Yves here. Remind me never to get on Bill Black’s bad side.
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly posted with Benzinga
Roger Erickson brought to my attention a column by Matthew Yglesias that relates to the ethical issues I was discussing in my column yesterday about Yglesias’ ode to GHB (Geithner, Holder, and Breuer’s doctrine of immunity for the largest banks). (In deference to Yves’ endocrinologist, I am renaming it GBH (Brit-speak for “grievous bodily harm”).
One of my criticisms was that Yglesias makes no explicit moral inquiries about the appropriateness of the administration’s GBH doctrine, which allows the fraudulent systemically dangerous institutions (SDIs) to inflict grievous harm on us with impunity. Yglesias, instead, framed the issue as an empirical and logical issue – in the context of the Great Recession, would our financial system be better off if we held banksters and fraudulent banks accountable for their crimes or if we bailed them out? Yglesias’ position is that if the decision is made that our financial system would be better off if we bailed the banks out (a position he supports), then it follows as a matter of simple logic that we must not prosecute. Indeed, Yglesias opined that bailing out the banks so obviously excluded prosecuting elite frauds that anyone who thought differently was “nuts.”
But either way, implementing a non-nationalization approach to bank recapitalization and then prosecuting the banks into a renewed state of insolvency and then nationalizing them would have been nuts. If saving the banks was a mistake, then the error had nothing in particular to do with prosecutions, and if saving the banks was the right thing to do, then curtailing prosecutions was the only way to execute the strategy.
“Mankiw Morality” is the term I coined to describe the mindset of theoclassical economists who think that wealth maximization is either inherently moral or transcends morality because it is “rational.” N. Gregory Mankiw was the discussant on George Akerlof and Paul Romer’s famous 1993 paper – “Looting: the Economic Underworld of Bankruptcy for Profit.” Akerlof and Romer were discussing accounting control fraud. Akerlof and Romer’s message that elites caused enormous economic damage by using their control over seemingly legitimate firms to become wealthy by “looting” “their” bank was, of course, anathema to Mankiw. Mankiw is a leading defender of businesses and opponent of regulation and the defender of the faith in theoclassical dogmas. Two passages from Akerlof and Romer illustrate the revolutionary nature of the challenge that control fraud poses to theoclassical economics. First, they used the “f” word (fraud) – violating the most powerful and primal of the tribal taboos of the economists’ clan. In this passage, they used an even more powerful four-letter word (“loot”), signifying the betrayal of the fiduciary duties of care and loyalty by the CEO.
[M]any economists still seem not to understand that a combination of circumstances in the 1980s made it very easy to loot a financial institution with little risk of prosecution. Once this is clear, it becomes obvious that high-risk strategies that would pay off only in some states of the world were only for the timid. Why abuse the system to pursue a gamble that might pay off when you can exploit a sure thing with little risk of prosecution? (Akerlof & Romer 1993: 4-5).
From Mankiw’s perspective, Akerlof & Romer then compounded their blasphemy by explaining that the widespread looting was not aberrant – it was the product of perverse incentives created as a result of the “unintended consequences” of deregulation. The Wagnerian leitmotif of the theoclassical economists’ clan is a variant on the theme of unintended consequences (always in the minor chord) of governmental programs intended to help the poor or the environment. Akerlof and Romer’s article was a brutal contrapuntal refutation of Mankiw’s main motif.
Neither the public nor economists foresaw that [S&L deregulation was] bound to produce looting. Nor, unaware of the concept, could they have known how serious it would be. Thus the regulators in the field who understood what was happening from the beginning found lukewarm support, at best, for their cause. Now we know better. If we learn from experience, history need not repeat itself.
Akerlof and Romer were explaining that it was the deregulators, not the regulators, who created a terrible unintended consequence – widespread accounting control fraud that had caused what was then the worst financial scandal in our history, the S&L debacle. The most elite private sector CEOs – those who ran our financial institutions were the criminals. The heroes were the field regulators “who understood what was happening from the beginning.” It is difficult to describe how subversive that phrase is to a theoclassical economist like Mankiw. The failures in Akerlof and Romer’s tale are conventional economists like Mankiw, so the paragraph was doubly insulting from his perspective. The most distressing lines were the concluding sentences – the two sentences that Akerlof and Romer chose to end their article in order to emphasize their policy message. The key fact that we now “know better” was that deregulation was “bound to produce looting” because it created such perverse incentives and crippled the regulatory cop on the beat who was essential to detect, prevent, and sanction elite frauds and prevent the Gresham’s dynamic that Akerlof had made famous in his seminal article on control frauds by seemingly legitimate sellers who use deceit to disguise the bad quality of their goods or services.
