Moral judgments

Since the financial crisis began, I have noticed phrases like “free market fundamentalists” being thrown around, and an accusation being leveled against “unregulated” capitalism. Thousands of newspaper columns and hundreds of columnists have repeated the same thing over and over. And so have many other people and bloggers. The facts are crystal clear – there is no “unregulated capitalism” at play anywhere in the world, and the crisis was definitely not caused by any such non-existent entity; you could just as easily claim that Fred Flintstone caused the crisis. The fact is that the crisis was caused by government intervention in the economy; as long as “any” regulation exists, the government is in direct or indirect control of the economy. Once the government asserts its influence over the economy, its natural that crooks will rush towards it so that they can benefit by modifying the regulations to suit themselves. Such crooks are not capitalists. They are what I have already called them – crooks.

So what does that say about the people making such claims? (This question is very significant when it comes to morality, and instead of inventing an example, I will continue using the present one. Further, this article is why I thought I should write about it, and wgreen asks a similar question here.) The claim can only be made by the following people-

• Those who are ignorant of the state of affairs, either purposefully, or as a result of an error.
• Those who are aware of it but are lying through their teeth because it suits their ideology.

A moral judgment needs to be passed on each of these. I will come to the “why” later.

1. Those who are purposefully ignorant are immoral because they are guilty of evasion.
2. Those who, after careful thought, believe in an ideology that doesn’t respect individual rights are evil. They may “honestly” believe that egalitarianism is good, but that doesn’t change the fact that it isn’t. And the unprincipled from that lot may even lie to further their agenda.
3. Only those who are ignorant as a result of an error – in judgment, or brought on by lack of sufficient information/ incorrect information can be said to be moral, but this is not a license that is granted for perpetuity.

Note that there are always degrees when it comes to moral judgments – a murderer is worse than a thief. So is a man who holds that there is nothing wrong in murder (even though he hasn’t actually committed a murder).

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Sometime in the 1980s, the “movement” around Ayn Rand’s philosophy split on a question of principles. One of the questions was that of passing moral judgments and whether “ideas” can be judged “good or bad/ evil” or whether they can only be “true or false.” Kelley said (see Appendix A)-

[E]vil and error are not the same.

The concept of evil applies primarily to actions, and to the people who perform them. Schwartz asserts that we should not sanction the Soviets because they are “philosophical enemies.” This is a bizarre interpretation of their sins. Soviet tyrants are not evil because they believe in Marxian collectivism. They are evil because they have murdered millions of people and enslaved hundreds of millions more. An academic Marxist who subscribes to the same ideas as Lenin or Stalin does not have the same moral status. He is guilty of the same intellectual error, but not of their crimes (unless and to the extent that he actively supported them, as many did in the 1930s, although even here we must recognize a difference in degree of culpability).

Truth and falsity, not good or evil, are the primary evaluative concepts that apply to ideas as such. It is true that the horrors of this century were made possible by irrationalist and collectivist ideas. Bad ideas can be dangerous; that’s one reason we shouldn’t endorse them. But they are dangerous because people use them to perpetrate evil. We are not Hegelians: ideas per se are not agents in the world. Truth or falsity is the essential property of an idea; the good or ill it produces is derivative. It is also true that a given person may adopt false ideas through evasion, which is morally wrong. But another person might adopt the same idea through honest error.

From my understanding of his statement, he’s making a “guns don’t kill people, other people do” argument. He says, then, that ideas don’t have a moral component to them – they can only be true or false. And that its actions that are good or evil; that its actions that can be morally judged.

Peikoff responded in a lengthy paper-

As one of his examples of an intellectually honest man, to whom others should show “tolerance” and “benevolence,” David Kelley offers not a groping teenager, but “an academic Marxist,” i.e., an adult who devotes his life to the job of teaching unreason, self-sacrifice and slavery to generations of young minds. When I speak of truth and falsehood in what follows, therefore, I am presupposing a definite (adult) context. I am speaking of truth qua truth (not of the arbitrary)—and of falsehood on the kind of scale and issues that preclude honest, short-lived errors.

[...]

