We’re On The Road To Somewhere

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Ethan Gach

I write about comics, video games and American politics. I fear death above all things. Just below that is waking up in the morning to go to work. You can follow me on Twitter at @ethangach or at my blog, gamingvulture.tumblr.com. And though my opinions aren’t for hire, my virtue is.

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187 Responses

  1. economic growth won’t look like it used to in the past.

    When did it ever?Report

    • Probably never, but the consensus right now seems to be, on the left and the right, that we’ve got to get back to where we were.

      So Republicans want to cut taxes and cut spending, like usual, to see more economic growth.

      Democrats want to increase aggregate demand through more government spending and maintained safety net benefits, so that we can have economic growth.

      In both cases no one seems to address the fact that more economic growth doesn’t necessarily mean more jobs or better average salaries, and that there are deep structural differences between now and some golden age in the 50s 60s where, at least in retrospect, we seem to feel that economic growth is naturally a rising tide lifts all boats with a strong middle class.Report

      • Avatar Kimmi in reply to Ethan Gach says:

        We’re at ZIRP. And I hope to hell nobody wants to get back to “the mess that greenspan made.”

        I don’t see how giving companies 15% more profit is going to incentivize them using the currently free money. But the republicans insist on pulling on the spring.

        If we get enough growth, the Democrat says we can equalize the “lack of jobs” and “lack of salaries” with taxes and redistribution. (the Republican also says the same damn thing, but a bit more quietly).Report

    • Avatar Kimmi in reply to James Hanley says:

      We’re headed into a Lost Decade. Economic growth will continue to look just like the past (Listen to Krugman screaming — he’s done his research. And Stiglitz and Roubini, though less loud, are just as much on the “inflate our way out” conservative side).

      Incentives distort. If we devise the proper incentives, we can get a 1-2% inflation forever. But do we really want that?

      It says somethign that the “ban on shorting financials” extended to GE and GM. and that’s NOT because they have undue influence on Bernanke. By any measure, they would have been adversely effected just as much as pure financial corps.

      We ought to be asking a few questions:

      1) Where is capitalism a good idea?

      2) Where is competition a good idea?

      3) How do we design incentives for long-term corporate research (herein defined as payoff more than three months away)? [n.b. if this is “tax ’em to death, and give ’em free public research” I’m still listening… skeptically.]

      4) How much leverage is too much? (Federal Gov’t and Hedge Funds, both. Probably has a different answer based on stability of revenue, ya?)Report

  2. “Then there are libertarians who don’t feel comfortable enforcing any morality, unless it’s the one that establishes negative rights and then banishes most ethical concerns that arise afterward.”

    Are you making the “no-ethos-is-an-ethos” argument? Because I think that’s a bad argument to make.

    Personally, I’m concerned about values and moral issues. Hell, I’ll even go so far as to state unequivocally that my values are better than yours (“you” of course being any possible reader.). But I don’t think my values should be legislated, because I know lots of intelligent people who have different values than I do, and I think they should be allowed to freely execute the behavior that emerges from their values so long as that behavior doesn’t involve assaults against another person. More than any other reason perhaps, is that a world full of only people who think exactly like me bores and frightens me, not to mention it is absurd. Of course, we’re free to have rigorous discussion on the topic with the collective goal of improving our respective values systems. Here we are, doing it.

    If this recession has taught us one thing it should be that economic growth won’t look like it used to in the past.  And yet no one, it seems, has any ideas on what to do about globalization, automation, or the paradox of saving more in a consumption driven economy.

    Globalization – Love it. Let’s open the borders and let people trade stuff and move freely. History will laugh at us if we don’t.  Automation – Love it. Let’s turn over government to intelligent machines. Paradox of Thrift – Shouldn’t exist. Wealth is driven by exchange, whether that exchange is quantified by some currency or free, such as our exchange at LoOG is. Some day we’ll realize that our methods of accounting are ill-suited for a world of mass-cooperation, information technologies, and a renaissance of production for use.Report

    • Some day we’ll realize that our methods of accounting are ill-suited for a world of mass-cooperation, information technologies, and a renaissance of production for use.”

      I agree, any ideas on what the new calculus would look like or how we hasten it?Report

      • Avatar Stillwater in reply to Ethan Gach says:

        And libertarians like to say that it’s liberals who live an land of far flung dreams.

        That’s the primary problem with libertarianism in a nutshell: even if the model they base their theory on is correct, there is no way to get there. Government will always exist. It will always be captured by special interests – centralized private power and populist movements and whatever else.There is no practical way (I’d even go so far as to say principled way) to limit government from becoming directly involved in creating/fostering/permitting/prohibiting practices which benefit one group over another.

         Report

        • Avatar Jason Kuznicki in reply to Stillwater says:

          Obviously, then, the right response to such a situation is to steal as much as I possibly can for my own side.Report

          • Avatar Ryan Bonneville in reply to Jason Kuznicki says:

            Can I be on your side? I need some more stuff.Report

          • Define it as a right.

            Now you are entitled to it.

            When you are entitled to it, it is no longer stealing.Report

          • Avatar Stillwater in reply to Jason Kuznicki says:

            That’s a different issue. Entirely.

            But look Jason, I get that you think libertarianism is a coherent view that elucidates precisely why taxation is theft (or whatever) but the limits of it are revealed in just these types discussions. Below, you advocate price as being an otherwise value-neutral incentive for specific action which yields positive utility. ECG’s point is that it <i>isn’t </i>value neutral. It’s embedded in a  value laden theory which claims that unfettered markets are the best maximizer of <i>overall </i>social utility. The normal understanding of ‘overall social utility’ is that the term includes other values, including non-economic ones. That utilitarians prioritize price in the argument justifying their view is one thing. But to collapse all other values into price is another.Report

            • Avatar Jason Kuznicki in reply to Stillwater says:

              [T]he limits of [libertarianism] are revealed in just these types discussions.

              Again, I don’t agree.  What I see in the OP is “hey, markets are neat, I can manipulate them to achieve whatever policy aim I want.”

              This isn’t a limitation to the free market.  It’s a fundamental and very deep misunderstanding of the free market.  The reason market incentives work the way they do is that they dispense altogether coldly with declarations of sentiment and with feel-good activities that fail to put food on the table.

              Urging policy makers to manipulate markets isn’t going to avoid the problem of, well, policy makers manipulating markets.  It’s just going to leave you pissed off when the policy makers manipulate to benefit their friends rather than your friends.

              There are certainly failures to markets, however.  One of the more incisive critiques of libertarianism belongs to Erik, who points out that a system without a social safety net leaves the worst off at the mercy of luck and impairs them from ever acting on the local knowledges they may possess.  This is why I’ve long been in favor of a negative income tax/GMI system, in which luck would virtually never interfere with at least having enough to get by.

               Report

          • Avatar Mike Schilling in reply to Jason Kuznicki says:

            Psmith’s definition of practical socialism: Collar everything I can and sit on it.Report

        • Avatar Roger in reply to Stillwater says:

          Stillwater,

          But we do know how to get there. Didn’t you hear… we are all leaving in eight years and taking all the gays with us.  Seriously, there is a path to libertarianism and it is called competition — in this case competition of state agencies. Seven years and 364 days and counting…..Report

          • Avatar North in reply to Roger says:

            Seven years and some change?!? I’d better start packing. It’ll take at least that long just to arrange to transport my Liza Minnelli shrine and shoe collection (to say nothing of my D&D miniatures).Report

            • Avatar Roger in reply to North says:

              Time flies. Speaking of Liza, I just got Barbara Streisand’s Broadway Album ON VINYL!

              note: I misspelled her name on purpose to prove I am neither gay nor progressive. This is how you can tell… right?Report

              • Avatar North in reply to Roger says:

                There is neither gay or straight nor progressive nor conservative in the Liza fandom (also you spelled it right). Love for her transcends all sexual and political boundaries. Also Liza can turn water into Grand Marnier with but a single touch.

                I’m deeply admiring of your vinyl acquisition. I’m told the sound from vinyl is peerless. Being not greatly strong in hearing and being only 30 my own connection to the medium is tenous. I was a casette and CD kid.

                 Report

              • Avatar James Hanley in reply to North says:

                So are you an Ethel Merman fan, too, or is that your father’s gay generation (so to speak)?  One of the best moments of my life was standing in a gay-owned pet shop in San Francisco listening to a parrot sing Everything’s Coming Up Roses.  I think that’s the moment I realized that despite my small-town church-going midwestern upbringing, it wasn’t possible for me to be anti-gay.Report

              • Avatar North in reply to James Hanley says:

                Alas, I only came to Liza by accident so I haven’t heard much of Ethel Merman. Probably more of the preceeding gay cohorts would have been the fans that obsessed over that music. But I do like Everything’s Coming up Roses.Report

              • Avatar Roger in reply to North says:

                Actually it was my reading of the prequel to Red October — the brilliant Striped September — that led me to embrace Gay Power.