[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty, therefore, lies not only in the amount by which the purchaser is cheated; the cost also must include the loss incurred from driving legitimate business out of existence. George Akerlof (1970) (discussing a market for “lemons”).
Mankiw’s response to the Akerlof and Romer featured his dismissal of the ethics of fraud by elite bankers: “it would be irrational for savings and loans [CEOs] not to loot.” If the CEO has an incentive to loot (which he nearly always does) then he is “irrational” (not “moral”) if he refuses to loot. Mankiw Morality is, of course, an oxymoron that describes those who strip moral decisions of their moral component.
One does not expect ethical insights from a theoclassical economist like Mankiw, but Yglesias received at least initial training in ethics as part of his formal education. His post-secondary education consists of an undergraduate degree in philosophy. Yglesias’ adoption of Mankiw Morality will make his professors cringe. The Yglesias column that Roger Erickson alerted me to shows that Yglesias is familiar with Frederic Bastiat’s work: Why I Don’t Love Frederic Bastiat (Aug. 18, 2012)
I agree with Yglesias’ column on Bastiat, but there is a famous quotation by Bastiat, not mentioned in that Yglesias’ column, that warns about Mankiw Morality.
When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it (Frederic Bastiat).
The GBH doctrine, which Yglesias’ has endorsed in two columns, represents a legal system that now “authorizes” “plunder” and a “moral [free] code that glorifies it.” The SDIs’ CEOs became our rock stars during the bubble. Goldman Sach’s CEO, Lloyd Blankfein, famously claimed that the banks were “doing God’s work.” Yglesias may wish to read Bastiat about crony capitalism and examine (I wish I could say “reexamine”) the ethical issues inherent in the GBH doctrine.
Declaring that our most elite banksters – the people who caused the financial crisis and became wealthy through their looting – should be exempt from the rule of law is I believe the most destructive public policy we could follow in the finance context. It is Yglesias’ indifference to injustice that causes me to call him out for his embrace of Mankiw Morality. We have an architect of torture teaching at Boalt Hall and Mankiw at Harvard, so Yglesias is small beer.
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Yglesias is not just indifferent to injustice, he considers it a feature of the Mankiw Morality that he supports…..and that pays him well to defend the immorality of those defending our inheritance based class structure.
Thanks and keep at it Bill Black. Someday even folks at Crooked Timber will take on Yglesias for more than his misrepresentation of higher education trends….one can hope.
Hillary Clinton in her town hall burnishing session, near the end stated…
QUESTIONER: Diana Lady Dougan, Center for Strategic and International Studies and Cyber Century Forum. Madam Secretary, I think all of us are — want to say how honored we are to have had you as our secretary. But I will move quickly on to a question that — for those of us particularly who served during the Cold War, it was much easier to identify American interests, and we had much more of a moral compass. And now I would like to know, when you are talking about protecting and advancing American interests, it’s becoming more and more difficult and more and more parochial in identifying American interests, particularly in a transnational world and the various vested interest groups. So what advice do you have to give to your successors in terms of defining American interests and redefining them?
CLINTON: Well, that’s an excellent question. And I think it’s on two levels. On the most fundamental level, you know, protecting America and Americans has to remain a core interest. Our security is non-negotiable. And we have to be smart about what really threatens us and what doesn’t. We have to work better on intelligence so that we don’t make very unfortunate mistakes. So — but security first and foremost. And I don’t think any official, secretary of state or otherwise, could put anything before that.
Secondly, we need an open, transparent, free market in which Americans are able to compete on a level playing field, because when we can compete, we often can win. But the deck has been stacked against us in the last years because of all kinds of forces converging, whether it’s, you know, state-owned enterprises or indigenous protections that are behind the borders and so forth. So, you know, it is very much in our interest to help write the rules for the 21st-century global economy and then to think of mechanisms to enforce those rules.
Thirdly, we have to continue to advance American values, which correspond with universal values. I’m always reminding my counterparts that when I talk about freedom of expression, freedom of religion, those are not just American values.
The world agreed to those values back in the declaration, the Universal Declaration of Human Rights.
And we’re going to stand up for them. And it’s not always easy, and we have to pick our times. We can’t be short-sighted or counterproductive, but we’re going to continue to stand up for them.
So on the fundamental first level, we do what we do because it’s in our security interest, our economic interest and our moral interest, and we have to continue to do that.
But then as you go up to sort of the second level, how you adapt that to the world of today requires us to be more clever, more agile, and we’re trying to do that.
So for example, countering violent extremism: There are those who estimate that maybe there are 50,000 violent homicidal extremists in the world. But they are able to maximize their impact and their messaging through the Internet. And what we have tried to do, as I briefly mentioned, is to get in there with them, to undermine them and to rebut them.
