Policy wonks, pitchforks, and the contradictions of capitalism

Yves Smith has asked, not entirely gently, that I reconcile differences in my outrage towards health-care chicanery and what she perceives as “a clever defense of abuses by the powerful” in the sphere of finance. This post is a second response; the first is here. In a nutshell, Smith wonders, why so much outrage for rapacious hospitals when I give a pass to rapacious banks?

The premise of the question is mistaken. I’ve been writing interfluidity for about seven years, and precisely one post has been specifically devoted to health care. Mostly I’ve blogged about finance. Many, many of my posts about finance express outrage toward self-dealing and rapacity in finance, including both private sector banks and their public sector enablers. I’ve not been as prodigious or relentless a critic as Smith. No one on the planet has, and I mean that as a completely unalloyed compliment. But I can’t cop to the crime of giving finance a pass, and I don’t think any fair reader of this blog could characterize me as doing so. I hope that readers who wish to play judge and jury will read the posts that angered Smith, and check out many other posts as well. If you think my posts on opacity somehow mark a change in my politics or my views on finance, you are wrong.

But there is a different sort of inconsistency that I think Smith has correctly honed in on by juxtaposing the health care and the opacity pieces. Let’s consider the health care paragraph she excerpted:

As soon as you delve into the policy wonkery in cases like this, you are submitting to a conspiracy by the powerful against the many. The greater the sphere of disagreeable things that are “complicated”, the more it is possible to construct intricate and inscrutable bureaucracies to “arbitrate”. There will be think-tanks and policy papers, funded by people who are well-meaning (in a narrow, idiotically un-self-aware way) but very rich and powerful. The conclusions of which will be earnest and carefully researched but confined to a window not very upsetting to the very rich and powerful. Undoing the ability of plutocrat hospital “CEOs”, or bankers or lobbyists or whatever, to continue the sort of ass-rape to which their lifestyles have grown accustomed will not be on the table. A good society depends on an active public, first and foremost. A society that has allowed the predations of the powerful to become purely private matters mediated via “markets”, courts, academies, and bureaucracies, that has delegated “activism” to a mostly protected professional class, is nothing more than a herd hoping that today it is somebody else who will be slaughtered.

The majority of this blog could be characterized as “policy wonkery”. interfluidity is constantly, in my own words, “submitting to a conspiracy by the powerful against the many” by speaking the language of the wonk, using modes of argument and accepting norms of evidence set by “academies and bureaucrats” who are, per my own analysis, ultimately bought and paid-for. [*] The opacity thesis is, from a moralist’s perspective, perhaps the very worst genre of policy wonkery — the argument that suggests what normal people consider virtue is wrong for clever, counterintuitive reasons. There is an inconsistency between claiming that “[o]utrage and shame are primary” and arguing that “[s]ocieties that lack opaque, faintly fraudulent, financial systems fail to develop and prosper“.

I don’t have a good answer, except to say that the true art of politics lies in reconciling this sort of contradiction. It’s a dilemma I’ve considered at some length. A society governed by technocrats, which chooses what seems “optimal” according to some expert’s criteria without regard to morality, will not (and ought not) survive. Human beings are moral animals. Institutions cannot thrive without being supported and rationalized by a widely-shared ideology. On the other hand, simply following intuitions about morality can lead to technocratically untenable choices. A society that eschews violence might be well and good, until a neighboring tribe makes a different choice. A successful society must find an intersection, some set of institutions that are both technocratically effective and reinforced by a moral ideology. My opacity thesis claims we face a mismatch, which in the past we resolved by devaluing transparency and tolerating a degree of misbehavior in the shadows. I don’t say we should go back to that. But I do argue that it was an arrangement which, however distasteful, served important functions. My own attitude towards finance is the same outrage I bring to health care. I believe we ought to restructure finance into something we can live with morally. I oppose the technocratic impulse to sweep sinning under a rug while doubling down on ever-less-plausible “regulatory” palliations of predation.

But I think finance will prove a harder sphere to bring into line with moral ideas even than health care. “Opacity” is just the tip of the iceberg. The financial sector is where the growing social and economic contradictions of our society go to get papered over. How can we reconcile increasing polarization in wealth and income with our pretensions of being a middle-class society? We’ll invent a special purpose vehicle, stoke a bubble, make it work somehow. If, er, ownership of the means of production, including market-value-weighted labor power, is increasingly concentrated, how can we maintain demand without redistribution? We can lend, even though many of the people without purchasing power now are unlikely to earn a lot later.