                The plot — if I recall– centered around a group of corporate directors of a biotech company who feared lawsuits and thus created a cancer causing apple disease — for PROFIT!. Luckily, the gay “middleman” Jacque Ryan, discovered the evil plot and revealed it to the world in an Ethel Merman tribute concert.Report

        • That’s the primary problem with libertarianism in a nutshell: even if the model they base their theory on is correct, there is no way to get there. Government will always exist. It will always be captured by special interests – centralized private power and populist movements and whatever else.There is no practical way (I’d even go so far as to say principled way) to limit government from becoming directly involved in creating/fostering/permitting/prohibiting practices which benefit one group over another.

          So, we shouldn’t even try to persistently work against that to minimize and counteract it?  Because we can’t eliminate it we should just accept it without criticism?  Do we need to embrace, and even enable it, too?

          This is not one of your stronger arguments, Stillwater, because the critiques of that type of government don’t become invalid just because eliminating it may not be possible.  The critique of <i>anything</i> doesn’t become invalid just because it’s impossible to eliminate that something (whether we’re talking about rape, cancer, bad driving, generally unsociable behavior, etc.)

           Report

          • Avatar Stillwater in reply to James Hanley says:

            James, it wasn’t meant to be a good effort. It was meant to show that the accusations libertarians throw at liberals – as being hopelessly unrealistic in waiting for a pony – are equally applicable to libertarians. The libertarian pony is that minarchism (of a certain form) actually will yield provide for the greatest good for the greatest number. My complaint is that there is no principled or practical way to limit government from deviating from it’s minarchist ideal – even if minarchism is the starting point of government. ‘Special interests’ will always impinge on the limited role of the state, compelling it – either through persuasion or force – to expand the role of the state. What would prevent the subsequent expansion: judicial decisions? Constitutional provisions?

            Now, insofar as libertarianism provides useful tools to critique current government activities, I’m wholly in agreement that the view makes sense. But at the end of it, I don’t think the libertarian position – on this score! – differs from lots of forms of liberalism: both camps believe that often the power of government is captured by private interests, and often government fosters unjust institutional practices because of that capture. Liberals and libertarians <i>agree </i>on that. Where they differ – well, one place they differ – is in believing that minarchism is either sustainable or even possible to attain, and that a minarchist state won’t inevitably require the exact same type of activist government that libertarians reject.

             

             

             Report

            • My complaint is that there is no principled or practical way to limit government from deviating from it’s minarchist ideal

              Principled and practical are two different things.  You may have shown the second (not that I was ever, sadly, in doubt about it), but not the first.

              Anyway I really don’t think you’ve shown what you want to show.  What libertarians are implicitly arguing in their pro-minarchy diatribes is that steps in that direction are for the good.  We could be wrong, but that’s not “hopelessly unrealistic.”

              But I won’t defend the claim that liberals, as a group, are hopelessly unrealistic. I know some who are, but I know lots who aren’t.Report

              • Avatar Kimmi in reply to James Hanley says:

                *yawn* I’d rather take each step individually, and make my decisions that way. Sometimes left, sometimes right, and sometimes right straight into the air.Report

              • Avatar Stillwater in reply to James Hanley says:

                Principled and practical are two different things.  You may have shown the second (not that I was ever, sadly, in doubt about it), but not the first.

                Well, look at it this way: the libertarian argument is that government is captured by private power or populism to the detriment of us all (well, not the powerful or the populists). In what principled way could minarchism prevent the exact same capture?

                Surely not the constitutional provisions themselves, since legislatures and justices could agree that a particular expansion of government is entirely <i>consistent with </i>any particular minarchist provision (via capture or otherwise). Other types of restrictions could be enforced by force, but according that much unilateral power to government is inconsistent with (some conceptions of) minarchism, creates avenues for government to use its power to favor special interests (the very thing minarchism tries to prevent), and it would deprive citizens of the right to redress via legislation and from courts from perceived or actual harms (since the state could unilaterally deny potentially legitimate claims).

                Alternatively, if minarchism is viewed as tyranny of ideology enshrined in a constitution and other laws which in turn are protected and defended <i>exclusively </i>by the state, then the state is accorded a power that’s in principle beyond the citizenry to control or influence. There would, then, be are no checks at all on what constitutes the legitimate role of the state, which could make and pass laws expanding from minarchism at is sees fit.

                In short: legitimate measures to constrain the state to its minarchist ideal could suffer from political pressure; illegitimate measures – the use of force – could (in fact would) permit the state to interpret minarchism in whatever way it chose to.

                 Report

            • Avatar Stillwater in reply to Stillwater says:

              And to flesh that comment out a bit, I’d go so far as to say that government – at it’s inception – is (almost) entirely captured by powerful private interests, and the subsequent challenges to, and liberation from, that capture-of-power is the short history of modern political evolution. Even the US government <i>at it’s inception </i>was captured by private power. And the subsequent expansion of government – which libertarians often find so objectionable – resulted from increased activism to extend rights to those not granted them, or to those denied the protections those rights entail. But activists/reformists didn’t work to expand those rights purely out of principle: it was primarily because there was perceived and real injustice in the world they lived in.

              But the larger point I’m making here is that capture by private power is a fundamental (read constitutive) aspect of government. (Mark T had a nice line about this in his previous post: (paraphrase) ‘private power has the ability to create government where it needs to’. I hope that’s accurate! 🙂  ) And that’s another area where I reject the libertarian view: government is not some institution conceptually or causally distinct from the short-term, narrow interests of the citizens it claims to have authority over. It emerges from those citizens, and often only a small fraction of those citizens, and in the ideal evolves to express the interests of increasingly more citizens.

              Some people would say this is the main problem with democracy. Others would say it’s a least bad option.Report

      • Instead of having General Theories, we would have Theories that Only Apply to Financial Accounting and Theories that Apply to Economies of Scale in Agriculture But Nothing Else.Report

    • But I don’t think my values should be legislated, because I know lots of intelligent people who have different values than I do, and I think they should be allowed to freely execute the behavior that emerges from their values so long as that behavior doesn’t involve assaults against another person.”

      That value seems enshrined in the Constitution (though not always interpreted as such), which puts it even beyond legislation. Whether we call this a value or a meta-value, it indicates a clear choice that we (or those before us) have instituted.Report

    • Avatar Stillwater in reply to Christopher Carr says:

      Automation – Love it. Let’s turn over government to intelligent machines.

      I’m thinking Diebold. You?Report

    • “Some day we’ll realize that our methods of accounting are ill-suited for a world of mass-cooperation, information technologies, and a renaissance of production for use.”

      I keep telling the collection agency this, but they just won’t listen.

       Report

  3. Avatar Jaybird says:

    The rot needs to be wrung out. It will be wrung out.

    Our choice is whether we want it to happen quickly or slowly. It looks like we’re going for “stretch it out as looooooong as we possibly can.”Report

  4. Avatar Jason Kuznicki says:

    [Incentives]… can be extremely helpful for reaching already agreed upon goals.  But in order to use them effectively, these end goals need to be articulated.

    I could not disagree more strongly.  Incentives don’t need to be articulated to be followed.  They just have to be reflected in prices.  One need not know why the price of of corn is going up to respond to that incentive.  One only needs to know the price of corn.

    Note also that the goal doesn’t have to be agreed upon.  I might absolutely hate the underlying reason for the increased price of corn — nowadays, that increase comes from ethanol subsidies, which I do happen to hate.

    But is buying stock in agribusiness still incentivized?  It sure is.  Incentives produce action in the absence of agreement or even knowledge.  This is both their strength and in some senses their weakness.Report

    • Avatar Stillwater in reply to Jason Kuznicki says:

      One need not know why the price of of corn is going up to respond to that incentive.  One only needs to know the price of corn.

      What if the price increase is due to government purchase of ‘surplus’ corn?Report

    • One need not know why the price of of corn is going up to respond to that incentive

      If one were investing in corn commodities, wouldn’t why the price of corn was going up be an important part of making that decision?

      As to the larger point, the free market is a mechanism with certain incentive structures, and how many times do we defend it by pointing to the ends it achieves (or that we think it will achieve)?

      No one says the free market is great…because it’s great, it’s considered the best way at achieving something, most usually, some equitably, non-biased, and free distribution of goods.Report

      • Avatar Jason Kuznicki in reply to Ethan Gach says:

        If one were investing in corn commodities, wouldn’t why the price of corn was going up be an important part of making that decision?

