"The Mind of the Market"
by Robert Russo
Many libertarians profess doubts about the Cato Institute, saying its message and actions are often contradictory, un-libertarian and hypocritical. One of the most common accusations is they rub noses with the very establishments we oppose. One blogger writes "Year after year, members and affiliates have maintained a marvelous high wire act, claiming superficially to be nonpartisan… And yet, as donations poured in from well-heeled private sources, a funny thing happened to the production line of scholarly documents and position papers. It veered right."* (Personally my beef is their support of academics, without which you can't even be a Cato intern.) It is the "premier" libertarian think tank, and yet many libs don't know what if anything it is doing (or if they do, what they consider libertarianism may be different from what comes from the party or even the individual).
Author Michael Shermer, economics professor and creator of Skeptic Magazine has written a book "The Mind of the Market", which he presented at a televised Cato forum in January that aired again this past Saturday. A proactive Darwinist and atheist, he has written several books denying the existence of God (which he calls "the case against intelligent design"), and ripping what he considers pseudoscience in his previous title "Why People Believe Weird Things". You can probably guess the content of this work doesn't sound very libertarian. He began his presentation with "it's good to be back in friendly waters amongst my fellow libertarians".**
Amid constant references to evolutionary theory and the lumping of all beliefs besides his own, he says in no uncertain terms that a misinterpretation of our economy results from the involvement of anyone who is not a graduate of the same school of economics as him. He opposes diversity in the sciences, citing that in the interests of fairness government typically assembles "a right-wing scientist, a left-wing scientist and a scientist who has no wings" to decide an issue to its own detriment.** He attributes economic failure in part to "the resentment of wealth that people have, the mistrust of corporations" etc., as sort of a primeval instinct we have carried since before those things existed, a fear of what we don't understand rather than actual reasons (i.e. corporate corruption). Individualism is presented as the belief that we are "cutthroat, greedy" Machiavellians refusing to be "pro-social and cooperative" as biology meant us to be, attributing this to "the selfish gene".**
Last week's article from DownsizeDC.org purports that the real reason for our economic problems is the existence of programs "designed to encourage, or even compel, financial institutions to make loans to people with lower incomes", and the approval of mortgages for low-income families since the 1970's.*** This sounds like maintaining the status quo is the key to a healthy economy (only those in a higher economic bracket should buy homes, no crossing the line that divides the classes). This is probably true, which is why it is necessary for priorities other than economic stability to have a seat at the table. This includes mathematicians, humanitarians, and whoever has a stake in the economy, not necessarily a business stake or one educated in the financier's school of thought.
I will therefore challenge the claims of Shermer and every other old-school economist who preach nearly in unison that trusting the system, resigning ourselves to our economic fate is the only strategy that works. Most libertarian and anarchist solutions are dependant on the belief that the establishment is permanently corrupt and permanently entrenched. The citizen is the good guy and those who control the cookie jar (i.e. mortgage companies) are the bad guys. This is a one-sided view, it is not a "custodial" solution but that of a minority in rebellion, trusting that our opposition can take a beating. So let's answer the question of how we would balance the whole equation if we had that responsibility.
What caused this reaction is economics being a lopsided business, whoever has the most money is in control regardless of how good or bad things are. Whether most people can buy a mortgage or secure a loan is dependent on the generosity of those who can afford to supply them. If threatened they just stop passing these opportunities down, so all professional economists advise placating them. To keep things balanced instead of just throwing a wrench, this imbalance has to end. It's like trying to keep an elephant and a mouse in the same cage, the greater the disproportion the more we are simply working to serve one side. A market where both parties are equal encourages fairness, a disproportionate one breeds jealousy, contempt and revolution.
In a fair market you have to consider both sides, but corporations and other super-entities abuse this. Banks for example have their own interests to consider. The entire practice of storing personal finance is controlled by a group that has a sense of self. What we do with our money should be our own business, but in case of dispute has to be protected at the risk of their reaction. Economy is supposed to serve us until we barely notice it, not the other way around. Saying the market has a "mind" humanizes it, as does saying it's us that is hurting it and we should be more responsible (or worse, mind our own business). Financial authority can't be it's own person or the meager citizen wouldn't stand a chance. One blogger calls this "A delusion that Adam Smith warned against. The notion that ownership of capital is the prime correlate with wise market capitalism. A very different concept, fundamentally, than saying that markets are themselves wise at allocating, rewarding or promoting innovative goods and services."*
Some goals are one-sided and just can't come with a reaction, like justice, or an emergency expense that has to be paid regardless of cost. There are myriad situations that aren't suited for a two-party market where both sides are subjective. An impartial third party is needed as a backboard so financial objectives can be taken without making ripples in the market. (Not necessarily a government agency, just a prideless public service which does its job with no stake in the outcome.) For anyone who dreams of buying a home at a fraction of cost, seeking revenge on an abusive creditor, reclaiming a home that was once foreclosed or any miracle situation which the market would normally not allow, some kind of impartial center is required.
One reader posts "I downloaded Mr. Shermer's talk at the Cato Institute, and got about 30 minutes in before deciding that I would no longer belong to the Skeptics Society because of the pro-market babble this gentleman was spewing.".* I do not doubt Shermer's expertise in the nuances of economics, in fact its connection to human evolution sounds very credible. However I do not understand how someone can be offended by purists, creationists or pseudo-scientists just because they exist. Disbelief is as subjective and primitive as belief; it is a type of belief much like the absence of color is itself a color. The belief in only one way of doing things is one of the simplest emotional anchors, easily indoctrinated into us and defended with great emotion. Shermer strikes me as a subscriber of popular doctrine, one who excels at it, receiving the fulfillment that comes with saying popular things and giving it to others. Any number of institutions will reward such a person. A libertarian speaks from his mind and often goes unheard, which is where Cato is needed and should know the difference. This speech is available in video and audio at www.cato.org/event.php?eventid=4297. "The Mind of the Market" and its reviews can be read at www.michaelshermer.com/the-mind-of-the-market.
*http://davidbrin.blogspot.com/2006/05/cato-hypocrisy.html
**http://www.cato.org/event.php?eventid=4297
***http://www.michaelshermer.com/the-mind-of-the-market
If you have responses to add to this thread send them to russo@richmondliberty.org and they will be posted. We welcome your input!