Thursday, February 19, 2009

Grand Old Burning Man

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So, tonight’s Debate at Lolita Bar (between Ken Silber and Ryan Sager) is about the fate and state of conservatism — and I can’t help thinking that if conservatism were a bit more like anarchism, as it should be, it could surely reformulate itself and endure.

The theme at this year’s iteration of the near-anarchist annual art festival called Burning Man (coming in August, with more than a few of my acquaintances likely attending again, though I’ll once more refrain) is the same as that of my blog entries this month: “evolution.”  And while I expect that the neo-hippies, performance artists, drug-addled nudists, and assorted freakazoids at Burning Man will play even more fast and loose with the concept — and stray farther from the topic of biology — than I have, there is a certain metaphorical logic to that theme as one for an anarchist temporary city, balancing as it does continuity and nearly boundless potential for change (and Black Rock City, as they call the physical location of Burning Man out in the Southwestern desert, is indeed an anarchist temporary city).

I was on a panel about parallels between evolution and econ once in Las Vegas (alongside Will Wilkinson and others, thanks to Gerry Ohrstrom and the Association of Private Enterprise Education), and I remember thinking then that free-market economics, evolution, and being in a place that tantalizes with endless possibilities like Vegas somehow seemed like a natural combo (even though I didn’t gamble).

I have no intention of going to Burning Man and trying to lecture people about Adam Smith (though I see the Objectivists are throwing a massive eight-day conference in Vegas this summer, which may amount to almost the same thing).  On the contrary, though, I would love it if Adam Smith’s ostensible defenders absorbed a bit of the anarchic spirit of Burning Man, in the sense that they should all remember that markets only make sense if experimentation and failure (and learning from even catastrophic mishaps) are part of the process.  That should mean no government bailouts and subsidies, for anyone, ever — but it also means that “fiscal conservatives” should not be conservative in the short-sighted sense of thinking we must cling to and preserve the current financial institutions or, even more shallowly, fall into the stock-watching trap of thinking that whatever “reassures the market” today is politically, culturally, and economically healthy in the long run (conservatives are supposed to think about the long run — as are progressives — right?).

Despite the pro-bailout arguments that came even from some very pro-market people like Megan McArdle (initially), we should be willing to sit back, let things fail, and trust that new institutions can be created that may actually improve upon the old (perhaps rapidly-revved-up, formerly small rural banks after the death of older Wall Street firms?).  If a bunch of art-hippies can build a temporary city in the middle of the desert each year, surely rich people can evolve new institutions to replace their failed, fraudulent, unreliable old ones — and do so without government holding their hands.

If fostering the open-minded attitudes that would allow such beneficial transformations to occur necessitates mixing and blending elements of radically different philosophies — into a very broad new fusionism that cannibalizes and then transcends libertarianism, paleoconservatism, liberalism, Marxism, and other strains — so be it.  But we won’t get far thinking the economy must not be allowed to evolve beyond its precise current forms, if that’s the stagnant attitude that our current blend of liberalism and conservatism breeds.  (Perhaps this is something we can address tonight at Lolita Bar.)

P.S. I know my evolutionary psychology expert friend Diana Fleischman (about whom more next week) has considered going to Burning Man, so perhaps this year’s theme makes it the perfect time for her to go.  (Me, I’m more tempted to return to Vegas and visit the Star Trek-themed bar again.)

12 comments:

T.A.B. said...

Isn’t that bar closed?

Todd Seavey said...

The Star Trek Experience has moved to the Neonopolis Mall, still located in Vegas. I assume the name either means “city of neon” or “city of people born yesterday.”

Dylan said...

Hey, so are the debates now going to be Thursday nights going forward, or is it just this month? I really wanted to try and make it to this one, but Thursdays are Disclaimer nights.

Todd Seavey said...

Almost always the first Wednesday of the month (next up, after tonight’s: March 4 pits two comics editors against each other on the question “Should Sci-Fi and Fantasy Avoid Nostalgia?” — but more on that in about a week and a half).

Brain said...

“…markets only make sense if experimentation and failure (and learning from even catastrophic mishaps) are part of the process. That should mean no government bailouts and subsidies, for anyone, ever…we should be willing to sit back, let things fail, and trust that new institutions can be created that may actually improve upon the old…”

The Bailout happened because the US banking system was on the verge of total collapse. Martial law would have been necessary to maintain some semblance of order. Your prescription is just not one that can be taken seriously. Failures of individual players within a sector of the economy is fine. Failure of an entire sector of the economy, or of the very economy itself (think no food, no water, no electricity) is disastrous.

You confuse the usefulness of the former scenario with the apocalypse of the latter. The latter scenario is only welcomed by kooks and madmen, not by any serious students of public policy.

Todd Seavey said...

Bullshit. It’s not even clear anything done by the government has helped at all, so claiming the alternative was apocalypse is mere fantasizing.

Here’s a handy list of kooks and madmen — by which I mean 200 economists including three Nobelists — for your files, though, you arrogant Democrat:

http://www.cato.org/fiscalreality

Mike Farmer said...

Any “serious students of public policy” who believe propping up bloated, failing banks was necessary to save America should search for better, and less melodramatic, public policy teachers.

Brain said...

