lose again, loser.... ;-)
Eddie Haskell
No retort.
So I'll assume that you're... uhmm..
A greedy, envy driven faggot, pedophile, criminal, cock sucker moron on food
stamps.
I win again.
-Eddie Haskell
Chom Noamsky
> "McCain Letter Demanded 2006 Action on Fannie and Freddie"
The problem with your erroneous and mistaken belief is that only a
quarter of the bad loans fell under F&F. The rest of the bad loans were
directly attributable to poor risk management in the financial sector
and to Wall Street gambling. In turn, poor risk management was a
consequence of predominantly Republican governments providing guarantees
to various markets and industries, aka off-budget liabilities, aka
government backed guarantees. And now, finally, after the latest two
terms of Republican government, the American taxpayer is having to make
good for those liabilities.
That is Republican-style neoconservatism is all about, privatizing the
profits while socializing the risk... has been since Reagan. You dolts
and fools wiggle your little hyper partisan fingers at Obama, when he is
only making good on liabilities imposed on the taxpayer by primarily
Republican governments.
Eddie Haskell
"Chom Noamsky" <m...@eatmoose.yum> wrote in message
news:TObon.68370$Db2.9811@edtnps83...
> On 3/17/2010 1:35 PM, Eddie Haskell wrote:
>
>> "McCain Letter Demanded 2006 Action on Fannie and Freddie"
>
> The problem with your erroneous and mistaken belief is that only a quarter
> of the bad loans fell under F&F.
"Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into
securities; that provides lenders the funds to lend more"
> The rest of the bad loans were directly attributable to poor risk
> management in the financial sector and to Wall Street gambling. In turn,
> poor risk management was a consequence of predominantly Republican
> governments providing guarantees to various markets and industries, aka
> off-budget liabilities, aka government backed guarantees. And now,
> finally, after the latest two terms of Republican government, the American
> taxpayer is having to make good for those liabilities.
>
> That is Republican-style neoconservatism is all about, privatizing the
> profits while socializing the risk.
Are you stupid or something, Chumpsky? Republicans didn't control congress
in 92 when you morons did EXACTLY that.
"Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into
securities; that provides lenders the funds to lend more"
-Eddie Haskell
Archie
Who repealed the Glass Steagall Act you partisan twat? Clinton paved
the way for speculators to abuse not only working class people but the
whole financial system. Clinton is what? A Republican?
The year before the repeal only 5% of mortgages were subprimes. When
the crisis hit it was over 30%.
Chom Noamsky
You keep repeating the same talking points over and over, as if it will
product a different response after the978th repetition. Do some basic
research, you will discover F&F only guaranteed about 1/4 of the bad
loans involved, and their mandate, as it was known up until the
meltdown, was established by the Nixon government.
klunk
"Archie" <aken...@googlemail.com> wrote in message
news:022fcb71-858e-4dda...@l25g2000yqd.googlegroups.com...
> On Mar 17, 6:27 pm, Chom Noamsky <m...@eatmoose.yum> wrote:
>> On 3/17/2010 1:35 PM, Eddie Haskell wrote:
>>
>> > "McCain Letter Demanded 2006 Action on Fannie and Freddie"
>>
>> The problem with your erroneous and mistaken belief is that only a
>> quarter of the bad loans fell under F&F. The rest of the bad loans were
>> directly attributable to poor risk management in the financial sector
>> and to Wall Street gambling. In turn, poor risk management was a
>> consequence of predominantly Republican governments providing guarantees
>> to various markets and industries, aka off-budget liabilities, aka
>> government backed guarantees. And now, finally, after the latest two
>> terms of Republican government, the American taxpayer is having to make
>> good for those liabilities.
>>
>> That is Republican-style neoconservatism is all about, privatizing the
>> profits while socializing the risk... has been since Reagan. You dolts
>> and fools wiggle your little hyper partisan fingers at Obama, when he is
>> only making good on liabilities imposed on the taxpayer by primarily
>> Republican governments.
