Thursday, October 23, 2008

more from libertarian fantasy land

So, capitalism is collapsing and that's bad, we all know it's bad. It's bad because people are losing money right? And losing money is bad because it means not being able to buy things that people like, like houses.

If we accept that losing money is bad, doesn't that imply that having money in the first place is good, or better than not having it? So capitalism should be praised for enabling us to have money to lose. Funnily enough, the people celebrate the end of capitalism were never thrilled with capitalism's wealth creation capabilities to begin with. Back then they were hammering away on the finding that above a certain level, money doesn't make you happier. I'd think that those who were negative on capitalism before the crash should be more relaxed now. They should be writing op-ed after op-ed explaining that the crash doesn't really matter because of how few Americans will fall below the level where money really does matter.

Ah, but there are all sorts of subtleties to the happiness research we'd be told. For example, the endowment effect means people dislike losing money more than they like having it etc. Few people will realise though that the same subtleties also undermine the simplistic anti-economic growth conclusion that they'd been pushing in the first place and that despite money not making people happier, rich western countries are still the happiest in the world.

Unfortunately, though I think the important thing is that people will still be rich and free, I'd guess these crashes really are bad for happiness; much worse than slower, but steady growth ending up at the same point. Though my point stands, money does matter to people.

Some people are also suggesting that Ayn Rand played an important role in creating the current crisis, because of her influence on Alan Greenspan, who supposedly caused the crisis. I find it genuinely depressing that respected intellectuals think this but that's not my point here (I've been reading Leiter's Marx posts and he doesn't seem to blame Marx for anything that happened under communism). My point is that if you think (as these people do) that one person could have such a huge impact on the world economy, the real problem is the person having so much power, not that the person might make mistakes.

If one American general has sole discretion to launch a nuclear attack it'd be stupid to put all the blame on him if he does it, the system should not allow such discretion. The security of the world should never depend on imperfect individuals.

Alan Greenspan may deserve some blame for mistakes he made. But the Federal Reserve isn't exactly a libertarians dream institution, even if libertarians are running it.

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