        Possibly.  There is some degree of speculation about future prices, of course. But a rise is a rise, and it is rare indeed that a rise in price causes producers to produce less.  Isn’t it?Report

        • Avatar Kimmi in reply to Jason Kuznicki says:

          … in corn? supply is major sticky for corn and other grains. you plant once (maybe twice with wheat) a year.Report

        • Avatar Kimmi in reply to Jason Kuznicki says:

          A rise in price of apples (on a year to year basis) should lead to less apple trees being planted the next year. Why? Apples are biennial (produce more the first year, and then produce less the next).Report

          • Avatar Jason Kuznicki in reply to Kimmi says:

            Sorry, this makes no sense whatsoever.  An apple tree won’t even bear fruit two years after planting.Report

            • Avatar Kimmi in reply to Jason Kuznicki says:

              why, yes, I was oversimplifying! Thanks for playing.Report

              • Avatar Jason Kuznicki in reply to Kimmi says:

                No, you were making shit up.  Yet again.  Don’t mention it.Report

              • Avatar Kimmi in reply to Jason Kuznicki says:

                And now you’re just being an asshole, and intimating that I’m a liar to boot. Furthermore, you seem to assume that you have more knowledge about apples than I do. So, dear, tell me, what the hell is a Striped September?Report

              • Avatar Jason Kuznicki in reply to Kimmi says:

                What the hell is a Google search?

                Answer: It’s something you should have done before saying a two-year-old apple tree can bear fruit.Report

              • Avatar Kimmi in reply to Jason Kuznicki says:

                and this one, unlike the last one I used on this site, is sticking. You’re accusing me of arguing in bad faith, being a liar, and not being willing to admit making a mistake (the last one’s probably true, to be honest).

                But one more joke before I leave your ignorant highness — you taste like a cheeseboro.Report

              • Avatar Jason Kuznicki in reply to Jason Kuznicki says:

                I’m surprised you didn’t flounce away earlier.  It’s hardly the first time I’ve called you a liar.Report

              • Avatar Kimmi in reply to Jason Kuznicki says:

                Okay, so if anyone who’s not Jason is reading this, I’m playing the sexism card. Flounce is a word used to connotate lack of seriousness, and in particular a feminine lack of seriousness. It both derides my reasons for walking off (which are both ample and serious), and throws out the emotionality — aka that I really don’t mean it.

                Not a word he’d have used if a man was saying the same thing — and it’s notably not a word that he’s used before I promised to leave his scaly hide out of anything I write in the future [I’d be markedly less upset if he had called me a dilentante about apples–as sexist as that is]

                Yinz said you wanted female voices. Yinz gonna hafta listen to us calling your posters out.Report

              • Avatar Ryan Bonneville in reply to Jason Kuznicki says:

                I’m not crazy about the word “flounce”, but I’m also not crazy about people who say they’re going to leave a conversation and then don’t do it.

                I don’t think either of those is a major crime, though I would suggest to anyone that feeding trolls is not a great idea. And it’s not made better when you lose your cool and call them names that reflect somewhat poorly on your own character.Report

              • Avatar Jason Kuznicki in reply to Jason Kuznicki says:

                And here I thought “plonk” was a word that means I’m in your killfile.  So you continue to lie.

                Also, I’m pretty sure I learned the word “flounce” in this usage from Shakesville.  Are you going to call them sexist too?Report

              • Avatar Ryan Bonneville in reply to Jason Kuznicki says:

                Huh, I’ve never seen that usage before, but it’s quite nice. Objection mostly withdrawn.Report

              • Wait, the LOOG is sexist?

                It would explain a lot.Report

              • Avatar Kimmi in reply to Jason Kuznicki says:

                J,

                The fact that I’m playing the sexism card on one post in ten weeks, considering how generally obstreperous I can be, should say volumes about how little sexism there is on the blog.Report

              • Avatar Jason Kuznicki in reply to Jason Kuznicki says:

                Somewhere in the archives, Kimmi (then called Kim, I think) was complaining that corporations couldn’t perform any activities that didn’t increase the bottom line.  This is evidently false, as corporations routinely donate to charity.  When I pointed it out, she changed the subject.  Much like she’s trying to do here, with the Striped September business.Report

              • Avatar Jason Kuznicki in reply to Jason Kuznicki says:

                Boards of directors are sued for this quite often, especially in mid-size and smaller companies.  Most corporations that rely on investors actually buy insurance for it.

                Can you cite a case for this?  I asked a while ago, and no one answered me.  It would seem that any company that failed to turn a profit would immediately face a lawsuit, yet I’ve never heard of a one.Report

              • Avatar Johanna in reply to Kimmi says:

                Kimmi,

                Maybe you should have just accepted that you gave a erroneous example rather than go on to challenge Jason on his knowledge of apples (which was totally irrelevant). I don’t understand your logic in trying to show you are smart on a subject after having said something that was quite simply proven to be factually wrong.

                As for flounce – it has been used before here (with definition no less) so welcome to the boys club.

                As a former produce clerk I can probably kick both your butts in an apple identification contest.Report

              • Avatar Kimmi in reply to Johanna says:

                Can you tell me what the hell a Striped September is?

                (I only know well the ones I’ve seen, but unless you’ve gotten a lot of organic apples (or russetted ones) i could probably whup you on those. My husband knows more, and much more about the theory, since he spent years on an apple farm as a kid).

                Initially, I did just laugh it off — stated that I had been oversimplifying, and that I thought the whole point he was making was obvious to the point of not needing to be stated.

                It’s when he started to say “you didn’t know that!” that I started to pull out some rather obscure apple knowledge, as a way to indicate that I perhaps know a bit more about the subject than he does. It doesn’t seem like he’s disputed that fact, either.Report

              • Avatar Jason Kuznicki in reply to Johanna says:

                It’s when he started to say “you didn’t know that!” that I started to pull out some rather obscure apple knowledge

                …which was also totally, perfectly irrelevant.

                Kimmi, you’ve lied about things big and small on this blog ever since you showed up.  I have no reason to even bother with checking your facts anymore.  Apple scabs don’t cause cancer.  Sony neither owns tanks nor uses them against protesters.  Corporations can’t be sued merely because shareholders think they haven’t generated enough profit.  And your claim to have killfiled me ([plonk] and this one, unlike the last one I used on this site, is sticking” — well, that lasted less than a single hour.

                Next to all of that, I couldn’t care less what a Striped September is.  It doesn’t make a bit of difference.

                November 4

                Report

              • Avatar Tod Kelly in reply to Johanna says:

                Jason: A minor quibble, what with your main point, but fwiw this is actually true:

                “Corporations can’t be sued merely because shareholders think they haven’t generated enough profit.”

                Boards of directors are sued for this quite often, especially in mid-size and smaller companies.  Most corporations that rely on investors actually buy insurance for it.Report

              • Avatar Kimmi in reply to Johanna says:

                Thanks Tod!

                (this is what I love about this site — a good deal of the time, folks know enough to cite “more credible” sources for me).Report

              • Avatar Jason Kuznicki in reply to Kimmi says:

                Bullshit. Tod didn’t cite a source yet.

                I’ll happily retract if he does. And you’ll note that this is far, far more than you have ever done, when I’ve pointed out your lies.Report

              • Oh for Christ sake, Jason.  I also don’t cite when I mention that that people buy home insurance in case their house frickin’ burns down.

                Follow this link to get this:

                “In recent years, directors and officers liability insurance has become a core component of corporate insurance. As many as 95% of Fortune 500 companies maintain directors and officers (“D&O”) liability insurance today. Furthermore, it has become a commonplace of the financial world that disappointed investors will charge corporations and their officers and directors with securities fraud whenever a company’s stock drops significantly in price. Studies indicate that the average settlement of securities fraud litigation in 1999 was greater than $8 million, with average defense costs exceeding $1 million. In light of these numbers, it should not be surprising that such litigation has become almost routine, and D&O liability insurance plays a large role in handling it. At the same time, the D&O insurance industry has become highly specialized and new products are constantly emerging to meet the needs of specific markets. This article will discuss the historic and current trends in the industry. In addition, this article will address some of the primary legal and coverage concerns that must be considered by underwriters, claims handlers, corporations and their executives, and the attorneys who represent them.”

                It was literally the first thing I got when I googled “directors and officers sued for financial losses.”  If you want I can list a bunch of other links. “Bullshit?” I don’t usually go here, but this is my freaking job.

                 

                [EDIT: Sorry, this originally went to the wrong place.]Report

              • Avatar Jason Kuznicki in reply to Tod Kelly says:

                Securities fraud is a very different thing from “failing to do everything possible to turn a profit,” which Kim claimed was the basis of the suits.Report

              • Did you actually read the sentence you took the phrase security fraud from?