In some contexts, a man is properly held blameless for an unreasonable idea, so long as he himself does not act on it. For example: if I conclude that, though you are innocent of any wrongdoing, your death would be a wonderful thing, but I then remind myself of your rights, hold myself in check and refrain from killing you, I may be free of blame and can even be given a certain moral credit: “He kept his idea within his own mind,” one could say, “he did not allow it to lead to the destruction of the innocent; to that extent, in actual practice, he was moved by the recognition of reality.” But this kind of analysis does not exonerate the philosophic advocate of unreason. In regard to him, one cannot say: “He implicitly advocates murder, but does not himself commit it, so he is morally innocent.” The philosopher of irrationalism, though legally innocent of any crime, is not “keeping his ideas within his own mind.” He is urging them on the world and into actual practice. Such a man is moved not by the recognition of reality, but by the opposite: by the desire to annihilate it. In spiritual terms, he is guilty of a heinous crime: he is inciting men to commit murder on a mass scale. Advocacy of this kind is a form of action: it represents an entire life spent on subverting man’s mind at its base. Can anyone honestly hold that such advocacy pertains not to “action,” but merely to the world of “ideas,” and therefore that verdicts such as “good” and “evil” do not apply to it?

Yet such is the essence of David Kelley’s viewpoint. “Truth” and “falsity,” he says, apply primarily to “ideas”; “good” and “evil,” to “actions, and to the people who perform them.” In regard to evil, he says, we must not be tolerant; but in regard to ideas, moral judgment is a mistake. In the cognitive realm, he says, the virtue to be practiced in regard to all comers, no matter what their viewpoint, is “tolerance” and “benevolence,” i.e., cool, open-minded, friendly discussion among civilized moral equals. Stalin, in this view, has killed people, so he is evil and intolerable; but Kant or “an academic Marxist”—he is merely a thinker of a different school, with whom one happens to disagree (and from whom, Kelley adds, we might even learn something “if we are willing to listen”). In regard to Kant and his academic progeny, therefore, moral judgment is inapplicable and even “hysterical.”

None of the excerpts do justice either to Kelley or to Peikoff. So reading their complete papers is recommended.

I agree with Peikoff that ideas “can” be moral or immoral and can thus be good, bad, evil etc. However I don’t agree with his narrow definition of “honest errors” (and therefore agree with Kelley – see Appendix B). I know from personal experience that errors are not the exclusive domain of youngsters, retards and illiterates. Depending on the kind of knowledge, the amount of material one has to wade through before reaching any kind of conclusion, and the ability that such a task demands, errors are more common place than Peikoff is willing to admit, particularly in the field of philosophy. I don’t refer to broad and thus simple principles – individual rights for example, but more technical and complex questions. If “such errors are not nearly so common as some people wish to think, especially in the field of philosophy” why is it then that two 40+ year old “rational” men who believe in individual rights are sparring over a question of “moral judgment?”

Note that Peikoff’s response is to Kelley’s brief paper. Kelley has written in depth about the subject of moral judgments in his book which I have linked to (but haven’t read beyond the two papers of interest.)

As for Schwartz’s addendum where he writes, among other things-

The Libertarian movement is not some innocuous debating club. It is a movement that embraces the advocates of child-molesting, the proponents of unilateral U.S. disarmament, the LSD-taking and bomb-throwing members of the New Left, the communist guerrillas in Central America and the baby-killing followers of Yassir Arafat. These views have all been accepted under the Libertarian umbrella (and remain accepted under it by everyone who still calls himself a Libertarian). It is these types of vermin that one is lifting into respectability whenever one sanctions Libertarianism—or whenever one maintains that ideas can be analyzed without being evaluated.

moral judgment doesn’t apply here like he thinks it does. He’s attacking an umbrella term. People cannot change that according to his convenience. Not everyone is C.S.Peirce.

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The “why.” A judgment has to be made because the Krugmans and DeLongs and Stiglitzs and thousands of other statist economists, philosophers and politicians are not indulging in this subterfuge and gross disregard for individual rights out of some “honest error” – they are knowingly supporting a stance that is anti-liberty in every conceivable way. And thus they cannot be given the “benefit of the doubt.”

The mother of all Stimuli

Its official. World governments are being run and advised by people who have escaped from asylums holding the criminally insane. How else can you have a proposal like this-

It has been on and off for months, but a key announcement in Alistair Darling’s budget in 10 days’ time looks like being a car “scrappage” scheme. The motor industry is in trouble and thinks the best way to reverse an alarming slide in sales is to give people who trade in old cars for new or nearly-new ones a £2,000 allowance.