We rely upon the financial sector to tell us sweet lies. We impose starkly contradictory requirements on financiers (“lend prudently!”, “support the economy!”), pay them incredible amounts of money when they somehow make it work, and are shocked, shocked that they evolve elaborate schemes to fudge things. I am not excusing anything. We gladly put drug kingpins into jail, even though we understand that high consumer demand plus aggressive criminalization makes the emergence of kingpins inevitable. While we have this cesspool, we’ll need to aggressively police it. But we won’t find our way to a “clean” financial sector until we resolve the contradictions that render dissembling essential to our social peace and economic development.


[*] On “norms of evidence”, Smith and other commenters have me dead to rights. I offered a very sweeping thesis that is internally consistent and that comports with my understanding of finance and history. That is weak evidentiary tea. I ought not to have written, in the second post of the series,

We must give the devil her due. It pissed a lot of readers off and pisses me off too, but the argument I offered in the previous post is true.
I have no right or ability to adjudicate the history of the world.

 
 

23 Responses to “Policy wonks, pitchforks, and the contradictions of capitalism”

  1. [...] Note: In her post, Smith asked me to comment about differences in my treatment of health care and finance. I think there’s something interesting to talk about there. That will be a second post. [...]

  2. skholiast writes:

    I have been puzzled by the charge that you were writing approvingly of what you describe. Some might think you were sort of posturing woefully, looking sad and shrugging, “But what can we do?”, but that is a very narrow way of reading those three posts, or indeed even the first two. I think, as I tried to say at the time, that you name a real operational premise of the market. That claim is of course disputable, and some people have offered better critiques of it than I can; but the factual dispute is different from the argument about whether you were offering an apology for opacity. In fact, it’s downright interesting that these two points, the What you said and the Why you said it, get so mixed up.

  3. andrew writes:

    I see your posts on opacity as ‘functionalist’ analysis in that you will outline the functions that opacity play for socoety as well as some interest groups – as well as highlighting how opacity often serves a putpose. that is indeed distinct drom endotaing tje focus of the analysis. a sociologist can describe how thr family division of labor in which the wife stays at home often ‘works’ quite well without endorsing patriarchy

  4. [...] Policy wonks, pitchforks, and the contradictions of capitalism – Interfluidity [...]

  5. S Stachura writes:

    I think how much we must depend on bankers’ ingenuity to promote investment is a function of how many real opportunities is out there. When demand is sound no one needs bankers’ magician to find some good investment opportunity. Relaxing banking regulations and a culture of fraud is necessary, where households are struggling.
    So I think we could do without it.

  6. stone writes:

    If hypothetically we had an alternative system that was brutally transparent with a no-nonsense financial system; can we really be sure that we would become impoverished as a result? I rather suspect the world as a whole would be more affluent. It probably would entail some state mediated redistribution such as replacing current taxes with an asset tax BUT we currently have opaque state mediated redistribution in the form of government support for banks, central bank mediated asset price inflation and so on. My guess is that the trade off might be that we would loose out to the developing World. Our bubbles mean that resources flow from the developing world to us. If all seven billion people on the planet could afford oil then we would need to develop renewables. A system that ensures that most people can’t afford oil means that we don’t need to bother.

  7. [...] Policy wonks, pitchforks, and the contradictions of capitalism – Interfluidity [...]

  8. Anonymous writes:

    I wouldn’t worry too much about Yves Smith’s vitriol … she’s hardly evenhanded and has become somewhat rabid (for example her links to YouTube videos fantasizing about killing banisters.) Her deciding what Sen Warren ought to be doing for her and her weird view of herself as a protective matron of the OWS movement is frankly just bizarre.

  9. Anonymous writes:

    Banksters, not banisters … Damned autocorrect!

  10. To reiterate a point I made (perhaps too) late in the comment stream on your previous post, when it comes to inconsistency, Yves Smith lives in a glass house: http://reservedplace.blogspot.co.uk/2011/10/naked-hypocrisy.html

    I hadn’t been looking at NC for sometime, mainly because I no longer learn much from the one-sided criticism it presents, but it is still the case that (in the UK at least), if you show interest in posts on payday loans, you get adverts from payday loan companies, so Yves continues to choose to benefit, albeit indirectly and probably in a small way, from some of the most predatory forms of finance. In my opinion, if you run a campaigning blog, it behooves you to either eschew adverts, or at least be sure that they do not promote the very thing that you are criticising.

    That said, I don’t agree with you about opacity in finance. There is no way that a small group of regulators can be expected to protect millions of investors from thousands of finance professionals, but the regulators can at least give those investors a chance of using their millions of eyes to spot dodgy propositions, if the regulators legislate clarity in finance as far as possible (eg by proper MTM accounting). That seems unlikely to me to mean that some genuinely productive investments don’t get financed, but if it does, then the appropriate course is to fund these socially (eg telecommunications hardware).

