Veronique de Rugy and Philippe Lacoude.
Please feel free to leave other references in the comments; there is a greater rush of material coming out than I can keep track of.
Addendum: Here is a (non-libertarian) dose of optimism.
Libertarian perspectives on the bail-out
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Here’s a nice video explanation by Russ Roberts.
A political philosophical perspective:
The political philosophy of bailout
Why are all the commentators on all sides saying the problem is not X, but Y? They should be identifying it as X and Y. Isn’t it stunningly obvious that changes in regulation of leverage were a bad idea in hindsight? Isn’t it equally obvious that mortgage originator and borrower fraud and perverse incentives for lenders, bankers, rating agencies – you name it – were a problem? True, it’s difficult to fix the relative magnitude of all these issues, even qualitatively. But it seems that everyone still has an ideological ax to grind. Libertarians need to get over themselves with the “it wasn’t really a free market” line. That’s true, but the aspects that did function as a primarily free market were completely screwed up as well. You don’t get a free pass, libertarians. The free market screwed up, just like it did with the dot com bubble, the biotech bubble, the conglomerate bubble, the tulip bubble, etc.
Regarding Liebowitz’s comments, that prices in a speculative
bubble start to decline after the prices stop rising and the
speculators “walk away,” is completely not a revelation.
Since Tyler practically invited self-promotion…
Here is my EconLib take on all of this, and here is a sample from the American Experiment collection entitled, “What’s a Free Marketeer to Think?” (You can follow its links to the entire collection of essays from a bunch of, well, free marketeers.)
But the market did self-regulate this. We just don’t like the result.
Even with their completely non-self-interested, lily white, only caring about the people selves, the government didn’t do as much to point out what was coming as did market participants themselves such as Mike “Mish” Shedlock, Bill Bonner, Warren Buffett, and George Soros.
I remember this vividly. Ironically, I was working on my shed, so it had to be about two years ago, listening to a podcast and Mish Shedlock asked “have we ever had a soft landing.” People who want the regulators to head off these things want what never was and never will be.
What we think is good are institutions that play to the self-interest of private actors by rewarding them for serving the public, not just themselves. We believe that’s what genuinely free markets do.
Oh good lord, how does one get tenure with such a rudimentary understanding of what markets do? Markets as institutions do not solve the misalignment of private and social returns. They increase the number of privately beneficial exchanges. The benefit of market exchange over planned exchange is that, if private and social returns align, it creates more social surplus by being better at locating opportunities for mutually beneficial exchange. That doesn’t mean it mysteriously solves the private-social misalignment that comes into play if the marketed commodity is fraught with externalities, information asymmetries, or a combination of the two.
The Stan Liebowitz article points a particular finger at the shoddy research of Alicia Munnell at the Boston Fed in a 1992 study that had broad influence on governmental practice in loosening lending standards. I distinctly recall that in the 1980s, Munnell had an exchange in the New York Review of Books with Pete Peterson (Concord Coalition) over Social Security in which she said that the program must be kept universal and compulsory, or else it might lose its political support. Peterson called her on this exercise in the tail wagging the dog, but to no avail, just as Liebowitz’ dissection of her Boston Fed study was to no avail.
Bearing in mind the prominent role of Barney Frank in pushing the Fan and Fred envelope, the more one reads about this crisis, the more one concludes that it is yet another example of bad Massachusetts ideas being inflicted willy nilly on the rest of the country.
I ask again:
When are the free market fundamentalists such as Tyler going to admit that the failure to regulate under existing law is the proximate cause of the mortgage mess and consequent freezing up of the credit markets?
I guess I shouldn’t hold my breath. Tolstoy said it best:
I know that most men, including those at ease with problems of the greatest complexity, can seldom accept even the simplest and most obvious truth if it be such as would oblige them to admit the falsity of conclusions they have reached perhaps with great difficulty, conclusions which they have delighted in explaining to colleagues, which they have proudly taught to others, and which they have woven, thread by thread, into the fabric of their lives.
Steve Forbes had some interesting comments in his magazine about the current crisis. He blames mark-to-market accounting. I guess the banks should have put their securities in hold to maturity.
The Leibowitz paper is embarrassing. While it does a fine job explaining the sources of the housing bubble, it fails to trace the causal connections between the bursting of the housing and the turmoil in financial markets.
Instead, it offers a truly sophomoric argument: “We are experiencing one of the worst financial panics in the post-WWII era. EVERYONE KNOWS that the increase in mortgage defaults has been the primary driver for these financial difficulties.”
Why is it true? Because everyone knows it. Horrible.
The Leibowitz paper is embarrassing. While it does a fine job explaining the sources of the housing bubble, it fails to trace the causal connections between the bursting of the housing and the turmoil in financial markets.
