The Capitalist Manifesto: Greed Is Good (To a point)
newsweek.com
newsweek.com
The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA.
The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated. In the last seven deals that I've been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars. Thank you. I am not a destroyer of companies. I am a liberator of them!
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"Then there was the 1997 East Asian crisis, during the depths of which Paul Krugman wrote in a Fortune cover essay, "Never in the course of economic events—not even in the early years of the Depression—has so large a part of the world economy experienced so devastating a fall from grace." He went on to argue that if Asian countries did not adopt his radical strategy—currency controls—"we could be looking at the kind of slump that 60 years ago devastated societies, destabilized governments, and eventually led to war." Only one Asian country instituted currency controls, and partial ones at that. All rebounded within two years."
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How'd Krugman ever get accepted as an economist? He seems to be a massive doomcrier who is consistently wrong, and uses a lot of anecdotes and very few hard numbers. Which works great for Gladwell, but not so good for economics (heck, I dropped economics as my major because I didn't want to deal with econometrics - but I still have a healthy respect for it).
There's some tremendously intelligent economists that I disagree with their overall message, but very much respect their contributions. If you take the time to read and decipher Marx, Gramasci, and Keynes, they said some really brilliant things. Very, very smart people.
But Krugman? The guy seems totally bankrupt. And I've tried to read his stuff, and I keep seeing anecdotes, doomcrying, and him just being provably wrong often without being verifiably correct ever. Can someone point me to some smart reading material of his, not babysitter scrip anecdote nonsense? I'd like to learn from the guy if he has made some good contributions, or get to the bottom of why he gets respect if not. Always been curious about this one.
That makes sense, good point nazgulnarsil. Thanks.
> Keynes in particular just bases entire chapters of his General Theory on trivially fallacious theses. Marx isn't even wrong, he's just exploring a world that isn't related to reality
Definitely true - but both of them made observations that were true and correct, which lends a bit of credibility to their work. Keynes for instance, "workers resist a reduction in monetary wages, [but] it is not their practice to withdraw their labor whenever there is a rise in the price of wage goods" (General Theory, p9). Which is true and correct - laborers don't notice gradual inflation, so governments can use it to lower wages and increase tax revenues under a progressive tax system (wages gradually rise, tax brackets remain fixed, therefore a greater percentage of GDP goes to tax revenues without an official tax increase).
These aren't good reasons to do what he advocates, but Keynes at least has some correct observations. Really insightful ones actually, if you listen to people who violently disagree with Keynesian economics, many of them have the utmost respect for him. (Friedman is the first one to come to mind, who always spoke well of Keynes).
But bringing it back around - Krugman... I haven't seen anything intelligent from him, ever. Not a single observation of the way the world works or implication that seems correct. He seems like a two-bit fearmonger, and he doesn't back off when he's proven wrong. I'd like to be wrong though, if there's any admirers of him that have links to good work by him. It doesn't have to be popular economics either - a link to a good academic paper would work too, if there is one. I really cling to a hope that it's not possible for an economist to get mainstream recognition just by partisan sucking up - I really hope so, as economics has such huge implications for society.
Of course the critique of the entire field is that it is blatant curve fitting, descriptive rather than prescriptive.
P.S. The nobel prize in economics was not one of the prizes originally enumerated by Alfred Nobel.
I've read a bit too much criticism of economy as a science using the same argument you see from creationists against palaeontology. (That is, assumptions that all researchers are idiots and/or in a conspiracy against the creationists/left wing extremists.)
In other words, Krugman's contribution is a lot of math that has never been shown to work. When you add math to a theory in a way that does not improve people's understandings of the issue, you have not added to the world's store of knowledge.
This is a good analysis of Krugman's contributions to international trade from when he won the John Bates Clark medal in 1991 - http://web.mit.edu/krugman/www/dixit.html. I'm not sure he's done anything too groundbreaking since then.
He's also co-written the textbook most undergraduate economists use (including me) for international trade - http://www.amazon.com/International-Economics-Theory-Policy-...
http://www.economics.ox.ac.uk/Research/wp/pdf/paper423.pdf
Basically, you have to separate his work as an economist from his politics or make a general distinction between quantitative and literary economics. Quantitative economics involves functions and calculus. Literary economics involves English words. I respect Krugman's intuitions even if his predictions are often wrong. It's hard to predict the future, even for a noted economist.
And we think that the Nobel folks made that separation and didn't do it to "kick Bush in the leg" (to quote a committee member's comment in a previous year about a given award)....
> I respect Krugman's intuitions even if his predictions are often wrong. It's hard to predict the future, even for a noted economist.
The point of science is to predict the future....
You need to separate Krugman's work as an academic economist from his work as a "popular economist" and political commentator. I'm not an economist, but my understanding is that his academic work is outstanding and has contributed significantly to improving the models for understanding international trade. He also correctly predicted that fixed exchange rate regimes would be dangerously unstable (a lesson that not everybody has learned yet).
