Skip to main content

Revolutionary justice in the Mortgage Market.

TKO - watch it on the video!

Via Eschaton, LI went to this astonishing site, the Irving Housing blog. The writer uses public information to profile the use of multiple loans on houses to extract money on the “appreciation” of the house’s value – and, of course, that money was not exactly invested in the organs of production in these here states. More like vacations and private schools and the lot. The rhetoric on the site is reminiscent of the charivaris and jacqueries of the Old Country, when communities would come down upon the those who threatened the social order. At the same time, there is a distinct whiff of real estate porno about the whole thing – the comments about the condition of the houses pictured, down to the year and model of the stove in the kitchen, are … amazing. Rather like YouTube comments about whether some stripper/singer in some video is fat or not.

The resentments definitely are going to be spilling out this year. I was happy to see, on the NYT Opinion page last week, the loathsome opinions of that all around toad, Steven Landsburg – the oh so contrarian economist who contributes to everybody’s favorite white supremicist mag, Slate. (a, but they are contrarian KKK-ers there, as we all know – secretly liberal to the core!). It was a Timon of Athens happy feeling - the feeling of confronting something rotten in its purest aspect. Landsburg starts out dumb and gets dumber, paragraph by paragraph. His point is that free trade is good! mmm good! Welfare is bad! We don’t owe anybody nothing, people unemployed as manufacturing goes down, ha ha sucker. Landsburg, who is supposedly defending a thesis about international trade, defends it by cavalierly identifying it with trade per se:

“I doubt there’s a human being on earth who hasn’t benefited from the opportunity to trade freely with his neighbors. Imagine what your life would be like if you had to grow your own food, make your own clothes and rely on your grandmother’s home remedies for health care. Access to a trained physician might reduce the demand for grandma’s home remedies, but — especially at her age — she’s still got plenty of reason to be thankful for having a doctor.”

How to put one’s brain around this fatuousness? Suppose I defended a law making it illegal not to speak French in the U.S. by writing – I doubt there’s a human being on earth who hasn’t benefited from language.”

Landsburg’s idea is that the destruction of the U.S.’s manufacturing base is made up for by the lower prices on goods we get from abroad:

“All economists know that when American jobs are outsourced, Americans as a group are net winners. What we lose through lower wages is more than offset by what we gain through lower prices. In other words, the winners can more than afford to compensate the losers. Does that mean they ought to? Does it create a moral mandate for the taxpayer-subsidized retraining programs proposed by Mr. McCain and Mr. Romney?
Um, no. Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?”

This is a nice argument. It calmly ignores the fact that the era of free trade has coincided with the era of trade deficits. Of course, if you just conceptually abolish the difference between trading in a nation and trading between nations – which is the point of Landsburg’s idiotic paen to trade – then there’s no problemo. The globe itself doesn’t have a trading deficit. But if you actually live on some point in that globe – say, the U.S. – then there is a big problem. If we pay for the lower prices through lower wages and greater and greater amounts of national debt, we are eventually going to be constrained in very nasty ways – or I should say, the bulk of the American population. Landsburg’s notion of we is confined to the five percent of the exploiters who have, through various unscrupulous and predatory means that are unwinding as I write this, engrossed the great benefit from destroying the bargaining power of labor.

These thoughts, I must confess, came to me only after I read a very sharp commentary on Landsburg’s column by my new favorite economics blogger, Peter Dorman. My first reaction to Landsburg is that he is using a measure that excludes intangible goods – in other words, he is tallying up the lower prices of first order consumer goods and ignoring social costs, which are evident whenever you go to Rust belt areas or industrial areas and start poking around. They are multipliers of crime and decreased well being. But, as Dorman points out, Landsburg is also bullshitting on the macro-economic level – like most of the radical free traders.

“Ordinary people in many parts of the world, and not just in the US, worry about trade because they are afraid that jobs lost to imports will not be counterbalanced by jobs gained through exports. They worry that there will be fewer economic opportunities for them and their children. They worry that their wages or working conditions will be pushed downward through competition with even more vulnerable, desperate workers in other countries. They are right to worry about these things. Such miseries are not destined to happen, but they cannot be ruled out either.