                “Furthermore, it has become a commonplace of the financial world that disappointed investors will charge corporations and their officers and directors with securities fraud whenever a company’s stock drops significantly in price. “

                Dude, seriously, I sell this for a living.  You’re wrong.Report

              • Avatar Tod Kelly in reply to Tod Kelly says:

                Which is not to say that Kimmi wasn’t wrong by accident….Report

              • Avatar Jason Kuznicki in reply to Tod Kelly says:

                I did read the sentence.  Did you read Kimmi’s original claim? Here it is:

                 
                If you fail to turn the most profit for your shareholders, you are legally liable.
                 

                Are you going to tell me corporate philanthropy is illegal, like she did?

                Look, I’m not disputing that companies get sued by disappointed investors. But they don’t get sued on the basis of “failure to turn the biggest profit.” They get sued for securities fraud. Whether or not that’s an apt charge, and whether or not it’s being offered sincerely, are different questions entirely.Report

              • I did not read what Kimmi said, so bad on me.  I just responded to your comment.  Again, bad on me.  It’s just that when I talk about something that I do for a living that isn’t remotely controversial and the response is “Bullshit!” my dander gets up.

                Sorry.Report

              • Avatar Kimmi in reply to Tod Kelly says:

                so if a stock is classed as a growth stock, and it fails to “invest” as the market thinks it should (say by building as many stores as possible, without regard to actual viability of said stores — cancer in other words), it’s subject to lawsuit — as well as all those CEO/BoD types getting hit in the pocketbook.

                Seems to me that nobody’s acting in stockholders’ long term interest, in that case. (which, admittedly, is probably worst for bondholders)Report

              • Avatar North in reply to Johanna says:

                For the record I’ve accused peopel I’ve been debating with of flouncing and they’ve rarely been women.

                • Go or move in an exaggeratedly impatient or angry manner: “he stood up in a fury and flounced out”.

                 Report

              • Avatar James Hanley in reply to Johanna says:

                Can you tell me what the hell a Striped September is?

                Tom Clancy’s failed first novel.Report

              • Avatar Roger in reply to Johanna says:

                ROFL  at the Clancy prequelReport

              • Avatar Mike Schilling in reply to Johanna says:

                And the London Underground is not a political movement.Report

    • Avatar Kimmi in reply to Jason Kuznicki says:

      and poorly designed incentives produce bankruptcy, when the prices of farmland are not inline with projected crop yields of corn. Yes, you still have an incentive to buy farmland, it’s just a really stupid one, and you’d be far far better off by using more knowledge than the market contains (inthat the market is crowded with disinformation), in order to find a better place to park your farm.Report

    • Jason, would you be open to the possibility that spontaneous orders may be “bad”?Report

      • Avatar Jason Kuznicki in reply to Christopher Carr says:

        It depends very much what you mean by bad.  I can think of several senses in which I’d answer yes, however.

        If you mean that a spontaneous order doesn’t deliver exactly what I want, right to me, for free, then yes, it’s bad.  It still needs considerable improvement!

        If you mean that a spontaneous order is subject to outside forces that cause it to produce perverse results, then yes.  History abounds with examples of this tendency.

        If you mean that a spontaneous order can take a frustratingly long time to produce its good results, then I’m right with you, too.

        And if you mean that sometimes a system of spontaneous order can’t always find its way to an optimum solution, well, that’s true too.  There were thousands of measuring systems before the world went metric.  An inefficient, confusing, wealth-destroying setup indeed.  We might argue, actually, about whether pre-metric measurements represented a spontaneous order (for starters, these measurements were often part of the governmentality), but the thing that replaced them was certainly not a spontaneous order.Report

        • Avatar Christopher Carr in reply to Jason Kuznicki says:

          It’s interesting that you bring up the metric system. I’ve been planning on writing about it for a while.Report

          • Avatar Mike Schilling in reply to Christopher Carr says:

            It’s why they don’t call it a quarter-pounder.Report

            • Avatar Christopher Carr in reply to Mike Schilling says:

              No, the gist of what I want to argue is that the metric system suddenly became useful because of increased internationalism and fairly accurate ways of making measurements. Before that, standards like the foot or the ri were superior for other reasons, like portability or convenience. It wasn’t just this great big cloud of stupidity as our science teachers would have us believe anytime the metric system vs. standard measurements are discussed.Report

              • Avatar Tom Van Dyke in reply to Christopher Carr says:

                We got to the moon in increments of 1/64 inches and miles, not meters.  Metric is overrated.

                JasonK obliquely refers to the origin of the metric system in Revolutionary France, perhaps, then its gradual imposition on the West and then the world by political means.

                It’s a good system, mind you, undoubtedly more efficient than the old one.  But you can get to the moon without it.  It’s an improvement, but not a necessary one.

                The French Revolution’s calendar of 12 months of 30 days with some assorted days left over was stupid.  The 10-hour clock of 100 minutes and 100K seconds in a day was no improvement.

                It was a very mixed record for those who would digitalize the human experience: the measurers, the beancounters, the social scientists.  The jury is still out on the utility of these MBAs of life beyond rounding out our rough edges: Man muddled through for 1000s of years before he even created them.

                If they simply didn’t create themselves, of course…

                😉

                 Report

              • Avatar Mike Schilling in reply to Tom Van Dyke says:

                Time zones were also imposed by governmental fiat, but had become absolutely necessary. Imagine a railroad schedule where every stop has its own local time.Report

  5. Avatar Kimmi says:

    From Calculated Risk,

    mp writes:

    So, the timing goes like this:

    1. Greece blows up before Christmas.
    2. Attention immediately shifts to Italy.
    3. Italian bank runs.
    4. European banking system seizes.

    h/t Krugman for points 3 and 4.Report

    • Avatar Kimmi in reply to Kimmi says:

      continued:

      Point 5. Eurozone in complete financial crisis and recession by end of January.

      Point 6. US follows right behind.

       

       

       

      My own point: Mortgages are at 3.85%, as of yesterday. If they go below 3.75, things will break.Report

      • Avatar Patrick Cahalan in reply to Kimmi says:

        I have an open bet that they’ll hit 3.5.  I’m locked in, if it happens.Report

      • Avatar Kolohe in reply to Kimmi says:

        I don’t see how mortgage rates (which I thought were somewhat off their low peg) or US Treasury rates going to a new low will *cause* things to break.  (I can see them as *symptom*’s of something being wrong, of course).  Esp not with Italian & Portuguese debt interest rates creeping up, which is both a sign, and a cause of trouble.  (Greece rates are already over 80%, but everyone already knows that Greece is fished)Report

      • Avatar Scott in reply to Kimmi says:

        Kimmi:

        7. Barry blames it all of Bush and wants four more years to implement hope and change.Report

  6. Avatar DensityDuck says:

    “As far as I can tell, the market is not very instructive when it comes to deliberating on values.  Prices?  Sure.”

    But according to free-market orthodoxy, price is value. Although free-market orthodoxy also assumes that all prices are renegotiated at every transaction, allowing expressions of relative value to occur.

    “Without clear direction, even the most innocuous incentives can lead to perverse outcomes.”

    Like the celebrated “pigouvian” taxes on awful-yet-legal behaviors like smoking. The tax is introduced on cigarettes and everyone applauds. Then all the smokers quit, as they were intended to do, and suddenly there’s a revenue crisis because all that tax money went away.Report

  7. Avatar Roger says:

    Ethan,

    Can I please try to summarize your argument?

    You seem concerned that we have not explicitly argued through the end goals and values of the market, and suggest meta-institutions are needed to address this. Is this roughly correct?

     Report

    • Avatar Ethan Gach in reply to Roger says:

      Partly.  And I’m not insisting that these values would lead us away from the market, so much as guide how we tinker with it.

      Let’s face it, there will be tinkering, whether it’s environmental laws, FDA regulations, or certain banking rules.  And having a clearer articulation of what we want the country to actually be like might clarify the policy discussion.

      Is 5% unemployment the end goal?  Reducing poverty to something like 10, increasing the total amount of wealth, maintaining a certain kind of bell curve distribution, etc.

      Otherwise we’re talking only about more stimulus, or only about tax cuts, or only about limited government and non-interference.  And without specifying what the desired outcome is, there’s no way of deciding, or even attempting to figure out, which set of policies, i.e. which incentive structures, will get us there.