    As for healthcare, I am sure most people in developed countries around the world think Americans are crazy. Given the size of the financial risk involved for individuals from conception to grave, it seems to me that public healthcare is the only efficient way to organise the most serious healthcare. We in the UK know that the NHS is not perfect and are always looking for ways to make it better, but there are very, very few who would like it privatised.

  11. Luis Enrique writes:

    The majority of this blog could be characterized as “policy wonkery”. interfluidity is constantly, in my own words, “submitting to a conspiracy by the powerful against the many” by speaking the language of the wonk, using modes of argument and accepting norms of evidence set by “academies and bureaucrats” who are, per my own analysis, ultimately bought and paid-for. [*]

    I don’t understand this passage at all. What are these modes or argument and norms of evidence? What do they have to do with a conspiracy by the powerful against the many? Who are you accusing of being “bought and paid for” – academics?

    I’m not sure what you have to apologise for – afaiks, you try to combine clear thinking and data. What other modes of argument and norms of evidence are there, that you ought adopt instead?

  12. Philip writes:

    The only remarkable thing to me is that you think that the healthcare sector is not also a place where various impossible ideas go to get papered over. Most people, of all political persuasions, have a deep instinct that we must do all that we can to stave off illness and decline for all citizens–withouth being willing to think about what that “all we can” really means, or putting front and center the fact that we will all die. Why on earth are we then “shocked, shocked that [those in the healthcare industry] evolve elaborate schemes to fudge things,” or that some people get a very raw deal from the system?

  13. [...] Wonks “We rely upon the financial sector to tell us sweet lies” - Steve Waldman [...]

  14. Jay writes:

    This is a blog, not a scholarly article or doctoral dissertation. For blogs there are generally no rigorous standards of evidence, reasoning, grammar, spelling, or even sanity.

  15. I don’t agree, Jay, but in blogs these ambitions should be promoted by ethics rather than editors. If bloggers wrote less posts, with more rigour, there would be less junk and more informative debates. Standards were higher when I got involved, initially with comments on Brad Setser’s blog, about five years ago. And I believe that adverts have something to do with the deterioration of standards since then, as advertising revenue may drive bloggers to write more posts, with more sensational ideas, to keep traffic up.

  16. Jay writes:

    I’m certainly not against evidence, proper spelling, or sanity, but I consider a blog post to be an entirely reasonable sounding board for ideas that have not been fleshed out in the manner that a scholarly journal would require. All ideas start as hunches. We look for evidence to flesh them out, but since we naturally tend to look for confirming evidence, it’s helpful to communicate hunches at a relatively early stage so that skeptics can weigh in with contrary evidence.

  17. allis writes:

    @srw, recently I’ve been mulling over the nature and importance of numeraires. For example, when buying cars, are we interested in fuel efficiency, miles per gallon (mpg), or are we interested in fuel consumption, gallons per mile (gpm)? (See the internet article, “Gallons per mile would help car shoppers make better decisions”) For good decision making, it’s important to know whether we are interested in maximizing the output per unit of input (mpg), or in minimizing the input per unit of output (gpm).

    Are we maximizing types or minimizing types? In the payoff matrix of the Prisoner’s Dilemma, a maximizer would go for the best deal in the upper left-hand corner and not squeal, having “faith” and “trust” than his partner wouldn’t squeal either. A minimizer would squeal, not having faith and trust in his partner, and would go for the least bad payoff in the lower right hand corner.

    It occurs to me that the importance of “opacity” for encouraging investment is analogous to Keynes’ promotion of “animal spirits.” In Prisoner’s Dilemma terms, it does seem that realistically speaking most partners will squeal; most businesses do fail. However, it’s one thing to use opacity to enable both parties in the game not to squeal and to end up with the big payoffs, but it’s quite another thing to encourage one party to keep quiet knowing all the while that the other party will squeal.

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  19. reason writes:

    My guess is that Yves is jealous of the quality of commenters you have here and wants to get in on the action.

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  22. Morgan Warstler writes:

    Real technocrats ship.

    The issue is that most people who think themselves wonks, are just bloggers.

    Wonks and entrepreneurs are the same thing. If you can’t and haven’t cut it as an entrepreneur you are not really a wonk. A government run by entrepreneurs, to favor and encourage entrepreneurs will OUT PERFORM as policy policy proposals of wordsmiths and rhetors.

    It is good to have agitators in the peanut gallery, it is even good to have politicians as evangelists, the real policy, the nuts and bolts or fine tuning the machine, that ought to be handed to hacker and coders – inventors who routinely INVENT – generally describe the problem, and then get out of the way.

  23. Morgan Warstler writes:

    Witness the ease with which the mind moves from Bloomberg to Jack Dorsey …