Except in standard economic models which begin with the assumption that increases in imports automatically call forth equally valued increases in exports. If trade balances on the margin we live in the happy world of comparative advantage, and it is indeed true, as Landsburg says, that “when American jobs are outsourced, Americans as a group are net winners.” But the assumption that trade balances at the margin is simply a modeling convenience, something that enables Landsburg to regale his students with blackboards full of elegant diagrams and equations. It is not grounded in real experience, and especially not the experience of the US economy since the 1970s.”

LI has some respect for the libertarian view of limiting the state’s right over one’s lifestyle choices. But we have zero respect, in general, for the libertarian view of the state. It is childish nonsense, and its motives are simply to paper over the unhinged system of mass inequality and increased exploitation in which we live with spurious justifications sprung from defective economic models. And, of course, the more spurious it is, the smugger the tone. I think libertarians have captured a certain tonal range of smug that you rarely hear, outside of successful high school debate teams. Ah, the soul in the tone of voice! There's the unctuous "I know best" voice of PC lefties hairsplitting identities and vying for the victim brand; and then there is the adenoidal, bowtied smugness of libertarians. I can take the former, but barely. The latter is the kind of thing that you just want to punch in the face.


Roger Gathmann said…
PS - check out the ever crazy Cramer's notion that the government - the state - yikes! evil evil! - come in and nationalize the monolines - the idiot companies that made a parasitic profit on insuring credit swaps.

Oh, Limited Inc does like to be right. A long time ago, we pointed out that neo-liberal cycles involve a free trade, anything goes stage in which the government is roundly denounced as impeding a people's natural desire to bloat the wealthiest segment's income and a second stage in which the government is asked to come in and clean up the mess - always of course on the grounds that it is for the good of all! See, for instance, this post.
modulo said…
This 'count-your-blessing' speech is going to be popular this year. Who knew that the only debt we have in this life is to capitalism?

By the way, don't know if you read this but it's fairly interesting to the amateur. As far as I can tell, the HF person is saying that the demand for CDO created the subprime loan frenzy and not the other way around.
Roger Gathmann said…
I must say, that interviewer asked the stupidest questions. Are we a third world country? Give me a break.

Although I did like the story about bidding down the dollar. Still, it would have been nice to ask - what does a hedge fund contribute to the capitalist system of production? How does it work? And how can you maintain that the stock market is efficient, and yet still maintain that you can squeeze unexpected profits from point plays? - the latter is a big point that Robert Kuttner makes.

The person who will be the star of 2008, I think, is Nassim Taleb, the author of The Black Swan - a philosopher who used to work on Wall Street, who is supposedly writing a new book, anti-Platonism for dummies. Here's his page
Anonymous said…
Ah, but Rev. Roger, don't you know? Turn the other cheek! If somebody punches you upside the face, show another face.
northanger said…
thomas: great article.


AZ 176 = OCCASIONAL DISCOURSE ON THE NEGRO QUESTION = 100,000 GOLD CERTIFICATE SERIES 1934 (The largest denomination of U.S. paper money ever produced, the $100,000 gold certificate was part of a series of gold certificates issued by the U.S. Treasury to Federal Reserve banks in exchange for the gold the banks turned over to the treasury. The printing on the bill includes the phrase, "This is to certify that there is on deposit in the Treasury of the United States of America One Hundred Thousand Dollars in Gold payable to bearer on demand as authorized by law").
Anonymous said…
Again proceeding in order of the points in the post:-

There are distinct parallels here with the plight of evictees during the English Enclosures, the Highland Clearances, in Ireland, and even under the Palestinian Mandate. The key point is that they lost out from not having a formal claim on the previous structure, recognised property rights. As Chesterton remarked, promoting Distributism, "the problem with Capitalism is that there are not enough Capitalists". The retrenched, like the evictees, had no formal stake. Rather than justifying not compensating, it rather suggests a prior injustice that only crystallised out at that point.