>
> Who repealed the Glass Steagall Act you partisan twat?
lol... you should learn to be less transparent with your butchered revisions
of history, idiot.....
http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act
"The bill that ultimately repealed the Act was introduced in the Senate by
Phil Gramm (Republican of Texas) and in the House of Representatives by Jim
Leach (R-Iowa) in 1999."
Chom Noamsky
> Who repealed the Glass Steagall Act you partisan twat? Clinton paved
> the way for speculators to abuse not only working class people but the
> whole financial system. Clinton is what? A Republican?
>
> The year before the repeal only 5% of mortgages were subprimes. When
> the crisis hit it was over 30%.
Glass-Steagall was superceded by the Gramm–Leach–Bliley Act, introduced
and sponsored by three Republicans back 1999. If you check your facts
you will find Republicans controlled Congress when the act was voted on.
Chom Noamsky
>> Who repealed the Glass Steagall Act you partisan twat?
>
> lol... you should learn to be less transparent with your butchered revisions
> of history, idiot.....
>
> http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act
>
> "The bill that ultimately repealed the Act was introduced in the Senate by
> Phil Gramm (Republican of Texas) and in the House of Representatives by Jim
> Leach (R-Iowa) in 1999."
Archie and Eddie make a great team, eh? One's a socialist Canuck and
the other a foaming teabagger.
What actually happened, according to the Ludwig von Mises Institute,
Robert B. Ekelund and Mark Thornton:
"But an insidious form of "market-based policy" is also a real culprit
in the current mess. In 1999 a bill was passed by a Republican Congress
and signed by Democratic President Bill Clinton that rescinded the
Depression era's divorce of commercial banking activities from
investment banking, called the Glass-Stegall Act of 1933. That opened a
floodgate of "creative" financial instruments backed by notes and other
commercial paper. Much of the banking regulation of the Roosevelt
administration — including abandonment of the gold standard — made
absolutely no sense, but markets can fail with dire short-run
consequences under a fiat monetary system. With Glass-Stegall, Congress
put its finger on and mitigated the tendency and temptations of banks to
create massive costly externalities to society, in this case, by holding
bundled mortgage-backed securities which were deemed safe by rating
agencies but which ultimately failed the market test."
"The Financial Services Modernization Act of 1999 would make perfect
sense in a world regulated by a gold standard, 100% reserve banking, and
no FDIC deposit insurance; but in the world as it is, this
"deregulation" amounts to corporate welfare for financial institutions
and a moral hazard that will make taxpayers pay dearly. Such government
privileges are nothing new to Republicans — consider the effective
subsidies to the pharmaceutical, sugar, and steel industries — but this
particular gift to financial institutions is what allowed the credit
bubble to expand to such absurd proportions, because it allowed banks of
all types to engage in increasingly risky transactions and to greatly
expand the leverage of their balance sheets. As the crisis unfolds,
credit continues to contract, the risk of bank failures increases, and
the possibility of far more serious economic consequences become more
apparent. The S&L crisis cost the taxpayers a few hundred billion, but
this crisis has the potential of saddling the taxpayer with several
trillion in bailouts."
Chom Noamsky
Food stamps are for nanny states like the US. In Canada people on
welfare are trusted to spend cash.
Duncan Patton a Campbell
The deregulation that tanked FannieMay/FreddieMac was undertaken by
Ronald Reagan as part of the Repiglican plot to game the Savings and
Loans. And it was the Reaganuts' use of Epsilon to track their S&L
game that exposed it to the Soviets.
Dhu
--
Duncan Patton a Campbell is Dhu
Duncan Patton a Campbell
> "McCain Letter Demanded 2006 Action on Fannie and Freddie"
>
> "Sen. John McCain's 2006 demand for regulatory action on Fannie Mae and
> Freddie Mac could have prevented current financial crisis, as HUMAN
> EVENTS learned from the letter shown in full text below."
