« Eric Posner versus the Heritage Foundation... | Main | "Conscience"? »

Saturday, December 20, 2008

The limits of "rot"

Over at the Marquette University Law School Faculty Blog, my colleague Jessica Slavin cites to a post by Frank Pasquale on Concurring Opinions which relies, to some extent, on a comment in response to a postthat I wrote on Prawfs. It's a small blogosphere after all.

There is much to be said in response to the Pasquale post (which I agree is provocative) but I want to focus on one part that Jessica highlights:

Can anyone doubt that our economy is exposed (with each passing day) as more Sicilian in its “winners’” casual acceptance of fraud, more Russian in its oligarchic tendencies, more Brazilian in its inequality?

Well, I think I can.

It is a natural human tendency to overemphasize whatever happened yesterday. But let's take the financial meltdown as somehow emblematic of "our economy." Over the past few months, I yet to read a convincing argument (as opposed to an assertions) that the problem was a result of fraud (although there certainly was some as there will always be)or deregulation.

One can always imagine regulation along the lines of "don't do that again" which will seem wise in hindsight. The one bit of proposed regulation that might have helped (reining in Freddy and Fannie) was opposed by the Democrats who, in the words of Barney Frank, did not want "to raise safety and soundness as a kind of general type of shibboleth." Another type - tightening lending standards - would have been dead on arrival.

Pasquale wants to say that a market economy does not recognize the ways in which wealth is commonly created. That's not true. Markets (which are always a product of some form of regulation - they require rules) permit interaction for the creation of wealth by voluntary exchanges between participants.

The results may not always be what we would like them to be and they are influenced by the existing distribution of wealth and talent. But, in the American context, no one really suggests that market forces should determine everything. Even over the last 30 years, government's share of GDP has continued to rise, albeit only slightly.

Inequality is, I think, a problem, but lack of wealth can be a larger one. Pasquale quotes Patrick S. O'Donnell's recitation of a a number of tenets of Catholic social teaching in response to a post of mine over at Prawfsblawg.

I disagree with none of them, although I think Patrick's restatement of the idea of subsidiarity is incomplete; it is not simply about which level of government should do some thing. 

But to accept these aspirations is not to accept any particular way of accomplishing them. Nor does it imply any particular tradeoff between conflicting goals. To move substantially in the direction of a more statist society (at least as concerns the economy) would, I think, be a mistake that would disserve these principles.

Cross posted (with modifications) at the Marquette University Faculty Blog.

Posted by Richard Esenberg on December 20, 2008 at 10:51 AM | Permalink

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341c6a7953ef0105368f0e25970c

Listed below are links to weblogs that reference The limits of "rot":

Comments

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Sarah
http://www.thetreadmillguide.com

Posted by: sarah | Dec 30, 2008 9:54:19 PM

I agree that markets can involve "political power, unfair or sharp dealing, and inequalities in bargaining power that are no fault of the weaker parties." I don't assume that a market result is desireable simply by virtue of it's being the market result. But I suspect that I more skeptical than you are of interventions designed to correct for these problems. They tend to come with unacknowledged costs and CST, at least as it is practiced by many, tends to want to wish those costs away. There is, it seems to me, a moral obligation not only to wish for a just economic outcome but to understand the way in which the wealth that one seeks to restribute is created.

"No one is allowed to amass excessive wealth when others lack the basic necessities of life."

Agreed but that hardly resolves the SCHIP debate that we really had which was concerned with crowding out private coverage and the extent to which eligibility ought to be expanded.

As far ad "The Reckoning" series, that's a post in and of itself, but I'd argue that, on balance, it confirms my point about the need to understand the impact as well as the good intention of market interventions since much of the problem seems to have been the failure to correct well intentioned interventions (GSEs, low rates, the encouragement of homeownership) that were pretty much universally supported. One could have blamed Bill Clinton or Barney Frank as much as the "white house philosophy." Regulation might have helped but who would have supported - who did support? - policies that would have made it harder to borrow money and purchase a home?


Posted by: Rick Esenberg | Dec 23, 2008 9:09:20 AM

I agree that much CST is either vague or nuanced. But I find this statement pretty concrete:

"No one is allowed to amass excessive wealth when others lack the basic necessities of life."

It seems to me that in our country, many have been allowed to do just that, while others lack basic medical or dental coverage, adequate nutrition, or housing. If CST does not demand support for a program like SCHIP, what's the point?

You state that "I yet to read a convincing argument (as opposed to an assertions) that the problem was a result of fraud (although there certainly was some as there will always be)or deregulation."