But neither do such injustices justify the state in its turn; see the work of Kevin Carson. The Libertarian critique of the State is sound, though incomplete; we can't infer the soundness of their prescription from that though, or the soundness of the State from the unsoundness of their prescription. (Kevin Carson's work has a stronger critique and prescription, but there still gaps in at least the latter.)

Something similar applies to Marx...
Roger Gathmann said…
Actually, such injustices do justify the state. See the work of Galbraith.

More than that, however: justifying or not justifying the state is like justifying or not justifying a beetle or a leaf. It exists, and there is no mechanism in sight that would make it not exist - save, of course, fullscale nuclear war. Give me a reason that the "Libertarian critique of the State is sound", Mr. Lawrence, not a simple assertion. This isn't like you - you usually supply reasons for your arguments. Begin with the absence of the state - and the absence, thus, of any legal contract - and work forward. Once, of course, you reach the contract stage, you immediately align the state with the property holders and history takes its usual course.
Roger Gathmann said…
He said, impatiently. Sorry for being so impatient in my comment, Mr. Lawrence. I am not patient with arguments like, "as Marx proved", or, as "we can see from Burke," since I figure that if these things have any validity, than one can actually say what Marx proved or what Burke saw, etc. And you of all people, Mr. Lawrence, are an expounder.

So expound what it could possibly mean for the libertarian argument against the state to be both sound and incomplete. There is a dissonance between those things - like being half virgin - that doesn't make much sense.
Arkady said…
If one were to accept the need for there to be an arbiter, who has the last word in disputes that cannot be resolved by the disputing parties, then it seems to me that something a whole lot like "the state" is implicit in that acceptance.

Customs, traditions, folkways, etc. . . as means of dispute resolution are as prone to interpretative capture as regulation is to regulatory capture. My own pet theory is that these semi-governmental, informal ways of resolving problems eventually reached the critical mass needed to form and formalize "the state", once concentrations of people grew large enough to make that a reasonable option. When those concentrations started interacting with each other, the path of least resistance leads to an institution that acts and in speaks in behalf of the whole. What's left is discussing how that might be structured and critiquing what actually exists.

I agree with Roger that whether it's an entity, a euphemism or an activity, "the state" does exist and there is no way to make it go away, short of making people go away too. It's possible that it could mature into something less prone to vicious coercion, violence and exploitive kleptocracy. But for that to happen, it seems essential to at least consider those critiques that are offered in good faith and not get too hung up on how they're labeled. Carson's, as a descriptive and in some cases micro-prescriptive, critique has a lot to offer in that regard.

It's my personal tragedy that, having endeavored to introduce him properly, the javascript on his site is causing the page to hang interminably on every attempt to load it. Perhaps bathos and farce is all there is, for people of good will, and we must learn to be content with that.
Roger Gathmann said…
Arkady, I'm not really against Carson, at all in fact - simply against concentrating a set of arguments in one canonical figure.

There are excellent reasons to hate the state. What thing has killed more people? What thing manufactured the missiles? I can go on and on. But I'd very much disagree with thinking that the legal level of abstraction, by which one distinguishes the state from private organizations, corresponds to social reality. That libertarians hate the state, say of Montana, and love the corporation, say of Alcoa, is a theoretical festuche.
Anonymous said…
First off, this post seemed to me to be addressing questions of justification, with things like "But we have zero respect, in general, for the libertarian view of the state. It is childish nonsense, and its motives are simply to paper over the unhinged system of mass inequality and increased exploitation in which we live with spurious justifications sprung from defective economic models" [emphasis added]. The question of respecting is part of that.

Stipulating for the sake of argument that we do and shall always have the state with us, whether it is justified still matters. To the extent that people internalise that, it not only reduces the amount of force that the state need apply but even gives it a resource it can call on for force at need. It works as a multiplier, extending the reach of the state. In fact, it is largely the cause of the state passing beyond break even point; whether any particular state is indeed enduring is a function of its justification, of its legitimacy. Even cutting the state back would be worth while, and questions of truth and of morality should be asked quite without regard to whether resisting would work anyway.