       Report

      • Avatar Roger in reply to Ethan Gach says:

        Ethan and James,

        It is ironic that one article I finished reading right before reading this is “I Don’t Know” by Leonard Read. His conclusion:

        “The accomplished student of liberty acquires a faith that men, when free to try, will perform miracles, a faith extrapolated from experience. But when it comes to predicting the shape of miracles that will show forth from creativity, he takes his place with men, not with clairvoyant demigods. As an aware human being, he must answer, “I don’t know!””

        For those interested, here is the link:  “I Don’t Know” by Leonard Read 

        The article focuses more on our ignorance of how free markets will accomplish a given goal, where you focus more on what our goals should be. However, the themes intersect and overlap.

        I certainly echo James’ concerns with a top-down approach. Most libertarians believe that bottoms-up creativity leads to prosperity, and that trying to direct it or plan it out from the top down is usually counterproductive and inefficient. My experience with non-libertarians is this just earns us blank stares if not outright ridicule.

        That said, I will take the bait and say that my goal is social progress. By this, I mean widespread success of humanity.  Free enterprise is just one wing of social progress (science being another).

        For free enterprise to work, we need a simple, consistent set of rules about property and voluntary, positive sum transactions without negative externalities. But the devil is in the details, and once you start wrestling over the details, the game often shifts from free markets to government coercion and crony capitalism.

        I am aware that democracy works along side free enterprise, and that people will wrestle over social goals. My recommended goals are systemic in nature — minimal interference with voluntary win/win transactions. If we establish goals on equality, employment, etc that interfere with the system dynamic, I believe it will be counterproductive to progress.

        Report

        • Avatar Kimmi in reply to Roger says:

          Nu, how does a cancer economy cause social progress? How do middlemen make the world better?Report

          • Avatar Jason Kuznicki in reply to Kimmi says:

            Apple scabs.Report

          • Avatar Roger in reply to Kimmi says:

            Kimmi,

            Free enterprise and science are solution discovery machines. They both explore creative variation, select good solutions, spread and multiply them and build upon them.

            Middlemen deliver value from where it is less useful to where it is more in demand, thus creating value.

            What were you thinking the source of progress was? Progressive dreams?Report

            • Avatar Kimmi in reply to Roger says:

              Do you consider the stock market, as it is currently implemented, as a “free market”? I consider many business decisions made in the last boom to be destructive, and instead of discovering good solutions, to extract the last scraps of money out of brand loyalty.

              Not against a free market, just don’t think we’ve got such a strange animal about.

              Those middlemen are arbiters, yes? Still doesn’t give me a dang use for realtors (and since they’re taking 6-7%)…

               Report

              • Avatar James Hanley in reply to Kimmi says:

                Those middlemen are arbiters, yes? Still doesn’t give me a dang use for realtors (and since they’re taking 6-7%)…

                Imagine selling your home without a realtor.  How do you inform prospective customers that your house is for sale, especially since you don’t even know who they might be, and they don’t know of you?

                Perhaps somebody has set up a website where homebuyers and sellers can meet, without the need of a realtor.  That’s still a middleman, but it’s just one that may outcompete the traditional middleman.

                 Report

              • Avatar Kimmi in reply to James Hanley says:

                In my neighborhood, people put up signs if they wanna sell their houses. You could also junkmailbomb the neighborhood.

                People around here walk around enough to see that your house is for sale.Report

              • Avatar Roger in reply to Kimmi says:

                Kimmi,

                A bunch of ordinary gentlemen and one extraordinary lady.

                You will hear no argument from me that we have a free market today or that incentives weren’t totally distorted thus causing the sheet to hit the fan.

                Relating this back to Ethan’s original post, someone decided to set a goal for society around home ownership and loans to those who couldn’t afford them. The system then careened out of control and toward this mistaken if well-intentioned goal. And we all know how that worked out.

                It is dangerous and foolish to try to control a system that you don’t understand, indeed that is beyond understanding (looping back to Hayek’s Knowledge article.)Report

              • Avatar Mike Schilling in reply to Roger says:

                You’ve got the mechanism wrong, though.  When mortgages were sold and held by the same people, lenders did theiur best to vet borrowers.  Once bad loans could be camouflaged inside a CDO [ 1] they became valuable, and thus the market created lots of them.   Markets are incredible engines for creating things seen as valuable at the moment.

                1. First hidden among good loans, then, as the process accelerated, not even that effort was madeReport

              • Avatar Kimmi in reply to Mike Schilling says:

                hence my critique of middlemen can be generalized from realtors to mortgage securitizers (and to the blasted, may it be damned in hell opaque derivatives market)Report

              • Mike, that is part of the story, but only a portion of it.  Without the federal government pressuring lenders to make loans to people who didn’t qualify by market standards, and then Fannie and Freddie picking up lots of those mortgages so that lenders felt safe enough to actually make those sub-prime loans, there never would have been so many bad loans in the first place.  Also relevant was the Clinton era reduction on capital-gains taxes for homeowners.

                The effort to make the housing market crash play out as just a tale of how markets go wrong ignores how deeply embedded in pro-loan government policy the whole market was.Report

              • Avatar Kimmi in reply to James Hanley says:

                You mean the government that repeatedly sued the mortgage companies for giving out “floating” rates for those people who actually qualified for fixed rates? *eyebrow*Report

              • Avatar Kimmi in reply to James Hanley says:

                oh, oh, oh, you mean the government after bush fired all the tigers! my bad!Report

              • Avatar E.C. Gach in reply to James Hanley says:

                What do you make of this James?

                “Did Fannie and Freddie buy high-risk mortgage-backed securities? Yes. But they did not buy enough of them to be blamed for the mortgage crisis. Highly respected analysts who have looked at these data in much greater detail than Wallison, Pinto, or myself, including the nonpartisan Government Accountability Office, the Harvard Joint Center for Housing Studies, the Financial Crisis Inquiry Commission majority, the Federal Housing Finance Agency, and virtually all academics, including the University of North CarolinaGlaeser et al at Harvard, and the St. Louis Federal Reserve, have all rejected the Wallison/Pinto argument that federal affordable housing policies were responsible for the proliferation of actual high-risk mortgages over the past decade.”Report

              • Avatar greginak in reply to James Hanley says:

                When did the Gov force banks to give loans to people who didn’t qualify? Banks weren’t allowed to discriminate and take part in red lining and such. Someone who is working poor can afford a house just fine as long as its not to expensive. The gov was not forcing banks to lend ridiculous amounts, package crappy loans or give out NINJA loans.Report

              • You mean the government that repeatedly sued the mortgage companies for giving out “floating” rates for those people who actually qualified for fixed rates? *eyebrow*

                No, I mean the government that threatened to charge lenders with red-lining if they didn’t start giving loans to people who didn’t meet the standards.

                I think you’ve made this claim before about people falsely being given adjustable rate mortgages (I assume that’s what you mean by floating), but you’ve failed to show that it was a factor in the housing market crash.  Would it change your behavior any if I piled on with Jason and accused you of lying?Report

              • Avatar Kimmi in reply to James Hanley says:

                James

                1) I believe that the redlining charge was often made in… oh… 1980’s or so?

                2) The lawsuits that I’m talking about (showing clear discrimination against blacks, by giving the exact same numbers to both a white and a black customer presumably(I’ll look up the cases if you insist)) happened past 2000, in the lead up to the housing crisis.

                3) Active Misrepresentation is different from “preferentially steering” (which is also fraud, but of a far more pernicious sort that ought to get the bamhammer, in my opinion).

                4) NINJA and LIAR loans are definitely a part of the housing debacle. Look up what Tanta’s wrote if you don’t believe me.

                5) yup. but you seem like a nice guy, so if you mean “cite your damn sources or I’ll call bullshit” say so. That’s a fairstatement to make — the implication that I’m lying if I fail to cite sources to your satisfaction is simply corrosive to further conversation.Report

              • greginak,

                When is it redlining and when is it not giving loans to people who couldn’t afford them?  Seriously, mortgage lenders were threatened with the second being redefined as the first. In <a href=”http://www.bos.frb.org/commdev/closing-the-gap/index.htm”>this booklet</a> the Fed admonished lenders about using “arbitrary and outdated criteria” in making loan decisions, and functionally they treated credit history, ability to make downpayments and debt-to-income ratio as arbitrary and outdated criteria.  This was all part of the federal governement’s policy–a well-intended one–to boost home-ownership rates among the poor (since that is often the primary source of wealth for poor people).

                How do you get a loan to someone who doesn’t actually qualify?  A) Give them a no-down payment loan, because they don’t have enough money for a fishing downpayment!  B) Charge them a low initial rate of interest that will adjust upwards in a few years to account for the fact that the borrower is a serious default risk (ARMs).  That works great as long as home prices are going up, because the increase in home prices means the equity to debt ration improves, so the person can get a better loan when the low introductory rate ends.  But if home prices go stagnate or decline, then the interest rate shoots up so they can’t afford to pay the loan off, they owe more than their house is worth so they can’t get a better loan, and everyone’s fished.