As Cynicus Economicus asks, why not bomb cities instead? Why not evacuate, say, New York City and send in a bomber to carpet bomb the whole city? I agree with C.E.’s conclusion-

If ever there were an indication of the absolute bankruptcy of ideas to fight the economic crisis, an indication of the underlying idiocy of government policy, then surely this is it. They are acting to destroy wealth to ‘save the economy’, and doing so at the expense of the future economy. They are spending future wealth in order to destroy present wealth.

Quite simply, the mind boggles.

It does, indeed.

Regulation ayatollahs

[Don't know what an "xyz ayatollah" is? Try this Google search.]

K links to this very entertaining Rolling Stone rant on the financial crisis. The article is interesting, but putting the entire blame on a bunch of bankers, “laissez-faire ideologues” and deregulation is just not done. But people are not going to give up on the regulation mantra just yet, even after it has been proven time and again that the market will always find a way to beat any regulation that is thrown at it. Why do you think corporate lawyers, tax accountants, lobbyists etc exist? To find and create loop holes in existing laws. A piece of advice for all the donkeys braying about deregulation and how the “free market” caused the crisis. Please get your heads examined, and then buy a dictionary.

The only way to fix the “problem” is to let the market take care of itself. Then every AIG, GM, Chrysler and Bear Stearns will go bust when they make stupid decisions. But that ain’t happening. Not in the immediate future, not so long as governments subscribe to the “too big to fail” theory. That’s why this law makes sense (its a single paragraph, so will post the whole thing here)-

We all know (or should know) Rockwell’s Law: “Always believe the opposite of what state officials tell you, and the corollary, always do the opposite of what they advise you.” But here is another profound truth. This one is Richman’s Law, from Sheldon Richman, the editor of The Freeman. In his article in the March 2009 issue of Freedom Daily (not online yet) titled “The Madoff Scandal Exposes Government Failure,” Richman says: “No matter how much the government controls the economic system, any problem will be blamed on whatever small zone of freedom that remains.”

Also read this Newsweek story on how the pragmatist (Obama) is not too happy with the interventionist (Krugman), and vice versa. Obama will probably be the first pragmatist who approves precisely those measures that have been proven not to work. So much for pragmatism. Then read Russell Roberts tear Obama’s auto bailout speech to shreds. I can’t figure out who is the more intelligent of the two – Bush or Obama. And that’s not saying much. Absolute madness!

Parallels

I finally finished reading Peikoff’s book (“The Ominous Parallels”) yesterday, two-odd months after I started it. I will (hopefully) write about it in some future post, but the following extract shows the parallels between the Germany of the 1930s and the USA of today. This is not to say that the US will adopt National Socialism to the extent Germany did, but the signs are there and the fact that the US is philosophically bankrupt means that the idea is within the realm of possibility with no “politically relevant” block available to question it. Well, more on that later. The following paragraphs are from the chapter “The Killers Take Over”, p. 215-218-

The Great Depression merely forced the issue, which had been implicit all along in the Germans’ philosophy. Economic catastrophe in Germany was an effect, the last link in a long chain of ideas and events—and a catalyst, which gave Hitler a real opportunity for the final cashing in. The catalyst worked because the nation was already ripe for Hitler’s kind of cashing in.

If a man long addicted to a toxic drug suffers sudden convulsions and then dies from them, one might validly say that the convulsions were the cause of the death, so long as one remembers the cause of the cause. The same is true of a country addicted to a toxic ideology.

* * *

For several years after the inflationary debacle, the Republic had seemed to return to normal, enjoying its so-called “period of prosperity.” It was a shaky, foredoomed prosperity built on credit and quicksands.

In essence, Germany’s recovery was the result of a massive inflow of foreign—primarily American—capital, in the form of huge loans along with large purchases of German securities. America was experiencing the artificial boom of the twenties, a pyramid of highly speculative investments and wild spending made possible by a variety of governmental actions—most notably, the action of the Federal Reserve Board in generating a cheap-money policy in the banks. The influx of this capital into Germany, which also lacked the free-market restraints on inordinate speculation and spending, helped to fuel a similar artificial boom.

