Posted on 03/17/2009 9:21:58 AM PDT by To Hell With Poverty
Last weekend, Harvard University sponsored a conference called (I am not making this up) "The Free Market Mindset: History, Psychology, and Consequences." Its purpose was to try to figure out why, since everyone knows the current crisis amounts to a failure of the market economy, the stupid rubes continue to believe in it. The promotional literature for the conference opened with That Quotation from Alan Greenspan — the one in which he suggested that there was, after all, a "flaw" in the free market he hadn't noticed before.
Well, that does it, then! If our Soviet commissar in charge of money and interest rates says the free market doesn't work, who are you to disagree?
The promotional material continues:
If the current state of the U.S. economy makes clear that former Federal Reserve Chairman Alan Greenspan's faith in free markets was misplaced, the question remains: what was it about free markets that proved — and still continues to prove — so alluring to economists, scholars, and policy-makers alike?
Because, of course, if there's one guiding principle behind the largest government in world history, it's free markets. Ahem.
This conference, we were told,
brings together leading scholars in law, economics, social psychology, and social cognition to present and discuss their research regarding the historical origins, psychological antecedents, and policy consequences of the free market mindset. Their work illustrates that the magic of the marketplace is partially an illusion based on faulty assumptions and outmoded approaches.
The speakers then spent the day, I am sure, laying out their own faulty assumptions and outmoded approaches, and studiously ignoring the Austrian School of economics.
In short, the conference was about this: Why do people still think the interaction of free individuals is a superior economic system to one directed by Harvard Ph.D.s like us? I mean, apart from the failure of central planning in every case in which it's been tried, a failure so staggering that only a blockhead could miss it, why would people cling to the idea that being herded into a collective run by the experts isn't the best way to live?
So by assuming from the outset the very thing that needs to be proven — namely, that the current state of the economy just occurred spontaneously, as the result of wicked market forces — our betters relieve themselves of the need to consider that central banking, a government-established institution, just might have had, you know, a little something to do with what happened.
George Reisman has already demonstrated the absurdity of referring to our present system as a "free-market" one. Naturally, of course, none of the participants bothered to notice that a Soviet commissar in charge of money and interest rates amounts to something like the opposite of the free market, or that the economic distortions he causes cannot, therefore, be the fault of the free market. This is exactly why, in my book Meltdown, I call the Fed "the elephant in the living room." We're not supposed to notice it, and we're supposed to pretend the damage it causes is the result of wildcat capitalism, unfettered free markets, or whatever other juvenile phrase is currently in vogue to describe the usual bogeyman.
Now I don't want to list all the paper topics at this conference, since it'd be a shame to make all of you feel stupid for having frittered away your weekend when you could have listened to, say, Stephen Marglin's paper on "How Thinking Like an Economist Undermines Community." Now there's a topic I haven't heard quite enough platitudes about. (If you must, you can view the whole schedule here.) You could also have heard a bunch of totally conventional polemics about how the market economy allows for "too much" pollution, when in fact a genuine free market — which, I need hardly point out, is not actually considered in any of these alleged papers — would punish polluters and bring about the internalization of so-called externalities. Murray Rothbard dealt with this matter in an extremely important article none of the participants had read.
I wonder if anyone at the conference asked questions like these:
*When Greenspan flooded the economy with newly created money and brought interest rates down to destructively low levels, thereby distorting entrepreneurial calculation as well as consumers' home-purchasing decisions, was that the fault of the free market?
*Do you think the Fed's creation of cheap credit out of thin air makes market participants more careful or less careful in how they allocate borrowed funds?
*When Alan Greenspan bailed out Long Term Capital Management in 1998, was that a "free market" phenomenon? Do you think he thereby encouraged more or less risk taking among other major market actors?
*The Financial Times spoke in 2000, in the wake of the dot-com boom, of an increasing concern that the so-called "Greenspan put" was injecting into the economy "a destructive tendency toward excessively risky investment supported by hopes that the Fed will help if things go bad." "All the insane dot-com investment we've seen, all this destruction of capital, all the crazy excesses of the past few years wouldn't have happened without the easy credit accommodated by the Fed," added financial consultant Michael Belkin. Did the free market cause that?
*Do lending standards decline for no particular reason, or could this phenomenon have a teensy weensy bit to do with (a) government regulation aimed at increasing "homeownership" and (b) loose monetary policy by the Fed? (When the banks get the additional reserves the Fed creates, they naturally want to lend it out — and in order to do so, they wind up lending it to people they either have or would have rejected previously. As I show in Meltdown, the phenomenon of lax lending standards in the wake of an inflationary boom by a central bank is traceable all the way to the 19th century. There is nothing even slightly unexpected — or market-driven — about it.)
Questions like these could go on and on. Not one, you can be certain, was raised at this conference.
Now if you really wanted to sponsor an event whose purpose was to try to understand why people believe inane things that have been falsified by reality, you'd do much better to hold a conference on socialism, or on Keynes and his school. It would be fascinating to learn the psychological motivation behind the persistence of Keynesian economics, whose popular version is a nonfalsifiable, ersatz religion.