                 Report

              • Kimmi,

                Perhaps you never lie.  Perhaps you believe the false claims you make.

                You, particularly, should develop the habit of citing your damn sources because you type more false claims per post than probably anyone else here.Report

              • E.C.,

                Good challenge.  I have to advise a couple students then go teach a class, and responding to your post will take more than just a few keystrokes.  Let me get back to you.Report

              • Avatar E.C. Gach in reply to James Hanley says:

                It’s all good guys, cause the CRA was redudant!\Report

              • Avatar Kimmi in reply to James Hanley says:

                James,

                see? was that so hard? acting as though I’m talking in good faith means that you’re in good faith. (and you’re right, incidentally)

                http://www.justice.gov/opa/pr/Pre_96/October95/540.txt.html

                There’s another for north carolina, and one in the northeast, at least.

                NOTE that these are asking for “better” terms, not ARMs.Report

              • Lovely Kimmi, you showed that 1 company in Ohio did it.  You did not show either that this problem contributed to the mortgage crisis or, going back to your original objection, that the same federal government that targeted these lenders for presumably illegal actions were not also at the same time promoting policies that encouraged more loans to people who couldn’t afford them.Report

              • Avatar Mike Schilling in reply to James Hanley says:

                The market cannot fail; it can only be failed.Report

              • E.C.,

                Russ Robertshere, shows that in 1998 Fannie and Freddie purchased only 4% of all mortgages originating with less than 5% downpayment, (about 76,000 out of just under 1.9 million of such loans total).  That number increased to 15% of such loans in 2006 (about 400,000 out of 2 million such loans total).  In just one year then, 2007, that increased to 23% of such loans (about 608,000 out of about 2.6 million total).

                Was this purely a government caused crisis?  No.  The packaging of mortgages made into securities obscured transparency to the point where investors could tell the real value of the securities they held—not just mis-judged them, but literally could not tease them apart to figure out how many good mortgages and how many bad mortgages were in them.  Everyone got excited by the bubble.  But it’s impossible, I think, to sustain an argument that an entity that increased the number of low quality mortgages it held until it held nearly a quarter of them can escape blame.

                I guess I’d ask where the true rejection point for the “not Fannie and Freddie” argument lies.  If a purely private investment firm had held almost a quarter of a particular type of subprime loan, would they really be absolved of blame?

                Fannie and Freddie held about half of all mortgages.  Again, if two purely private firms had held half of all mortgages and we’d had a mortgage crisis, would there be so much effort among liberals to absolve them of blame (and, by the way, your “virtually all academics” is false, but I can’t add enough links to satisfactorily demonstrate it—it’s an argument made predominantly by liberal academics, but certainly not “virtually all”).

                But it’s not just about Fannie and Freddie.  It’s about the government’s effort to make home-ownership as widely spread as possible.  I actually like that goal, a lot.  I’ve lived in apartments and I’ve owned my own home, and as much of a struggle as it is to maintain and try to renovate a 140 year old fixer-upper, I delight in home ownership and would like everyone who wants to own a home to have the opportunity.

                But the reality is that for many poorer people home ownership is can be more of a financial burden than is worthwhile.  There’s probably some more or less natural limit of what kind of homeownership rate is sustainable in any particular country.

                The Fed’s money policy in the early 2000s also played a role, making loans cheaper than they should have been, as did the Clinton era removal of capital gains taxes on homes held, iirc, two years, turning home ownership into far more of a speculative investment than it ought to have been.  Both of those policies were well-intentioned, too, but had unforeseen consequences.

                I’ll also blame the American middle class, for demanding ever larger homes, even as they had ever smaller families.  Granted having fewer kids leaves more money available to spend on things like housing, but when the number of kids per family drops by almost half at the same time the average home size almost doubles, it’s hard to escape the judgment that maybe people are paying for more home than they need.

                But I’ll also throw the media under the bus.  They idiotically report home prices as a primary economic indicator, helping to pervert how Americans view their homes, leading us to see them as short-term/high-return investments instead of being as much about consumption value as investment value.

                Our housing market is bolloxed up from bottom to top.  As to the Bloomberg comment on your link, his attempt to blame it solely on the government is wrong; but no more wrong than the effort to blame it solely on the market.Report

              • Avatar Kimmi in reply to James Hanley says:

                James,

                that last comment of yours is gold. I’d blame more of the mess on Greenspan — but you’re right, there were a lot of parties, and they all deserve some of the blame (including hedge funds, fwiw).Report

              • Avatar Kimmi in reply to James Hanley says:

                James,

                having heard the “ignorant right” making the case that the CRA caused the housing unpleasantness, and being right sick of it (as it is so small of the part of the picture), I think you might have been unfairly jumped upon by some of the liberals on this board.

                You appear to have a clue about you, and I apologize if I was a bit more irritable than I sometimes am. Dogwhistling sometimes happens by accident…

                DoJ civil rights handled some stuff, at the same time that other parts of the government (McCain?) were asking for More Loans, More Loans!Report

              • Kimmi,

                There will always be some people in the market committing fraud.  Happens from both suppliers and consumers.  Some people are just shits without any integrity.  And that’s one of the reasons libertarians mostly favor the existence of a minimal government–one of the legitimate jobs is to punish fraud.  But because fraud is pretty much a constant, it can’t explain variation.  That is, your example (as my wife pointed out to me) came from the 1990s, well before the housing crisis.  If it had anything to do with housing crises, we should have had one in the ’90s.  We didn’t.  Is there any indication that actual fraud increased so dramatically in the 2000s as to be the cause of the housing crisis?  Not that I’ve seen, whereas some other factors did kick in.  And then, of course, some of it may just have been a true bubble.  If so, that’s a for-sure market problem, but not one government actually has the capacity to do much about.Report

              • Avatar Kimmi in reply to James Hanley says:

                James,

                The north carolina case that I keep on citing and not googling (I’m bad! talk to the UPitt Urban/Racial studies folks, and they can get you the bloody research.) happened in the 2000s.

                You’re actually saying that the government couldn’t have stopped the bubble???? Lordy have mercy! The Government (Mr. Greenspan!) started the bubble by leaving too much cheap money floating around. Had to go somewhere (and the real estate bubble is the bubble of last resort?)…

                http://themessthatgreenspanmade.blogspot.com/2010/01/mess-that-bernanke-is-making-worse.html

                http://themessthatgreenspanmade.blogspot.com/2010/02/greenspan-was-dy-no-mite.html

                Lender safety was mostly through insurance, as run through goldmann sachs.Report

              • Kimmi,

                I should clarify.  If a bubble is in fact a purely market phenomena, not a consequence of government policy, then I don’t think government has the capacity to do anything about it.  Obviously I don’t believe the housing bubble was purely a market phenomena.  But ifReport

              • Avatar Kimmi in reply to James Hanley says:

                how about by raising interest rates? if the problem is too much free money lying around, by raising interest rates, you decrease the amount of available money to go into the bubble.Report

              • Avatar Mike Schilling in reply to Mike Schilling says:

                 Without the federal government pressuring lenders to make loans to people who didn’t qualify by market standards, and then Fannie and Freddie picking up lots of those mortgages so that lenders felt safe enough to actually make those sub-prime loans, there never would have been so many bad loans in the first place

                This doesn’t explain the vast number of bad loans made to people who were reasonably well off.  No  CRA involved, just the knack for making excessive mortgages sound affordable, short-term profits generated from creating them, and clever enough accounting to disguise them.Report

              • Avatar Kimmi in reply to Mike Schilling says:

                and its teh well off people who are getting foreclosed on, remember. the poor people tended to get things within their means…Report

              • Yeah, it’s all the fault of the lenders.  It didn’t have anything to do with middle class folks persuading themselves that they really needed a 2800 square foot house in an upscale neighborhood.

                Look, the paperwork tells you how much your monthly mortgage payments are going to be. At some point people are responsible for the choices they make, and if you’re unrealistic about how much of a monthly payment you can handle, it’s a bit much for folks to blame it on everyone but themselves.

                Am I saying realtors and mortgage lenders are totally innocent?  No, but everyone was caught up in the excitement of continually rising home prices.  They’re human, too.  But placing the blame solely on them, and absolving consumers of any responsibility is wrong on multiple levels.  It’s a cheap effort to demonize someone as the guilty party rather than figure out the real problems.  It infantilizes consumers.  It promotes a policy of protecting people from the consequences of their mistakes, encouraging future careless behavior (which is precisely the problem created by the bailouts, of course).