In particular, the various levels of government in Germany, which had learned nothing and forgotten everything from the inflationary crisis, were once again pouring out money and piling up debts; they were endowing lavish public works, starting a program of unemployment benefits, enlarging the bureaucracy, raising its salaries, and the like. This time, however, the governments were not counting on the printing press to finance their activities, but on the Americans. “I must ask you always to remember,” said Gustav Stresemann to his countrymen, “that during the past years we have been living on borrowed money. If a crisis were to arise and the Americans were to call in their short-term loans we should be faced with bankruptcy.” He said it to deaf ears, in 1928.

When the New York stock-market crash signaled the collapse of the American boom, the collapse of Germany followed immediately, as a matter of course. For the second time in less than a decade a protracted agony struck the country, this time involving plummeting investments, the crash of famous financial houses, cascading bankruptcies, soaring unemployment, tobogganing farm prices, and widespread destitution.

The mania of the inflation years had been succeeded by a wave of giddy, unreal prosperity. Now the unreal stood revealed as unreal. Giddiness gave way to panic and to black despair.

The unphilosophical majority among men are the ones most helplessly dependent on their era’s dominant ideas. In times of crisis, these men need the guidance of some kind of theory; but, being unfamiliar with the field of ideas, they do not know that alternatives to the popular theories are possible. They know only what they have always been taught.

When Hans Fallada in his popular novel of the time asked Little Man, What Now? the little men in Germany (and the other kinds, too) knew the answer, which seemed to them self-evident. They turned to the group—to their economic class or trade association—as their only security; each group blamed the others for the crisis; each party demanded action, the kind of action it understood, government action, i.e., more controls.

Man is rotten, the omnipresent chorus of “Weimar culture” was crying, the individual is helpless, freedom has failed.

The Social Democrats, however, playing out to the end their founding contradiction, were unable to act. One union leader at a party convention indicated the reason eloquently. He asked whether the party at this juncture should strive to preserve the “capitalist” Weimar system, or to topple it. Should socialists stand “at the sick-bed of capitalism” as “the doctor who seeks to cure,” he wondered, or as “joyous heirs, who can hardly wait for the end and would even like to help it along with poison?” His answer was that the party is “condemned” to play both roles at once, which in fact is what it did, by switching back and forth at random between them.

In the early months of 1930, with the nation desperate for leadership, the party stumbled into its “proletarian” stance: it decided to bring down a coalition government headed by a Social Democratic Chancellor, Hermann Mueller, because of a proposed measure that might have had the effect of reducing unemployment benefits in the future. The Weimar politicians had long been engaged in Kühhandel, as the Germans called it, “cattletrading,” and had treated the country to a procession of musical-chair coalitions, sudden governmental collapses, and continual new elections. The spectacle had evoked widespread contempt for popular government even before the depression. After the Mueller cabinet fell on March 27, however—the “black day” of the Republic—no new coalition could be formed; the economic warfare among the parties was too virulent. The Germans’ contempt for the Reichstag became disgust. There was only one solution that seemed feasible.

On March 28, 1930, the Reichstag’s normal legislative prerogatives were suspended by President Hindenberg. A semi-dictatorial system of government, a system of rule by emergency executive decree, was established under Chancellor Heinrich Brüning, a conservative Centrist. Popular government was abandoned for the duration of the emergency. The dichotomy between political and economic freedom was breaking down by itself, without any help from the Nazis.

In regard to methods, the Brüning government was dictatorial. In regard to policies, however, it was democratic. The program Brüning (and his two short-lived, authoritarian successors in 1932) enacted was an exact reflection of the popular will. These men “did something,” in the German sense of the term.

The government issued a torrent of new decrees. It raised the tariffs, the taxes, the unemployment-insurance premiums; it expanded public works, imposed rigid restrictions on foreign exchange, and introduced a twenty-month “voluntary labor service” for young people; etc. Most important of all, the Reich in this period effectively erased the last significant remnants of private economic power, by turning the banks, the cartels, and the labor unions into mere administrative organs of the state. The Republic, writes Gustav Stolper (a member of the Reichstag at the time), “came close to being a thoroughly developed state socialism. . . . Government was omnipresent, and the individual had been used to turning to it in every need.”

The government’s policies did not work. Among other things, hyperprotectionism (in Germany and abroad) was strangling the country’s vital foreign trade; the cascade of sudden new taxes and emergency decrees was creating a climate of acute business uncertainty, which made impossible any significant recovery of German investment and production; the unions’ adamant opposition to further wage cuts was exacerbating the unemployment.

