Our Runaway Economy

I was intrigued by the dueling opinion pieces by Paul Krugman and David Brooks in this past Friday's NYT (02.12.2011). Down the right edge Paul Krugman makes his Keynesian, technocratic case for government intervention, in the fat bottom piece David Brooks extols the Germans for defending "values," "effort," "self-control," "merit," and "enterprise" in resisting that same intervention.

While Krugman's knowing, arrogant tone have long since worn thin on me, he's still a) an actual economist and b) has so far been consistently right on how this crisis would play out, as opposed to, say, folks like Niall Ferguson, who have been just as consistently wrong.

Brooks is of course right when he says that there is a political cost to the "value blindness" inherent in the purely technocratic calls for crisis intervention right now. When irresponsible governments get "bailed out" it does call the legitimacy of the status quo into question (thus, the tea party movement).

But, as Brooks acknowledges over and over again, we are in a crisis, and crises like these demand decisive actions that may or may not comport with your general morality.  What crises demand is action, not actions contingent upon something else happening. If, as agreed, we have a crisis, then we need action to stave it off. It's as if I saw a car beginning to roll freely down a hill: my first action is not to seek out the driver to make him or her promise to use the handbrake in future. My first action is to see if this person was also irresponsible enough to leave the door unlocked.

Is it fair that I should have to do this? No. It's what you do to prevent a calamity.

And that gets to one of the funny little things about living in a complex society--questions like "Is this fair?" or, more generally, "Does this comport with how I conduct myself or my family life?"--are often the wrong sorts of questions to be asking. Why? Because the point of the system isn't to be fair. The system wasn't made to retell the story of Pilgrim's Progress or Horatio Alger. And this has always been the case with how the managers of that system have made their decisions.

Capitalism over the last 100 years or so has gone through some interesting developments--it's interaction with the more inclusive democractic political system has become both fruitful (witness, the postwar economic boom in the West) and more fraught (witness, the post-1980 shift in reward structure, the Occupy Wall Street movement). For people like Brooks the story of our economic system--the deserving are rewarded and the undeserving punished--is more important than tending to the technical function of the system because of that now very strong interaction between democracy and capitalism.

But the fact is, that story is a lie and always has been a lie. Are there strategies that you can find out about that are likely to lead to success in our system? Yes, certainly, particularly when it is working well. Do those strategies necessarily have something to do with deservingness by some other yardstick (moral, utilitarian)? No.

A crisis is not a time to try to shore up tired old lies: it is a time when we ought to be being a bit more honest with ourselves. If "virtue rewarded and vice punished" is what you are looking for from your economic system, capitalism is not your baby--we can condition the competition and power plays of capitalism so that we reach this outcome more often, but we have to do it. It won't do it itself. It isn't designed to do so.

And there are absolutely no economic rewards for virtue in and of itself. If your virtue turns out to be economically non-viable, you don't get an economic reward. The moral/political realm and the economic realm are separate. They interact constantly, but we should really stop encouraging people--as Brooks is urging--to think they are the same thing.

This is really part of a collective growing-up we've got to do, akin to discovering that your parents were not the paragons of the virtues they so strongly urged on you. A crisis is a time for a bit more truth. Let's acknowledge that preventing the calamity and the virtue of the people rescued from it are two separate issues to be dealt with in their own proper occasions. So lets see if that driver's side door is open, shall we?