Is Japan's economy still suffering? Why, that's because Japan didn't spend enough — even though it spent so much that it became the most indebted country in the developed world.
Have people spent so much that they're now burdened with debt they can't possibly repay? Then we need more spending.
Is the economy a distorted mess after an artificial boom? Then instead of letting the economy restructure itself along sustainable lines, let's instead "stimulate" the system just as it is, with the goal of bringing about more "consumption," more "labor" employed, and higher "income," without bothering to disaggregate any of these things and deciding what kinds of labor need to go where, what kinds of consumption are sustainable and what are figments of the bubble economy, or how the capital structure needs to be reassembled in order to cater to genuine consumer demand. In fact, let's actually boast about neglecting capital theory altogether (as indeed Keynes did in a 1937 article in the Quarterly Journal of Economics).
Here's another thought: given how many Keynesian economists predicted a return to depression conditions when World War II spending came to an end, and that what we instead got was the single most robust year the private economy has ever seen, isn't it a little strange that not one of these economists went back and reexamined his premises?
On the other hand, consider the names Jim Grant, Peter Schiff, Ron Paul, and Jim Rogers. Apart from having predicted the current crisis — unlike anyone at the Harvard conference and indeed unlike the paper-tiger economists they unsurprisingly preferred to spar with during their deep-thinking session last weekend — one thing these men have in common is that they are all Austrian economists, they all believe in the Austrian theory of the business cycle, and they all pin the blame for the crisis on the Fed, a nonmarket institution. These men believe in the real free market, not the centrally planned market of Alan Greenspan, Ben Bernanke, and the Federal Reserve. And they saw a crisis coming at a time when everyone else was predicting new highs for the Dow and singing the praises of a world economy that was more robust than it had ever been.
Maybe that's why people believe in market economics: unlike the Rube Goldberg models of their counterparts in the profession, the things Austrian economists write and say actually have some connection to the real world.
People who believe in the market economy support a social order in which free individuals make voluntary contracts with each other, and no one can initiate physical force against anyone else. Is that vision so obviously unattractive that we have to refer its supporters for psychological evaluation?
We might instead wonder at the psychological condition of those who would denounce such a system: might they be motivated, for all their noble talk, by nothing but base envy of those with more material wealth than they, or by a pathological desire to dominate other people?
I'm sure that will be covered at next year's conference.
Anyone thinking about Harvard for schooling is a verifiable idiot.
BTTT!
My, how history repeats itself...
If they ever remake “One Flew Over The Cuckoo’s Nest”, they should shoot it in a college or university instead of an asylum.
Stupid rubes? Good grief!
Harvard has fallen so very far from "New England's First Fruits". If anywhere a revival and return to purpose is needed in America, it's there.
.
Be careful. The author is mixing personal opinion with conference outlines. It would have been nice if the author actually reviewed presented material vs. attack the conference title. This conference could have ended up supporting capitalism but there is no way to tell from this article.
I will be the first in line to criticise Harvard and Ivy League schools but lets base it on reality vs. perception.
Wouldn't it be more sane for me to take a gub'mint job and get some decent sleep at night?
Yeah, capitalists are crazy alright.
The term “stupid rube” is a racist term. Whoever used it, should know better.
The word Rube was condensed from the name Reuben. I’ve seen it used as a pejorative in relation to Jews. In fact it’s more comment use seems to have be a reference to “stupid” Rube Goldberg-like ideas. I don’t use the term due to the way I’ve seen it used, but that’s my personal take on it.
http://dictionary.reference.com/browse/rube
Well said and a darn fair point.
Then Alan looked in the mirror, and exclaimed, "There's the flaw. I see it now!"
Harvard has been selling its product (an toney education) in the capitalist market for centuries. The market seems to bear quite a bit when it comes to paying for said education.
It’s time for the capitalist entity Harvard to be seized by the government so that all the people can afford to attend it.
Of course free market capitalism has only brought us more than two centuries of overall economic growth, but hey...
Yeah, let’s listen to the experts from Harvard.
“If recession should threaten serious consequences for business (as is not indicated at present) there is little doubt that the Federal Reserve System would take steps to ease the money market, and so check the movement.” ~~Harvard Economic Society, October 19, 1929
“...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation...”
- Harvard Economic Society (HES), November 2, 1929
“... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall.”
- HES, November 10, 1929
“...there are indications that the severest phase of the recession is over...”
- Harvard Economic Society (HES) Jan 18, 1930
“... the outlook continues favorable...”
- HES Mar 29, 1930
“... the outlook is favorable...”
- HES Apr 19, 1930
“Business will turn for the better this month or next, recovering vigorously in the third quarter and end the year substantially above normal.” ~~Harvard Economic Society, May 17, 1930
“...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent...”
- HES May 17, 1930
“... irregular and conflicting movements of business should soon give way to a sustained recovery...”
- HES June 28, 1930
“... the present depression has about spent its force...”
- HES, Aug 30, 1930
“We are now near the end of the declining phase of the depression.”
- HES Nov 15, 1930
“Stabilization at [present] levels is clearly possible.”
- HES Oct 31, 1931
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.