The Lessons of Greed

The Lessons of Greed by Thomas Fleming • October 27, 2008 • Printer-friendly

I am not an economist. I do not want to be an economist, because I do not believe there is a science of economics, and from all I can gather there is no kind of economics being practiced today, at least in high official circles, except “voodoo economics.” If I were wrong, then there would have been a consensus of economic experts on what would happen if, say, Congress deregulated the mortgage industry and encouraged lenders to issue mortgages for hundreds of thousands of dollars to people who might not be able to buy a cheap used car from Sleazeball Joe’s No-Money-Down used car lot.

In my youth I was foolish enough to take an Econ 101 course, in which I learned very little that was useful or true from Paul Samuelson’s textbook, and as a young college teacher I took part in a year-long interdisciplinary postdoc group that studied macroeconomic theory with Jack Tawil, a disciple of Armen Alchian who taught me to think, for a time, in economic terms. Though we disagreed profoundly on such issues as the forced relocation of Southern textile companies, I learned most of what I know of economics from Jack and the economists he turned me toward–Alchian, North, Friedman–and my spotty education was filled in in later years by Murray Rothbard and his best disciples. Now that I have established my amazing credentials as the new genius Stein–Ben, not Ein or Franken–let me share with the world my completely uninformed and unreliable opinion on why, as Christopher Buckley recently put it, I no longer have a 401(k) but only a 1(k) future.

We have all by now learned a few things from this mess. The clearest message is, I repeat, that there is no science of economics, and there may not even be an art. If economics were a science like biology and medicine, there would be agreement among experts on the fundamentals and some reasonable expectation that policy A would produce results B. The same rules would apply to all nations in all periods of history. If it were an art or craft, like poetry or carpentry, we could expect an expert in the art to be to do good work predictably and consistently. But when has any of this ever been true of economics? As Sir Moses Finley demonstrated brilliantly in his Sather lectures, Greeks and Romans did not act economically as they should have but made decisions on other grounds. Yes, a philosophical economist can take account of these differences by referring to subjective values, though this only trivializes the question, because a principle that can explain everything explains nothing. And, yes, by and large, liberal economists have a vastly superior understanding of how markets work, but their policies fail to take into account the all-important human factors–love, desire, hate, envy, greed, and ambition–that can distort or torpedo their wisest initiatives.

Look at all the economic geniuses hired by the White House and the Congress. How many of them warned their masters against, for example, the credit derivatives that have been plausibly described (in a recent 60 Minutes segment) as side-bets on the mortgage market, a form of reckless gambling legalized by the Clinton administration? Some of the “experts” did predict recession and a market pullback, but the only man I know who told me to get out of the market was Rockford Institute board chairman and retired banker David Hartman. Dave has told me over and over that there is no such things as economics, only economic history, and his successes in business–and as economic prophet–are enough to convince this ignoramus that he almost always knows what he is talking about. When bright boys criticize his judgments, I ask them to show me their bank balances.

I may not know much about economics, but I know a thing or two things that Allan Greenspan does not know. It turns out that his inability to speak clearly is a reflection of his inability to think at all. He apparently believed his own free market rhetoric about open competition, and it is equally apparent that he did not read the the unabridged version of The Wealth of Nations in which Adam Smith explains that capitalists always seek to form, by fair means or foul, monopolies and cartels. In terms of gross market efficiency, greed may be as good as Gordon Gekko insisted it was–and I think he was right, by the way–but anyone who praises greed as the root of free market competition should as a consequence be on guard against the looters. Greenspan (like his successor) turned a blind eye to moral reality What did we expect from Ayn Rand’s beloved disciple, a cult member who has never repudiated his silly and ignorant leader’s gospel of selfishness? Turning over the Fed to a Randian is like turning over Health and Human Services to a disciple of Mary Baker Eddy.

Here is this question in a nutshell. If the government’s leading economic advisers knew what was going on and allowed it to happen, they are criminals who should be locked up for a long time and have their possessions distributed among their victims; if they did not know, they are incompetent and should be fired and have their possessions distributed among their victims. But is good old Hank Paulson out on the street selling apples to unemployed money managers? No, he is too busy hiring his croneys from Goldman Sachs and giving them the power to cartelize the entire US economy as a wholly owned subsidiary of Goldman Sachs–or, rather, Government Sachs, as the firm is beginning to be called. Is he stupid or a criminal? Fortunately, that is a question to which the answer may be: “Both.”

Small wonder that so many people are pinning their hopes on the Democrats–who, unfortunately, were neither more prescient nor less corrupt than the Republicans. When Senator Obama blames John McCain for the crash, he proves what a liar he is. Is even George Bush responsible for a world-wide credit-crunch caused by corrupt and greedy lenders on several continents?

So that is the first lesson of greed, that while greed may be good as an incentive to hard work and investment, it is also morally corrosive to the plutocrats. But there is another lesson of greed. If the Big-Money boys were out on a speculation binge, their clients were doing the same thing. Yes, I have heard about all the poor widows and orphans being evicted from the family farm, but what is not mentioned so often is the number of defaulters who are real estate speculators. One estimate is that 30% of the defaults are the result of ill-advised speculation. But that is the mentality of today’s American home buyer who wants to double his money every five years. We no longer buy houses in the expectation of living and dying in them and passing them on to our children. They are nothing more significant than investment vehicles, like 1000 shares of Microsoft. In more recent years, home mortgages have turned the whole industry into something more like the options market. Small wonder, then, that local governments have so little hesitation in exercising the tyrannical power of eminent domain. It is not as if there were real homes at stake–the entire concept of the home has been outmoded by no-fault divorce, working mothers, and the emblematic candidacy of Sarah Palin that has put the “Christian” seal of approval on the feminist movement.

This is, as they like to say in this land of the Almighty Dollar, the bottom line. There is nothing real in these United Socialist States of America. Our currency consists of pieces of paper we are ordered on pain of death to treat as money; our marriages do not last as long as shack-ups in Sweden; and our homes are nothing but investment vehicles, no more stable than a house-trailer on a rented lot on which state, federal, and local government have a permanent lien through the tax codes.

Well, then, what is to be done? As subjects of a vast socialist state that controls our lives, we can do nothing except vote for column A or column b. In the USSA, the right to vote, as I used to say some 20 years ago, is little more than the right to collaborate with your oppressors. You get to choose the nicer concentration camp guard who does not really like torturing and murdering people, but, shucks, we all have to make a living somehow, and, besides, we’re really voting for Sarah. This time, as Rush Limbaugh puts it, “We have the hot babe.” (Question: which hot babe have the Democrats run? Gerry Ferraro? Nancy Pelosi? Hilary Clinton?) I have more sympathy for the wiseguy who came up with: VOTE FOR CHUTHULU. WHY VOTE FOR THE LESSER EVIL?

As human beings, however, we have the power in our hands not to live the way they tell us to. Nobody forces a woman to conceive children out of wedlock and then either kill them or cash them in for welfare checks; nobody forces us to change houses and jobs; and nobody forces us to buy houses we cannot afford in the expectation of making enough money to afford wall-to-wall high definition TV. Accepting the moral responsibility for the way we live is our first step toward freedom, and if morally responsible property-owning citizens were ever to add up to a third of the population, we could begin to think about taking our country back.

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