The Germans attempted to assess the situation and determine the cause of government’s failure. “At last,” writes Stolper,

it became common knowledge that all this state interference . . . was of no avail in the most disastrous economic crisis that had befallen Germany in the course of her history. Paradoxically, the system of state interference as such, being far too deeply rooted in the German political and economic tradition, was not blamed by the opposition. On the contrary, the general mood of the public backed the demands that this imperfect and incomplete system of state intervention be superseded by one more perfect and complete. This was the content of the so-called anti-capitalistic yearning which, according to a National Socialist slogan of the time, was said to pervade the German nation.

Naomi Wolf (not Klein) thought that fascism would creep into America from the right, and given Bush’s track record, few would deny the fear. But what must not be forgotten is this – it can just as easily come in from the left; the right does not hold a patent on fascism.

No expense spared

The Economic Times editorializes-

Obama announced on Wednesday a salary cap of $500,000 (Rs 2.4 crore) for top executives at companies that receive taxpayer-funded largesse. The move, reminiscent of controls in state-controlled planned economies, including our own pre-reform era, is an obvious attempt to address public anger before the President seeks more taxpayer money to fix the US banking system.

It follows quick on the heels of reports of generous bonuses ($4 billion) paid to Merill Lynch executives just before it was taken over by Bank of America, and of the lavish lifestyles of some of the now-disgraced investment bank honchos.

John Thain, ex-chief of Merrill Lynch, spent $35,000 on a commode and former Tyco boss Dennis Kozlowski spent $15,000 on an umbrella stand. Calling Wall Street bonuses shameful and expressing disgust at chiefs who reward themselves for failure, Obama said the curbs were aimed at “taking the air out of the golden parachute.”

Thain spent $35,000, Kozlowski spent $15,000, some one even got himself a $1,500 trash can; and Obama spent $150,000,000 on his inauguration, a third coming from his supporters. But didn’t everybody’s favorite economist say that even if you pay some one to dig a pit and fill it again, that helps the economy? Surely buying trashcans helps too. If you can pay pit-diggers, why not people like Thain?

I think people have lost all sense of perspective and have gone crazy. That’s why they can’t see the situation for what it really is – a big government engineered mess. Not all of them though. Read this comment from the BW article linked to above-

John, you make too much sense. Congress doesn’t seem to understand that “economics” comes from the word meaning “household management”. If we all ran our households like they run our country, we would have creditors threatening our lives. I can’t believe we actually run our economy based on the “wisdom” of John Maynard Keynes. He had no concept of future generations. I’ll have to research his personal life to understand how anyone thinks it is a good idea to pass that kind of debt to your children and grandchildren. These are the same liberals who are always faulting conservatives’ lack of compassion? Wake up, America, we are being robbed blind by the people we “hired”.

Vipin writes about what will happen post recession-

Note that since the cause of the crisis is misallocation of resources, we would like economy wide churning. Firms must readjust production processes, some firms will have to reduce employee count, these people will then be employed elsewhere (the time lag between the two registers a high rate of unemployment), some firms will have to shut down, other firms will have to produce new products (less luxury villas, more apartments for instance), and so on. And soon enough we will be back to a rather normal state of affairs.

Not understanding this process is the root cause of many dangerous proposals floating around in the press.

[...]

In fact what we really need is more savings, and it’s a good thing that household reduce consumption and increase savings during recessions, we need more resources to restructure production.

Some other perspectives. The Austrian Economists say-

Goldman Sachs has released a report that the economy is going deeper into recession, not recovering. They have also predicted that the bank bailout will exceed $4 trillion. The Washington Post headline this morning is that the economic signs are getting worse, not better. Michigan is officially the hardest hit state by this economic downturn, but California is right behind. Cut backs are taking place everywhere from Starbucks to colleges nationwide.

[...]

As readers of this blog know, neither Steve nor I endorsed Ron Paul in his presidential bid even before the negative press concerning his newsletter came out. But I think Ron Paul has been the only political actor I have heard who understands what is going on. As he recently said, politicians and policy makers in Washington think they see a house on fire and they are providing water to put the fire out, but instead what they are doing is pouring gasoline on the fire. As I have said several times on the blog, we are turning a “crisis” into a catastrophe through the policy actions taken.