Not Bullshit, though the point is moot; and you’re mixing apples and oranges.

Regarding the fears of martial law:

http://www.youtube.com/watch?v=HaG9d_4zij8

So it is on the congressional record that the bailout was prescribed as a necessary to avoid martial law.

But the point is moot, because, if I read you correctly, a total collapse of the financial sector would still be preferable to a bailout.

Regarding the Cato pamphlet – that is in regard to the fiscal stimulus package, not the financial bailout. And the Cato petition still argues for activist fiscal policy, only instead of increased spending they prescribe “Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth”.

Before either of us was born, the Right actually stood for fiscal responsibility and balanced budgets. Notice that the Cato Statement does not call for CUTS in spending. Keynesians consider tax cuts pump-priming, just as they do spending. Spending is generally preferred because it is considered more effective. That’s certainly open to debate. But the Cato petition does not argue against the financial bailout, and it does not argue for less government spending. In fact, by arguing for lower taxes, and presumably accepting the concommitant increase in government borrowing, the Cato petition leads to greater government involvement in the credit markets.

Going back to the original point. I would be very interested to hear one responsible economist claim that allowing Bank of America and Citibank to go bankrupt would be a good thing.

Todd Seavey said...

Even a passing familiarity with the Cato Institute would cause one to realize they favor radical spending cuts to go with the tax cuts, not more borrowing. They are libertarians.

Brain said...

The petition does not explicitly endorse spending cuts. Show me a document that calls for substantially less government spending (with or without tax cuts) as a solution to the current recession, and I will stand corrected.

However, I should, once again, point out that the stimulus plan and the bank bailout plan are two different beasts.

Regarding the bank bailout plan

“The urgent, immediate need is to provide banks and the financial market with the liquidity and capital they need in order to resume or maintain normal lending.”

http://www.cato.org/pub_display.php?pub_id=9688

(” The Big Bailout รข€” What Next?” by Warren Coats October 3, 2008)

Coats certainly takes issue with aspects of the (then-proposed) bailout, but on the whole, in this Cato-published paper, the notion of considerable government intervention in the banking crisis is soundly endorsed.

I found this paper by using the internal Google search on Cato.org for “bank bailout”. It is the the first paper of substance that approaches the matter from an economic view. To be fair, The first paper that appears from the general search is a substantial one from a legal and political view, and it is against the bailout.

(“Is it Constitutional?” by Richard W. Rahn, November 5, 2008)

http://www.cato.org/pub_display.php?pub_id=9772

Then again, Rahn’s paper is also against US economic policy over the last 65 years. I think it’s time for Libertarians to get used to the fact that the Constitution’s commerce clause has been substantially broadened in theory, law and fact for long enough now to be considered a done deal. You might want to change that fact, but after 65 years, the arguments are no longer legal, but political, and would require political action to change an existing and legitimate interpretation of law.

–Arrogant Dem

Tim said...

1. Some people have argued that recent levels of

lending are far from normal. Govt is going to try to

require that this continue – it might not be wise,

but it surely will be popular.

2. Maybe some of the folks/govts who are willing to

park money in massive amounts of short-term

Treasury bonds could take up some of the slack in

commercial paper, etc. if the Treasury were not

considering pumping out massive numbers of bonds.

(Govt as middleman)

There wouldn’t be *zero* credit. In fact, these

guys could bail out some banks directly by buying

assets without govt as middleman. The question

is: Why does that not happen?

3. The Cato mentions MBS liquidity as a big factor. I

find arguments that they are worth more than the

banks could sell them for (I have heard such)

unlikely. Why would each bank value them enough

not to sell in their own assets, yet not offer enough

to another bank if they had the chance to get at

least some to part with them? Yes, high risk is a

factor, since banks tend to be conservative, but

then one would expect private investors to get

involved.

I suspect the answer lies in the valuations of

those assets – lending levels of banks are *legally*

limited by the assets held in a certain ratio. This

creates an incentive to claim assets in a higher

amount than could actually be gotten on the market.

In the meantime, those banks don’t have as much assets

available to be converted to cash as are legally

listed, and so are more vulnerable to runs, etc. than

they ought to be.

The valuation method is not just academic, I read

articles that complained about some law passed

over a year ago that required assets to be marked

in value according to market valuations – the

previous method allowed some historical method

(I could be wrong on this – but it was certainly

proposed somewhere). There’s been an editorial

somewhere that valuation methods should be

switched to this – the idea being that if there is

a market, banks with lots of MBS that need cash

can sell, and banks with lots of cash can buy.

Maybe some legal change in valuation can create

enough trust among banks to trade these, but

there is something really wrong in here – as I

stated before, unless there is some perverse way

to create fantasy valuations for the purpose of

lending more money than one ought, there should be

a market of some type – and government is a suspect.

Tim said...

Warren Coats actually rejected the bailout as proposed,

stating that the loans from the Treasury (done

independently of the bailout bill) might be enough. The

article does considers more things that might need to

be done if necessary, oriented towards creating a

market in troubled assets.

To quote:

On Monday, September 30, 2008, a majority of the House of Representatives rejected the Administration’s proposals.

No convincing evidence has been presented that existing liquidity and bank resolution tools are not up to the job of seeing us through the adjustments to earlier excesses which are now underway.