But I think several articles in the NYT "The Reckoning" series show precise causal links between a deregulatory program and the resulting crisis. I will of course accept the argument that "smart" regulation is needed, not just "more" regulation; the favored regulatory position of the rating agencies was appalling.

Finally, you say "Pasquale wants to say that a market economy does not recognize the ways in which wealth is commonly created. That's not true. Markets (which are always a product of some form of regulation - they require rules) permit interaction for the creation of wealth by voluntary exchanges between participants."

My point was that market distributions reflect political power, unfair or sharp dealing, and inequalities in bargaining power that are no fault of the weaker parties. Redistributive politics attempts to correct for those factors. Alperovitz and Daly's point is that the distribution of wealth needs to reflect the commonality of its creation--or, in terms of Catholic Social Thought, that there is a universal destination for human goods, and a social mortgage on the goods and services produced by market exchange.

Posted by: Frank | Dec 22, 2008 8:45:12 PM

Thanks!

re: aspects of life---

namely, those that "exceed the capacity of individuals or private groups acting independently." Assuming the value of individual autonomy supported by both negative and positive conceptions of liberty or freedom, I would on this point defer to David L. Norton in Democracy and Moral Development: A Politics of Virtue (1991):

[We should be careful not to confuse the characteristics of self-development (after all, as John Dewey explained for us, any plausible psychological and ethical construal of autonomy, is a developmental concept) with an account of what characterizes its conditions. Thus,] "to say that self-development is voluntary is to say that it is optional. If it has necessary conditions then self-development is an option only when those conditions prevail. And that is to say that for the option of self-development to exist, supply of its necessary conditions is mandatory. To be sure, supply of the necessary conditions that are to be self-supplied by individuals falls within the option of self-development and is not mandatory. But conditions that must be furnished to individuals by external agencies do not partake of the voluntary character of self-development. Recognition that their presence is mandatory commensurates the provision of them with the coercive nature of government, while respecting the voluntary nature of individual self-development: individuals remain free to avail themselves, or not, of the provided conditions. It is mandatory, of course, that individuals contribute (notable through taxes) to the government that provides the necessary conditions that individuals cannot self-supply...."

And here is the point at which, as Dewey also reminds us, that classical liberalism, for all its economic and political virtues, falls short, for it fails to sufficiently distinguish between "purely formal or legal liberty," or what others term "negative freedom," and "positive freedom," or what Dewey called "effective liberty," what is otherwise known as autonomy (minimally, in the Kantian sense). As to the latter, Elster rightly suggests "Other things being equal, one's freedom is a function of the number and importance of the things that one (i) is free to do, (ii) is free not to do and (iii) wants to do." Elster provocatively points out that if "there are many things that I want to do, but am unfree to do, then this indicates that my want structure, including the things that I want to do and am free to do, but not free not to do, is not in general shaped by adaptive preference formation. This in turn implies that all my satisfiable wants should count in my total freedom, since there is reason for believing them to be autonomous or at least non-adaptive."

Be that as it may, Liberalism's failure to provide us with a robust conception of autonomy has, by default theoretically and historically, meant a "fixation of individual initiative upon economic interest," and thus "instead of the development of individualities which it (classical liberalism) prophetically set forth, there is a perversion of the whole ideal of individualism to conform to the practices of a pecuniary culture." This insight was central to the analysis of capitalist culture provided in Tawney's The Acquisitive Society (1921), an analysis wholly idependent of any affiliation with "guild socialism" (with which, in any case, Tawney was only very briefly associated), and is likewise a preoccupation in differing degrees and ways in the work of such disparate thinkers as Werner Sombart, Thorstein Veblen, the theorists of the so-called Frankfurt School--from Fromm, Adorno and Horkheimer, to Habermas and other self-described contemporary Critical Theorists--as well as analytical Marxists like Jon Elster and Michael Luntley, in their respective formulations of a Marxist account of the "good life" predicated on autonomy (the 'freedom of self-realization') and a socialist and ethical conception of "the Good."

Posted by: Patrick S. O'Donnell | Dec 22, 2008 2:05:04 AM

Duly noted. But subsidiarity is not just a theory of what level of government should do what, but also speaks to what aspects of life ought to be left to private associations.

Posted by: Richard Esenberg | Dec 22, 2008 12:29:37 AM

For the record, and as seen in the comment I made to your previous post, the quoted material was not my "restatement of the idea of subsidiarity" but simply quoted material from http://www.osjspm.org/major_themes.aspx

Posted by: Patrick S. O'Donnell | Dec 20, 2008 12:35:27 PM

The comments to this entry are closed.