                Most of all, the urge to blame others for our bad choices is a distinctly juvenile urge.

                When I moved to this town, my wife and I bought an inexpensive home in a manufactured home community.  We became friends with the family a few doors down.  A few years later we both moved out.  My wife and I passed on some houses that were right at the local median, realizing that paying that mortgage would stretch us further than we wanted (we preferred to use our money to travel), and we ended up getting a good deal on a somewhat run-down old house in an average neighborhood for about 60% of the median.  Our friends’ judged their status in life by having a really nice house that was brand new, and they paid more than twice the median.  Granted they made considerably more money than we did, but they also could never manage their money at all–they never had enough even when they were paying as little as we were in the manufactured home community.  Today my wife and I are happily fixing up our old house little by little and not struggling to pay the mortgage, even though my wife was unemployed for a while and even though her current job has her laid off and not receiving a paycheck in summer.  Our friends, well he lost his job, but later got another one at a lower pay, their something like two years behind in their mortgage, and their house just got forclosed on.  I’m sympathetic to them; it sucks when your dreams fall apart.  But to blame the realtors is to miss the larger part of the story.

                 Report

              • Avatar Kimmi in reply to Mike Schilling says:

                James,

                Madoff’s customers got what they deserved too. The smart ones (I knew one) knew he was running a scam, and got the hell out as quick as possible.

                I’m totally down with people paying something for being greedy. A year or two of living in a car seems reasonable. Ganking our economy by forcing people to stay in economically inviable areas? Not reasonable.

                Not that everyone was scammed, but a great deal of people were — and when those “papers” only talk about “estimates” (and my own real estate agent got those hilariously wrong, in our last transaction. She wasn’t trying to screw us, either. Just the type who gets numbers wrong sometimes).

                I didn’t get scammed, I didn’t buy into the whole greedy thing. I’m getting a house with a 3.85% rate. I win. Having won, I feel like other people should be able to get something — granted, something that is qualitatively worse than me… but something.

                (being cantankerous, I feel like posting something defending slum lords. but that’s drifting offtopic)Report

              • Avatar Mike Schilling in reply to Mike Schilling says:

                Am I saying realtors and mortgage lenders are totally innocent?  No, but everyone was caught up in the excitement of continually rising home prices.  They’re human, too.

                Markets are made up of people.  When enough people are irrational, the market is too.  There’s a lot of money to be made in gaming markets gone crazy; I’m not going to let people who did that off the hook by saying they were “excited”.Report

          • Avatar James Hanley in reply to Kimmi says:

            How do middlemen make the world better?

            They reduce transaction costs by making it easier for supplier and demander to find each other. Imagine your search costs in a world without middlemen.

             Report

            • Avatar Kimmi in reply to James Hanley says:

              taking current example of realtors: quite little. I go to a centralized place like zillow, I put in where I live, and I get back priced houses.Report

              • Avatar James Hanley in reply to Kimmi says:

                Kimmi,

                I preemptively answered this above.  You’re still dealing with a middleman.  It’s just that technology has enabled the development of a new, much cheaper, type of middleman.  What brought that about?  The market, of course.

                Now try to imagine shopping for a home, or selling one, with no middleman helping to bring buyers and sellers together.  No zillow, no centralized information source at all.Report

              • Avatar Kimmi in reply to James Hanley says:

                I actually don’t consider that to be too onerous a burden. I can walk to wherever I’d be looking for houses, and the tax assessment/deeds office gives enough information on how much houses go for (not a middleman because not connecting people, ya?).

                I guess I can say that I’d call it different for most purchases, because most are neither as important, nor as location based as houses.Report

              • Avatar James Hanley in reply to Kimmi says:

                OK, Kimmi, specialize the transaction just enough and maybe you can find that in that one particular case you don’t need any middleman.

                Now, imagine you’ve just been transferred to L.A.

                But even before you get transferred to L.A., you have to walk around looking for “For Sale” signs, then you have to go look up their tax assessments.  Time consuming, so not free.  You also have to find your own inspector to examine the structure before you buy, so you have to find one of those you can trust.  And I hope you can handle all the paperwork on your own–some folks can, some can’t–again, though, that’s more effort and time consuming, so not free.

                The simple fact is, realtors exist because most people find the % they charge to be less costly than the difficulties of doing the work on their own.  I mean, your assumption that middlemen eat up value instead of adding it requires that people could do better without them, so you need to explain why people who could do better without them don’t normally choose to do so.

                If you have plenty of free time and attention to do the job by yourself, then go for it.  But anyone with that much free time and attention is just someone with really low opportunity costs.Report

              • Avatar Kimmi in reply to James Hanley says:

                1) If I got transferred to Boston (or someplace sane, not City of The Future LA), and I didn’t walk around enough to know where things were, I’d be pretty derelict in my duty to evaluate the damn neighborhood and house (showing up at 10pm on foot on a Friday makes a good eval).

                2) The buyer’s agent is not your ally. His choice in housing inspection is suspect, because his incentives do not align with yours (and he’s likely to recommend someone that’s less thorough than the person you’d choose on your own). Choosing a housing inspector that the buyer’s agent recommends is pretty damn stupid, if you ask me. It’s how people get fleeced — by trusting people who aren’t on your side.

                3) Legal documents should be handled by lawyers, who are paid out of my pocketbook, and thus are on my side, dangnabit!

                4) Reducing the commission down to 3% (rather than the seller’s agent going with an even more compromised dualagency) requires pissing off the other middleman, and basically ramming it down the seller’s throats — even though it’s actually to their benefit.Report

              • Kimmi,

                1.  Fine, you don’t want a realtor.  That’s fine, but you haven’t even begun to make an argument that the market–e.g., homebuyers in general–don’t want them.  You’re making the huge mistake of taking your personal experience and trying to translate it into a story that the market is acting inefficiently.  It doesn’t wash.  Granted, if everyone was like you (say you are), there would be few to no realtors–but it’s because so many people are different than you (say you are) that there actually is market demand for that middleman.  How can you possibly not get that?

                2. Yeah, yeah, principal agent problems.  You can’t escape them.  But that doesn’t mean any particular homeowner is actually going to do better by choosing their own inspector.

                3. Lawyers handling legal papers are a middleman, don’t you know.  Hiring a real estate lawyer to work just for you is a good idea for many people.  But the lawyer’s a middleman (and likely more expensive to boot!), so thanks for utterly destroying your own argument against middlemen.

                4.  Cartelization among real estate agents?  Perhaps, but I’d need to see more evidence than “they’re charging more than I think they should.”

                 

                 Report

              • Avatar Kimmi in reply to James Hanley says:

                James,

                whether or not the market wants them is rather immaterial. It’s safe to say that the sellers want agents, because the agents will tell them what they want to hear, and that the buyers (I’ve talked to a few around the office) don’t think the agents do jack. We’re still talking 6%, in a market where 8% of loans are in the process of foreclosure. Granted that many people are 50% underwater — there’s probably a good deal that could get out of the loan and move if they could obtain 6% for free.

                you can hardly do worse than choosing the person whom the agent has an existing relationship with…

                The lawyer is at least on my side, ain’t he? Yeahsure in an ideal world, without “asis” clauses and people trying to intimidate their way into better terms (which would be less likely without agents involved. he said she said when both parties are compromised into “lets make this deal work” is a bad move)

                google on how difficult/unworkable it is to be your own buyer’s agent, and not wind up with “dual agency”Report

              • whether or not the market wants them is rather immaterial.

                Absurdly wrong, Kimmi.  That is precisely the point and has been from the beginning–markets demand middle men to reduce costs, which creates value.Report

              • Avatar Jaybird in reply to Kimmi says:

                There are many things that I do not consider a particular burden that other people find to be pure torture. On the other side of things, there are things that I find excrutiatingly painful that other people do for fun or to relax.

                It is important that matters of taste not be confused with matters of morality that need to be imposed on society at large.

                (But, for the record, Marx didn’t understand middlemen either. He thought it unfair that the farmer did not get the full $0.39/pound for his turnips while the grocer did and the guy with the cart/horse who bought from the farmer and sold to the grocer got something between the two prices. He saw the disparity between the prices and not the opportunity to buy turnips in the middle of the city when that opportunity just did not exist before.)Report

              • Avatar Kimmi in reply to Jaybird says:

                am okay with those middleman. those middlemen are performing a service, and can compete with alternate methods (trains, or trained monkeys)Report

              • Avatar Jaybird in reply to Jaybird says:

                Most middlemen do preform services.