As it happens, although the existence of any particular state is always precarious in this way, overthrowing them or their withering away often results in a sort of dynastic change with only ephemeral benefit at best (e.g., the USSR); meet the new boss, same as the old boss. But also, history does show cases of non-state systems, like clan systems or the feudal system; the problems with those were real, but not from being a state (I am not referring to what most people now think of when they say "feudal", which is actually the state sponsored co-option and buyout of feudalism that was in place in many countries during the 18th century). In fact, the problems with feudalism were much like what Chesterton said of capitalism in promoting distributism: "the problem with capitalism is that there are not enough capitalists"; the problem with feudalism was that there were not enough feudalists, since it rested on a sea of largely disempowered peasants with no great leverage of their own. Chesterton's insight addresses your remark "you immediately align the state with the property holders and history takes its usual course" in passing, of course; formulate the problem properly and you're a long way to seeing what to do about it (how to do it comes next... "l'execution, c'est tout" - N.Bonaparte).

Whichever way, from a moral, pragmatic or academic perspective, it is worth questioning the authority and justification of the state.

With that out of the way, and realising you didn't have it at your fingertips, I can see how I didn't get the point of "The Libertarian critique of the State is sound, though incomplete" across. I could have written "sound as far as it goes", but that would have implied that it fell short of what it sought to demonstrate. What I had in mind was, it fully demonstrates those limits of the state that it has on the agenda, but that there is far more to be done in that direction - that Libertarians do not choose to take matters to the logical conclusion, philosophical anarchism, but instead suppose that the state has some proper sphere. Even necessity does not justify at that level, any more than Robin Hood was not a robber because of his circumstances and what he did with the loot; it is a matter of definitions, and distorting those to get the right answer is like insisting the sun goes round the earth (you can adjust how you use the truth pragmatically from a basis of truth, but if you deceive yourself you will eventually trap yourself). And, of course, I wasn't trying to demonstrate the soundness of what the Libertarians had, but leading in to what I wrote next.

Hidden behind assertions like "such injustices do justify the state", we often - not always - find a justification of necessity at a shallower level than one that requires self deception about what is going on. That is, some people will admit philosophically that they are dealing with lesser evil, but then proceed regardless. People who cannot admit that they are choosing lesser evil have to internalise it as good, a form of denial much like that that led slave owners to think slavery good. Suppose we have got past that, which we must do to have a chance even to look for other options; that is the greatest problem with that internalising, the way it blinds us and eventually leads us beyond even pragmatism into self destruction. Suppose, that is, that we accept the state as presently existing in a tourniquet role. Sometimes you get broken eggs with no omelettes. Tourniquets only buy time. And, most of all, there is nothing from the necessity that specifies the state as part of the answer - apart, that is, from its dog in the mangerishness that forbids any other help. But that makes it part of a larger problem, crowding out alternatives.

And pity 'tis, 'tis true. The state has indeed made a poison pill such that, without it, ruin; the Libertarians are wrong if they suppose that merely removing it from its role would conjure up the private alternatives that it has already crowded out (consider Russian economic "shock treatment" when the USSR withered away), but their critique is quite right in accusing the state of doing that crowding out. The problem facing us is largely "how", not "what", and concerns transition.

That is why so much of what I have at my publications page is concerned with transitions, and the early stages of them at that.

I will end by quoting the 38th article of the Church of England to show a good balance between being right and doing right, avoiding seeking to do evil that good may come the way you end up if you start with "such injustices do justify the state". The Vulgar Libertarian mindset will be tempted to stop at the semi-colon. Note that the article does not tell you how or what in any specific way, but it sidesteps the hidden pitfall:-

XXXVIII. Of Christian men's goods which are not common.

The riches and goods of Christians are not common, as touching the right, title, and possession of the same, as certain Anabaptists do falsely boast; notwithstanding every man ought of such things as he possesseth liberally to give alms to the poor, according to his ability.
Roger Gathmann said…
Ah, Mr. Lawrence, now that is a proper comment. And I will respond, probably in a post, after I ponder the right and wrong of it a bit.
piety piet said…
please northy, go rescue a palomine if you can/dare, see stuff about lawrence chin at your earliest convenience


sorry to get so personal past you roger .. love you too