There is an article on the Angry Economist that I had to respond to. Largely because so many people agree, and they agree with the author’s position, despite the fact that he is entirely WRONG.
As usual, I might have gotten a little deep and covered too much territory here.
Here is a reference to the original posting.
Sun, 26 Oct 2008
The Crisis, understood in six sentences
Regulation on the part of legislators was lacking.
Regulation on the part of corporations was lacking.
Nobody thinks people are capable of self-regulation.
The Corporations have competitors, and their malfeasance is limited by customer flight.
The States compete with each other, and their malfeasance is limited by citizen flight.
The Federal government has almost no power to tax, and a strictly limited set of powers.
Of course, there are far better sentences.
1) Government printed money in order to stimulate a collapsing economy, which was collapsing due to both national and international demographic conditions, exacerbated by the victory of capitalism as the means of cooperation, the fall of the communist ideology, and the widespread increase in technology and trade because of it.
2) Everyone in the entire country thought they profited from it, and so did everyone outside it, from the people who make and buy DVD’s to investment bankers, to consumers, and new homeowners.
3) The stimulation failed, because no one invented a form of productivity using that stimulus that compensated for the debt increase, and instead, the people actually became lazier consumers.
4) Government violated the calculability of money by printing money, and did not regulate the fact that knowledge, property, calculability and money must maintain their relationship: in other words, for a thing to be treated as property it must have a knowledge component. And bankers no longer have knowledge of the land and homes when they resell bundled loans, homeowners cannot possess thirty-year forecasts, and fed members cannot judge the impact of their inflationary action. Simply put, originating lenders of custom property (all homes) must maintain ownership of some part of what they lend against because the numbers they use to quantify value of the assets are insufficient to express the complex relative value these custom assets have in time, without that local knowledge, especially over long time periods. And when sufficient excess and inflationary capital enters the system, the insurance provided by the relative price movement in the market for those custom goods ceased to be an insurance policy for informing all participants. I.e.: if you are demonic enough to inflate then you must require lenders maintain ownership of mortgaged properties purchased with inflationary currency. And the side effect is that lenders will regulate government in this model rather than exploit it.
5) The root of this problem is that people in government think of economic policy in terms of incentive and punishment rather than in terms of maintaining the knowledge economy necessary to maintain the material economy.
6) Regulation is not necessary because of the selfishness in human behavior. It is necessary because of the malfeasance of governments that employ Keynesian monetary inflation in order to stimulate an economy, while at the same time violating the common knowledge held by the population: the Hayekian traditions of cooperation.
If you think we are going to get “One Peaceful World” in the future, you simply don’t know enough history. What we’re going to get is a brief period of conflict, the outcome of which will be a vastly less united world, highly racist, nationalist, tribal, and religious. Exhausting western traditional values will not produce the long sought utopia. It will produce chaos and war. Western institutions of capitalism, which have NOTHING TO DO with DEMOCRACY, and certainly less to do with POLITICAL systems, and everything to do with contracts, truth, property rights, technology, banking, insurance, accounting, and now computer systems, are the greatest revolution in human interaction since the development of farming led to the development of cities. Out of cities we developed what we call morality, or the morality of farmers, and the institutions of cooperation (and conflict). We did it very quickly. But we have not yet developed a morality of cities. We seem not to be able to develop a means of cooperation, a common morality, when most of any civilization lives in cities. Because cities break down the calculative processes of families (an understanding of the relationship between breeding and resource production), and the calculative process of defense (enfranchisement through shared male responsibility for protection), and the tendency of cities to produce totalitarians because of these limitations.
We are not going to get a utopia. We are not going to see One World Government. We are not going to see peace. We are going to see widespread war, conflict, and fragmentation. That’s what we’re going to see.
And governing for “now,” and for “the poor” and for “the ignorant,” and destroying the method of cooperation “money and prices and property and family and moral traditions” is the cause of it.
How is that for changing your opinion on regulation?
A lack of regulation isn’t the problem. Government is the problem. Because they interfere with how we cooperate.