Instead, it offers a truly sophomoric argument: “We are experiencing one of the worst financial panics in the post-WWII era. EVERYONE KNOWS that the increase in mortgage defaults has been the primary driver for these financial difficulties.”
Why is it true? Because everyone knows it. Horrible.
Bird on a Wire: As if they were passenger pigeons of old, the government has tricked and slain securities firms. Now they want to do it again.
Excerpt:
“What’s the last bank or corporation that failed—small or large, financial or manufacturing, or any other type—and then actually caused the entire free market to shut down?”
“Now the market participants are finding that they not only haven’t thought about counterparty risk enough, they don’t have nearly enough information to find counterparty risk, so their lending to the only counterparty they trust”
I don’t think this could have been said better. Eventually people will have to either start accepting risks that they unconsciously accepted before, or their investments will have to reduce their risk. Maybe the government is trying to accomplish both at the same time, which is the only explanation for their schizophrenic policy, and puts them to the nihilistic side of even me.
That said,
I have zero problem with Tyler not being 110% my kind of libertarian.
To paraphrase Warren Buffett, there are 6 billion people in the world. Imagine a lottery where you got to put your lot in life back into the bin and re-choose your life. Would you take a chance? Probably not. Would you do it for 100 choices, of which 5% would put you in America, and half of those would be below average, again probably not.
Would I put Tyler back and take 100 alternative Tylers? 1000? 10,000? Nope. 100,000…no. 1,000,000…no. 10,000,000…getting warmer, maybe.
He’s also been dealing with the criticism from both sides forever, so, even if people believe they should have the right to define other people, why do they think they can do it by browbeating?
I also have zero problems with liberals who aren’t A-holes, if we can actually talk and they teach me something about truth I hadn’t thought of? People are wrong about so many things, and simply being wrong doesn’t reflect on character, which is the way I would hope they think about my faults. Nothing is more irritating than people believing you have no value just because you disagree with them.
It is much simpler than all that, in Cuba they do not have rising and falling un-employment this comes with freedom but look around folks. If this is the chaos of freedom and Cuba is the result of a Government controlled economy, well I will take freedom any day. Freedom sucks when the economy contracts but the controlled economy is always worse.
Some might say that I should not use Cuba as a controlled economy but instead use Sweden. Well Sweden’s economy is not really much more controlled than the US economy, but more that Sweden is in the same down turn as we are and has gone through a similar thing in the recent past, they did not nationalize their banks because everything was great.
It is insufficient to say that freedom caused the problem you must show that a Government controlled economy is better. There is no evidence for that in fact our government loved this problem while it was happening. They liked poor people getting loans, they liked home ownership going up. Local governments play to current home owners with slow growth policies which have the benefit of pushing up voters net worth and also tend to drive out undesirables. They all loved it!
http://finance.yahoo.com/tech-ticker/article/92881/Does-Wall-Street-Need-to-Be-Able-to-Fail
http://money.cnn.com/2008/09/29/technology/View_from_Valley_OBrien.fortune/
Here’s a take on getting bailed out
http://movies.yahoo.com/feature/joshbrolin_blog.html
I’ve started to wonder why we tolerate the fact that police always mischaracterize arrests. It’s to the point where everyone knows the cops do it. At what point do we do something about it. Is it going to take white celebs getting abused?
Andrew,
We have to trust that they needed to use those tasers. Only a conspiracy nut would suggest that the government would abuse it’s monopoly power of violence.
Bob Murphy asked:
What are you talking about? Are you a frequent reader?
I read this blog sporatically. But my question about when the free market fundamentalists or liberatarians would confess was motivated by many years of dealing with them in another policy context. And my conclusion thus far is that “intellectual honesty” and liberatrianism form an oxymoron when juxtaposed. Like Diogenes, I look for an intellectually honest liberatarian and conclude that they do not exist, even when they have a Ph.D. and a very good educational pedigree.
I would be very interested to learn if you know of any.
A intellectually honest interventionist would have to confront the paradox involved in this idea :” the powerful cannot be trusted to do the right thing so we need to take power from individuals and give extra power to entities called politicians and these superhumans will then be impervious to corruption from the bad people we were worried about before”
An intellectualy honest person probably wouldn’t use the term “market fundamentalism” when describing libertarians. I have seen it used to describe neo-cons(as seems to be common), in which case the term would have more to do with massive corporate welfare and crony capitalism…or the proccess by which some industries take over the government power and use it to destroy their competitors and write the rules so as to maximize their profits at the expense of the public.
When using it to describe people who want less government power AND describing it as the system that has been embraced the last 30 years your getting silly. The irrational faith that you seem to be ascribing to libertarians could just as easily be ascribed to the flip side of the coin “economic interventionist fundamentalism”.
