Free-Market Absolutism: Some Parades Need Rain

Back in those sweet, sweet college days, a small group of friends came up with a category of people we weren't terribly fond of.* We called 'em "parade rainers," and their crimes against our sensibilities typically took the form of finding something negative to say about, some set of caveats to offer concerning, some form of doubt or discounting to apply to somebody else's success. It was conduct unbecoming, we thought, and, preferring sun to clouds (in particular given our pacific northwest whereabouts), we didn't like to see negative energy crowding out the positive.

Those basic preferences still apply, but the fact is that not all parades are created equal. Many are richly deserved, serving to encourage and reinforce whatever good behavior combines with good luck to produce good outcomes. But some reflect more good luck than good behavior, and can actually reinforce bad behavior that appears (to almost everyone!) to correlate with good outcomes.

With that as a semi-philosophical backdrop, please read this, Justin Lahart's description of one observer who rained--not obnoxiously, but wisely--on a very big parade thrown for Alan Greenspan in 2005. (A free summary version of Lahart's account is available here.)

The key substantive point in Lahart's piece is that free market absolutism makes no more sense than other forms of dogmatic ideology. That's not to say that markets don't make more sense than other forms of economic organization. We certainly think they do, and we think whatever finishes second in that race finishes a very distant second indeed. But the totalizing ideology of markets, which tends to rise up just as market mechanisms are about to break down, tends to leave some serious--and, what's worse, unnecessary--destruction in its wake.

The ultimate irony here is that those best suited to defend markets are those most attuned to their limits and periodic failures.

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* Yep. That sentence ends in a preposition. We're over it. Many grammatical rules exist for good reason, and we'll defend those that do until last we type. But the no-preposition-at-the-end-of-a-sentence rule serves no identifiable purpose, does nothing to favor clear communication over muddled, and deserves polite but firm relegation to the dustbin of linguistic history.

Source

Justin Lahart, "Mr. Rajan Was Unpopular (But Prescient) at Greenspan Party," Wall Street Journal, January 2, 2009

Comments

[bosun.j:]

The author wrote: "The ultimate irony here is that those best suited to defend markets are those most attuned to their limits and periodic failures."

If this is truly the case why did "those most attuned" turn a deaf ear to the inevitable mess their "attuned" greed got us into? Perhaps "those most attuned" are tone deaf?

Jan 07 06:16 AM

[1RuleNoRules:]

You are not getting it. Fannie and Freddie were not born of market forces. The problem began there. The problem is political not market driven. Greenspan complained about Fannie & Freddie for how many years? Help me here, it is at least 20 isn't it. Do not absolve the politicians of this mess. The blame lays with them and the voters.

Jan 07 10:58 AM

[carey_jim:]

Breaking a grammatical rule is a good way to open your article because it demonstrates certain aspects of the Anglo-American system that other countries don't have.

The French and Germans, for example, regulate language usage, in schools and other places, much more than we Anglo-Saxons do. One of the results is that they have two or more dialects that are spoken informally, in ordinary situations, and a formal language which is only spoken at schools, government offices and other official places.

American English is spoken by everyone, more or less, with a lot of slang thrown in when we are speaking informally but we don't have two or three separate languages.

The rest of our society is similar.

Rules seem to percolate upwards from the actual practice of people and not downwards from edicts from educators, politicians and religious leaders.

The same is true in economics and finance: We are less driven by ideologies than other cultures. So I think you are just noticing that free market ideologues are out of step with 'business as usual' in America and I agree.

Whatever works here is best and not what we are TOLD works best.

Jan 07 12:06 PM

[Glen L.:]

Free markets have never really existed, at least not in recorded history. That said, markets don't "fail"; they often punish people, including the unwise and greedy, and reward the wise and greedy (otherwise known as the enlightened self-insterested). Government intervention in the markets always distorts market signals and causes malinvestment by the majority and unwarranted profits for the politically well-connected.

The notion that the Fed offficials in Rajan's piece were defending free markets is laughable. As representatives of a government banking cartel that does nothing BUT distort markets, they are the prime cause of the business cycles of the last 95 years.

Jan 07 01:35 PM

[bosun.j:]

America is the MOST ideologically driven society on the planet! Starting with American exceptionalism! Americans are the most propagandized people on the planet. America's biggest lie is that everyone can be another Horatio Alger story. I'm happy to see more are beginning to see these truths and are beginning to look for a way to survive.


On Jan 07 12:06 PM carey_jim wrote:


>
> The same is true in economics and finance: We are less driven by
> ideologies than other cultures. So I think you are just noticing
> that free market ideologues are out of step with 'business as usual'
> in America and I agree.
>
> Whatever works here is best and not what we are TOLD works best.

Jan 07 09:38 PM