                The problem comes when the middlemen erect barriers to entry, capture legislation, make such things as “pick your own turnips, $0.35/pound!” illegal, and otherwise collude with the government to maintain something approaching exalted status.Report

              • Avatar Kimmi in reply to Jaybird says:

                Okay. How much of a problem do you have, in this context, with current banking/Securities industry?Report

              • Avatar Jaybird in reply to Jaybird says:

                I oppose, say, bailouts… if that’s what you’re asking.Report

              • Avatar James Hanley in reply to Jaybird says:

                Kimmi,

                Can you provide us with an example of a middleman who doesn’t provide services.  I’m willing to bet that you can’t provide such an example of one who exists solely through the demands of the market and not as a consequence of protective regulations (e.g., like liquor wholesalers).

                You really haven’t caught on to what both Roger and I are trying to explain, which is that middlemen create value by reducing transaction costs.  If they weren’t creating value, the market would eliminate them because nobody’s going to voluntarily pay them in teh absence of gaining value in return.Report

              • Avatar E.C. Gach in reply to Jaybird says:

                Kimmi’s points aside, I think we’re all in agreement that middle-men monopolies can exist that push costs up unnecessarily high.

                Now whether those monopolies arise naturally in free markets, or only through government distortion, is another issue.Report

              • Avatar Kimmi in reply to Jaybird says:

                James and Jay,

                I was actually thinking of the financials’ place as middleman…

                Apologies if this seems a bit circular, but I think much of the trade in derivatives was middlemen upon middlemen, not actually adding much of value — and in fact destroying value due to obscuring the chain of insurance (removing knowledge from the market, and thus making risk assessment hard/impossible). Now, I think the freemarketeer says “but that was a stupid opaque market, and it doesn’t count!” Which is fine, but then I get to say — how many markets aren’t opaque? And, of course, should we get rid of these opaque markets?Report

              • Avatar James Hanley in reply to Jaybird says:

                I think we’re all in agreement that middle-men monopolies can exist that push costs up unnecessarily high.

                The word middle-men actually adds nothing to that sentence.  Once you’ve said “monopoly,” the particular sub-category is pretty much analytically irrelevant.

                Now whether those monopolies arise naturally in free markets, or only through government distortion, is another issue.

                Yep. And outside of the very restricted realm of “natural” monopolies, that issue’s pretty well settled.Report

  8. in order to use them effectively, these end goals need to be articulated

    What exactly does that mean?  The point of a market is to let each individual pursue their own goals, rather than to follow the goals dictated from on high.  So whose goals need to be articulated here?  Do you and I need to publicly articulate our goals?  Does every corporation need to articulate their goals?  Are we supposed to be articulating some abstract social goals?  There’s something in there that has an appealing ring, but I can’t make out what it actually means.

    Part of the problem for me is that it seems to push too far away from the individual toward a top-down conception of how economies really work.  And frankly we know from experience that articulating our ends, in terms of public policy, very frequently does not actually lead to an effective shaping of incentives to get us to those ends.

    It really seems contradictory to what Hayek argued in “The Use of Information in Society” (which I find one of the most insightful economics pieces ever written), and which I think Jason is hinting at above.Report

    • Avatar Ryan Bonneville in reply to James Hanley says:

      I think the point here is that, even getting to an actually free market, if we did such a thing, would be implicitly setting a goal about allocation of resources to efficient productive ends (where I’m stipulating those things instead of putting scare quotes on every single one of them). That, of course, is not the only thing we care about – which is how we get to the safety net and various other things that you may or may not think are justified.

      In any case, we have generally decided (it appears) that there are other things worth achieving than purely efficient allocation of resources. Having a conversation about what those things are helps us build incentive structures that get us to those outcomes (Pigouvian taxes being a relatively uncontroversial example).Report

      • Fair enough, Ryan.  But which ends have not been articulated?Report

        • Avatar E.C. Gach in reply to James Hanley says:

          I think the ends of meaningful community life, spiritual fulfilment, and strong families.

          Ironically, Santorum is one of the few to do this, despite how I loath his conclusions.Report

          • Avatar Matty in reply to E.C. Gach says:

            Maybe I’m misreading you but I really don’t want the community, government or anyone else who is not me deciding what makes my life meaningful and fulfiled. I’ll give you a pass on strong families since I haven’t a clue what that means (how would spot a weak family?) but the others are very much personal goals, how much do I want to interact with the local community, what kind of ‘spiritual’ life satisfies me? Any attempt to set these things however democratic has a high chance of pissing me off and if not me then someone else.Report

            • Avatar Jason Kuznicki in reply to Matty says:

              how would spot a weak family?

              Ask Rick Santorum.

               Report

            • Avatar E.C. Gach in reply to Matty says:

              Obvioulsy, meaning isn’t something someone can decide for someone else.  The community can turn around and say/decide whatever, that really has little baring on what I subjectivly experience as meaningful.

              On the otherhand, we could collectively decide that those things, meaning, self-realization, family are important things that should be allowed the light of day to grow in whatever way they may.  As it stands, many of our social arrangments leave little room for these things.  Economic requirements on individual productivity and work alone make it extremely difficult to foster these kinds of connections and relationships, and cultivate community and invidual meaning.

              On “weak” families, the family is a social structure which serves a purpose.  Short of obliterating it and raising individual only through villages, family life is one of the biggest indicators of future outcomes.  “Weak” families are ones that do little to promote growth and individual developement or offer emotional and material support.  They offer stabiilty in the way the friends can later in life, but at a time when most people have yet to develop these alternate kinds of connections.

               Report

  9. Avatar Charles says:

    “Liberals have bleeding hearts, but push civil liberties to the point of making discussion of community and cultural values moot, or at least subordinate to the procedural values found in the Bill of Rights . . .however, resist as we might, the Tea Party and Occupy Wall Street have pushed values to the forefront of national debate, at least for the time being.”

    The problem is that the Tea Party is pilloried by the cognitive elites (of whom OWS is most definitely a part) for any gestures that it makes toward establishing a coherent sense of moral community. Imagine if *they* had attempted to shut down the Brooklyn Bridge, in the name of “restoring the American Dream” — it would be portrayed as the Reichstag Fire all over again.

    Meanwhile, the “morality” of OWS boils down to nothing but a set of starkly materialist concerns over wealth distribution, with little or no attention given to the underlying moral questions surrounding said distribution (beyond a vague sense that inequality is unfair, prima facie, with little or no justification as to why this is — e.g. no sense of procedural justice, or why greater equality of outcomes is inherently desirable, etc.)

    Put simply, the prospects for establishing the sort of broad moral consensus that could underpin a substantive conception of community in modern-day America are grim. And that’s precisely the way that the 1% wants it.Report

    • Avatar E.C. Gach in reply to Charles says:

      OWS is actually very much about values, e.g. community, expression, the dignity of labor.

      That’s why they have weird assemblies, and lots of people at those camps work on crafts, established libraries, and give lessons/lectures depening on who is knowledgable about what.

      I would argue that part of the reason why OWS is, at least for the time being, more popularly supported by the public, in addition to them being new/flavor of the news cycle, is that they aren’t as exclusive or fueled by identity politics.

      Plenty of Tea Partiers are angry, scared, uncomfortable with immigrants, Muslims, and “outsiders,” (including our President), and from early on that was present in their rallies and message.  You are right thought that to the extent that OWS has less to do with culture/race, it can be more unifying because by definition it only excludes 1% of the population.

      Still, it’s not the material differences that motivate the 99% so much as the disparities in freedom and power that come from not having access to that kind of capital or fundraising potential.  I don’t think the OWS people are interested in getting to buy expensive cars, so much as feel that they’re political voice matters more and they are more empowered in the marketplace.Report

  10. Avatar James K says:

    While I think the scope of things that should be decided collectively is narrower than you do, I agree that politics should have a bigger focus on values.  After all, technical questions shouldn’t be debated by the public, they don’t have the necessary knowledge to usefully contribute.  But subjective values is an area where everyone’s opinion really does matter, so democratic debates should focus on little else.Report

    • Avatar E.C. Gach in reply to James K says:

      Yes, to the degree that such things should be decided collectively at all, their discussion warrants much more of our time than talk of policy “triggers,” health care exchanges, and complex banking regulations.

      Afterall, the health care debate was/is about “mandates,” and not their policy consequence (i.e. getting rid of free-rider problems), but on how they affect our values, e.g. taking away my liberty not to do something.Report

      • Avatar James K in reply to E.C. Gach says:

        Right, though that’s still a little low-level for me.  What I’d really like to see is debates focusing on what we want to achieve generally, and then let people who actually know what they’re doing work up the policy proposals.Report

  11. Avatar Kimmi says:

    *bows in gratitude to Tod*

    Your googlefu is indeed strong. I am humbled.Report

  12. Avatar Tod Kelly says:

    Also, what happened to the threads?Report

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