That being said it is ignorant to imply all the libertarians advocated the same things the last 30 years(many are against having a Federal Reserve System and against the government encouragement given to fractionalized banking practices, corporate welfare, interfering the tax incentives for home ownership, bailing out banks, etc). Given these positions and the drastic differences between those positions and what we have been living under the last 30 years I just don’t understadn how you can say that libertarians caused what is happening today.
However, given that Tyler did lend his support to the bailout I can understand how you blame some libertarians for what is currently happening. Given this confusing behavior your confusion is understandable. I guess it would be fair to say that “libertarians” like Tyler have probably increased your loyalty to the ideals of the democratic party and Obama. Is that true?
HCG,
libertarians = idealogues = ready made answers to all situations.
This seems to be a false ideaology of yours. I think
Gabe=libertarian and yet Gabe=! (has ready made answers to all situations).
This shows your ideaology is wrong.
‘In contrast, what we should learn in school is that when a problem arises, we should say “let’s think about it”‘
I think people should learn that before they go to school, but I know that is being idealistic.
‘and then ask “HOW we should think about it?”. That is, what are they received theories and findings are applicable to a solution? ”
Oh so you want to take it on faith that the received theories are not to be questioned? I’m not so big on that idea, while I will agree that it is good to study the “received theories.
‘Evidence is being produced that conservatives (and liberatarians by extension)use the limbic system more than the prefrontal cortex (where judgment and reasoning are located).’
so now you are not going to investigate or debate the ideas and the evidence in economic arguments? You are just going to trust some obscure research that “conservatives use more limbic” and so therefore libertarians use more limbic and since limbic doesn’t use reason as much as “liberals” then libertarian ideas must be inferior?
This is an amazingly roundabout way of avoiding discussion of the actual ideas. So if there are pro-federal reserve libertarians(lets call them cosmotarians for the sake of brevity) and anti-fed libertarians(lets call them paleos)….which side uses more limbic? is it the paleos or the cosmos?…if we could only have a few tests done on paleos and cosmos and see which one uses more limbic we could figure out who is correct in or ongoing debate.
“So it is clear, while they may be very educated, are very intelligent in the usual sense of the word, and have learned the received paradigms, they easily set these aside when reasoning would lead to a recommendation that they don’t like.”
what recomendation are you getting at? raise taxes and centralize power away from individuals?
“My complaint is with self professed libertarians. Any one who announces such a proclivity is announcing that he or she is an ideologue,”
Really? Would you be willing to reconsider that belief, and consider, instead, that you have had dealings with some people who are self-professed libertarians that you disliked, and you are unfairly generalizing your experiences with them to all self-professed libertarians–the vast majority of whom you do not even know?
“and ideologues by definition have ready made answers to all situations. So that is intellectually dishonest.”
Maybe its intellectually dishonest for you to define someone as something that is, by definition, intellectually dishonest, in order to prove your theory that they are intellectually dishonest.
http://www.psych.nyu.edu/amodiolab/Amodio%20et%20al.%20(2007)%20Nature%20Neuro.pdf
“I don’t think that all the peer reviewed findings should be taken on faith.”
I quite agree. A couple of standard dictionary definitions of faith (Answers.com):
Belief that does not rest on logical proof or material evidence.
The body of dogma of a religion.
For Christina: it is standard to represent political beliefs on a simple two dimensional linear continuum: left and right. If the continuum is conservative and liberal, then the libertarians go on the conservative side, of course.
And also of course, two dimensions are far too simple to capture the full complexity, as we all know that our political positions are multi-dimensional. Perhaps someday the cognitive neuroscientists will be able to illuminate that with evidence.
What’s been lost so far in all the uncertainty and confusion of this country’s current financial fiasco?
The fact that a cadre of white collar criminals are still out at large, just possibly pulling off one of the greatest heists in this country’s history?
I think so.
I also imagine them as a well funded group of characters –politically connected too, undoubtedly set for life now – all of the money needed for a lifetime of comfort and leisure, secured in just 3 to 5 years of fraud and deceit.
Too many underestimate the untempered short term profit motive – to get in and out quickly, making millions, no wait, some making billions in the process.
While many of us now reel in the uncertainty of our own short and long term financial security, the party’s just begun for those who’ve perfected stealing with a pencil.
I’ll tell you what I think is missing from this news story thus far. Mortgage and banking CEO’s in suits being led away in hand cuffs, a new breed of no-nonsense regulators being introduced to the American people, and how about a unified American voice declaring enough is enough!
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” – Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802) 3rd president of US (1743 – 1826)
Gary E. Geraci
http://afederalwhistleblowerstory.blogspot.com/
When are the free market fundamentalists such as Tyler going to admit that the failure to regulate under existing law is the proximate cause of the mortgage mess and consequent freezing up of the credit markets?
Every success is based on continuous efforts. It is not possible be done over nigh.
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