As you point out however, he was incorrect in his prescription for how to deal with the currency crisis. I'm going to postulate here that economists don't have really good models for studying how to recover from crisis events because they are relatively rare in comparison to their complexity, so the mathematical tools of economics are unable to explain them well. When you're placed in a situation in which you do not have enough information to make a good recommendation, the correct action is to admit that fact. That goes for the current crisis as well. Krugman seems to have very strong idealogical tendencies, given that he wrote a book called "The Conscience of a Liberal," and thus expresses his opinion about how to handle these matters much more forcefully than is warranted by the information that is provided by economics. In my opinion, this is an abuse of the natural authority provided by his economic credentials, and he should probably stick to writing articles for the academic community and not the popular press.
1) voluntary in-kind exchange ( Christmas presents, buying each other rounds of drinks)
2) coercive in-kind exchange ( corvee, slavery, conscription, bound serfdom)
3) voluntary monetary exchange ( buying food at the super market )
4) coercive monetary exchange ( taxes )
#1 is great, but unfortunately is does not scale. It works very well among family, friends, and small communities, but it quickly breaks down in larger economies.
Of the remainder, #3 seems obviously the superior way to engage in transactions. And #3 is free market capitalism. Capitalism is not good because greed is good. Capitalism is good because it forces greedy people to actual produce something of value and exchange it, rather than just taking it from others.
The financial crisis is not an example of #3 but of #4. The "too big too fail" and "lender of last resort" policies have been in place for decades. They allowed banks to take huge risk, and then when the risks failed, the government uses its coercive powers to tax the public and bail out the financial system, thus encouraging even more risk taking.
If we only ever debate on their terms we can not hope to avoid the stupid Randian take on liberty and markets that dominates most people's thoughts about capitalism.
Markets, with all of their permutations, are just a few tools in our toolbox. I completely agree with you that the debate needs to be made much less ideological and much more precise, but we cannot pretend these discussions are happening in a vacuum.
I am a fan of Rawls' "veil of ignorance" line of reasoning. This is probably because I want to embrace "luck" not as an excuse for domination, but as something orthogonal to control and subjugation: diversity necessary for us to successfully traverse the fitness landscape, hopefully enabling us, collectively, to move towards the stars and friendly posthuman intelligences.
i would suggest that civilization requires both communes and markets to function properly -- basically, communes interacting with other communes and individuals in a market. markets may get you what you want, but to get things done, groups must behave like communes, all working together -- you do not barter over what you will get out of individual tasks. true, tasks are done in exchange for a continued wage, and the establishment of a job is done in a market. but once you are within a group, what is most effective? doing every task because you are paid to do so, or because you want the product to be as good as possible? I think that ties into one of the reasons that startups are so much more effective than large corporations; if I can try to put my finger on it, pride for the product and group cohesiveness.
i don't know what the answer is, but I just want you to consider that markets are not only not the only tool humans have used to cultivate civilization, but they are not even the first tool.
and when technology progresses to the point where we can give every individual a chance at a healthy and productive life at no cost to society, they will certainly not be the last.
True, but some people view self-interest much more narrowly than others. For example, some oppose welfare for the poor because they do not want their money going to people who do not work as hard. This is a narrow view of self interest. Others support welfare because they believe that in the absence of welfare, the poor will engage in illegal activities, such as robberies, which will inevitably cost more than taxes that go towards paying for welfare. This is a much broader view of self interest.
Capitalism, unfortunately, has come to be identified with the narrow view of self-interest.
http://wiki.lesswrong.com/wiki/Typical_mind_fallacy
You are not me.
So people who are understandably annoyed that Wall Streeters make millions without contributing very much, if anything, are unnecessarily encouraged to support state socialist policies. In reality, it is the lack of free markets which caused such problems in the first place.
He was not, actually, positing that it would eventually collapse but that it may survive its cycles so long as there are enough "willing" people to take the brunt of the crashes and least of the booms at the bottom rungs of society.
Of course, he probably had less of an idea about the resource problems we will be facing in the near- to mid future, complicating capitalism's crash-recovery.
Personally, I think it will take at least two more of these before there is anywhere near enough support for abandoning capitalism.
If we all act for our own interest, then there is competition and I suppose the more adapted will win, which as it happens is the foundation of evolution. So to speak of checking our own moral compass is empty rhetorics because morality as such does not even exist. Only jusgments as to what is right to do for my own interest and what consequences there are.
Therefore, supposing that morality does not exist, the only way to enforce this "moral compass" is by legislation or culture. The culture in such places is greed and perhaps rightly so as if someone makes money, that money will go somewhere surely, hence making more money, etcetera. If the culture is greed therefore, the only way is imposing a code of conduct supervised by some governing body and or imposing legislation and or, there are ups and downs in life, why should we expect the economy to be up always and never go down.
I think the system is fine, I would have liked to see the banks fail to be honest. If they did not do their job properly they should be out of a job. Otherwise we are just feeding an artificial creature which does not adhere to the laws of evolution and by association competition, perhaps to the detriment of us all.