>
Yabyabyab. The deregulation causing the problems now was begun in
the '80s by Ronald Reagan's administration.
Eddie Haskell
"Chom Noamsky" <m...@eatmoose.yum> wrote in message
I was wondering how you managed to afford all that whiskey you drink.
-Eddie Haskell
Eddie Haskell
"Chom Noamsky" <m...@eatmoose.yum> wrote in message
Projection, Chumpsky.
> Do some basic research, you will discover F&F only guaranteed about 1/4 of
> the bad loans involved, and their mandate, as it was known up until the
> meltdown, was established by the Nixon government.
The bad loans were made in the first place because they knew they could sell
them to the government. That they got caught with their pants down in the
interim is irrelevant, Chumpsky.
-Eddie Haskell
Eddie Haskell
"Duncan Patton a Campbell" <camp...@neotext.ca> wrote in message
news:pan.2010.03...@neotext.ca...
When you get a knock on the door, go along with the men in white coats
quietly.
Thanks a bunch.
-Eddie Haskell
Eddie Haskell
>
>
> "Archie" <aken...@googlemail.com> wrote in message
> news:022fcb71-858e-4dda...@l25g2000yqd.googlegroups.com...
>> On Mar 17, 6:27 pm, Chom Noamsky <m...@eatmoose.yum> wrote:
>>> On 3/17/2010 1:35 PM, Eddie Haskell wrote:
>>>
>>> > "McCain Letter Demanded 2006 Action on Fannie and Freddie"
>>>
>>> The problem with your erroneous and mistaken belief is that only a
>>> quarter of the bad loans fell under F&F. The rest of the bad loans were
>>> directly attributable to poor risk management in the financial sector
>>> and to Wall Street gambling. In turn, poor risk management was a
>>> consequence of predominantly Republican governments providing guarantees
>>> to various markets and industries, aka off-budget liabilities, aka
>>> government backed guarantees. And now, finally, after the latest two
>>> terms of Republican government, the American taxpayer is having to make
>>> good for those liabilities.
>>>
>>> That is Republican-style neoconservatism is all about, privatizing the
>>> profits while socializing the risk... has been since Reagan. You dolts
>>> and fools wiggle your little hyper partisan fingers at Obama, when he is
>>> only making good on liabilities imposed on the taxpayer by primarily
>>> Republican governments.
>>
>> Who repealed the Glass Steagall Act you partisan twat?
>
> lol... you should learn to be less transparent with your butchered
Speaking of butchered, where is the rest of his post? Oh, yeah. That's
right. You're hiding from it.
> revisions of history, idiot.....
>
> http://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Act
>
> "The bill that ultimately repealed the Act was introduced in the Senate by
> Phil Gramm (Republican of Texas) and in the House of Representatives by
> Jim Leach (R-Iowa) in 1999."
The irrelevancy of the repeal to the meltdown aside, who was president in
99, klunk, you drooling inbreed?
-Eddie Haskell
Eddie Haskell
"Chom Noamsky" <m...@eatmoose.yum> wrote in message
Pssst.. Hey Chumpskey..
"Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into
securities; that provides lenders the funds to lend more"
Heh heh..
Man, just too easy..
Heh heh..
-Eddie Haskell
Eddie Haskell
"Chom Noamsky" <m...@eatmoose.yum> wrote in message
> On 3/17/2010 3:30 PM, Archie wrote:
>
>> Who repealed the Glass Steagall Act you partisan twat? Clinton paved
>> the way for speculators to abuse not only working class people but the
>> whole financial system. Clinton is what? A Republican?
>>
>> The year before the repeal only 5% of mortgages were subprimes. When
>> the crisis hit it was over 30%.
>
>
> will find Republicans controlled Congress when the act was voted on.
The irrelevancy of the repeal aside, who was president at the time,
Chumpsky?
Hint:
Eddie Haskell
BRAACK!
-Eddie Haskell