Monday, January 24, 2011

Ayn Rand and Laize Faire Capitalism: a "Conceptual Framework" of Lazy Thinking

"I'm opposed to all forms of control. I am for an absolute laissez-faire, free, unregulated economy. Let me put it briefly, I'm for the separation of state and economics."  - Ayn Rand from the famous Mike Wallace Interview,  1959 
"It did not go without notice that Ayn Rand stood beside me as I took the oath of office in the presence of President Ford in the Oval Office. Ayn Rand and I remained close until she died in 1982, and I'm grateful for the influence she had on my life. I was intellectually limited until I met her."  - Alan Greenspan, former Federal Reserve Board Chariman, The Age of Turbulence, (Greenspan's ironically entitled book published just before the panic) published September 17, 2007.
"I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms." - Alan Greenspan, testimony before The House Oversight and Government Reform Committee, October 2008
Exchange from the same committee:

REP. HENRY WAXMAN: The question I have for you is, you had an ideology, you had a belief that free, competitive -- and this is your statement -- "I do have an ideology. My judgment is that free, competitive markets are by far the unrivaled way to organize economies. We've tried regulation. None meaningfully worked." That was your quote.

You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying its price.
Do you feel that your ideology pushed you to make decisions that you wish you had not made?

ALAN GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to -- to exist, you need an ideology. The question is whether it is accurate or not.

And what I'm saying to you is, yes, I found a flaw. I don't know how significant or permanent it is, but I've been very distressed by that fact.

REP. HENRY WAXMAN: You found a flaw in the reality...

ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?

ALAN GREENSPAN: That is -- precisely. No, that's precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

"Forty years or more" ago:
President Ford, Alan Greenspan, and Ayn Rand;
2nd, 3rd, and 4th from the left

What I have always believed is that it's much easier to disagree with the way things are than to govern effectively. It's much easier to support easy world views that involve no action like "no government intervention in the marketplace" than to act and build a regulatory framework that works. When the influential and powerful among us use this lazy ideology it inevitably results in large bubbles followed large busts that carry everyone, especially those without influence or power, in a tidal wave of destruction. Sometimes the timing of the booms in our economy, can make some presidents or parties look better than others; and people vote accordingly. Yet the timing of economic cycles doesn't simplistically follow election cycles.

To me, it makes sense that philosophical ideas that seem perfect in their simplicity, would necessarily be flawed because of a world that is much more complicated.

Soon Ayn Rand's influential novel, Atlas Shrugged, will be in a more simple movie form (no doubt carefully tailored with our recent crises in mind to avoid redicule), for those with even lazier thinking. :)

Those dingbat liberals in Hollywood ! :)