Skippy… its a full court *press* Mr Black. The agenda is all that matters, everything else is secondary to that vision.
“So, you know, it is very much in our interest to help write the rules for the 21st-century global economy and then to think of mechanisms to enforce those rules.”
YOU KNOW ITS SO LIKE YOU KNOW…
im terminally ill from these sickfucks
btw GO BILL GO
“But the deck has been stacked against us in the last years because of all kinds of forces converging, whether it’s, you know, state-owned enterprises or indigenous protections that are behind the borders and so forth.”
“… how you adapt that to the world of today requires us to be more clever, more agile …”
BAD: “state owned enterprises,” “indigenous protections … behind the borders” …
GOOD: “more clever, more agile …”
The sound of Hamilton Institute visionaries talking … nightmare.
Interesting how when a bankster commits fraud to maximize shareholder value or personal profit, that it’s “irrational for him not to commit fraud,” and thus, all is forgiven in society.
But if an inner-city minority with no education or job prospects turns to selling drugs to support himself and his family, he’s a hardened criminal who willingly chose the wrong path without any mitigation for circumstances or rationality.
The world can only remain upside down for so long before outrage engulfs the masses.
Prosecuting banks into insolvency? How about prosecuting bank’s executives into insolvency (banks don’t ruin people, people ruin people)?
Moreover, the correct response to looting in repeated “game” is to punish more than one-turn NPV (in fact, the optimal response would be to punish just below the sum of all future NPVs). Which, for short-term based reasoning may sound wrong, but long term is the best response.
See Norway solution 1992 – nationalised two key banks, reopened them immediately, no one prosecuted. Admitedly the Norwegians had prepared for the eventuality, which facilitated this solution. The fact that a bank has to be rescued by nationalisation does not automatically imply that some one has to prosecuted.
That’s because liar loans and other forms of fraud were insignificant factors. You see, the Norwegians have a system of ethics.
Anyone arguing the same applies here is living in deep denial.
I’ve read that Norway is the only European nation that would be seriously affected by the Rapture.
Why?
I have some relatives there, so it would be nice to warn them.
Why? I suppose because (supposedly) Norway is the only country in Europe with a serious number of real Christians? So their sudden, mass disappearance would seriously affect the economy?
They do indeed, though their ethics are strained by the profits made through Statoil and arms sales.
Considering that the rent of the pharma companies is essentially used to cover marketing costs and late stage medical trials that could be efficiently administered by good data collection in the health system, I am not sure that Yglesias took the best example to bash Bastiat. In fact, one could easily apply the “plunder as a way of life” treatment to pharma…
Great article. Keep at it, Bill Black.
So he’s finally out of the closet. Crime is Good, according to MY.
MattY is a neo-Orwellian after all. I always suspected such.
Gregory Mankiw is part of the Neo-Liberal “Big Stupid” that thinks markets always self-regulate in the interests of the common good.
When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it (Frederic Bastiat).
Sounds like the history of banking. So now we have a money system based on usury for stolen purchasing power.
Is it annoying to anyone else that we even have to spend time de-bunking Yglesias? WTF is he doing writing for a major alt news source in the first place? A BA in Philosophy, so Slate gets him writing about Econ? Yeah, that makes total sense…Maybe that’s why so many of his articles remind me of conversations I had in college with pseudo-intellectual, hyper-arrogant undergrads (who almost always came from the more affluent strata of society) who thought they knew everything about everything.
Slate should really be ashamed of itself for letting MY sully it’s name with his tripe. Reading an MY article always feels to me like taking a trip to the playground: I know there is going to be a lot of childish make-believe. Unlike most children, however, Yglesias appears to be cheering for the bad guys.
Very annoying. Conventional media embraced the most mediocre of the bloggers who bubbled up in the last 10+ years which is a good reason to make sure the internet stays free, open, and neutral.
Forgot to say, Slate’s not exactly alt.
true…didn’t Slate start out more alt-lefty? It seems to have gone down hill lately, though I’ve never followed it that closely. Of course, I used to think NPR was “left-wing,” so maybe it’s just me that’s changed…
Yglesias was a vocal Iraq War supporter. Sure, he was 21 at the time, but he didn’t enlist in the global war on terror while gladly supporting sending other young people to certain death. I suspect like the Romney boys he had to fight the war of ideas here at home.
http://thinkprogress.org/yglesias/2010/08/19/198289/four-reasons-for-a-mistake/
His “thoughts” about Iraq in 2002 follow a similar pattern to his views on healthcare and the economy.
“One does not expect ethical insights from a theoclassical economist like Mankiw, but Yglesias received at least initial training in ethics as part of his formal education. His post-secondary education consists of an undergraduate degree in philosophy.”
I think I’ve asked this question in the past, but who is Bill Black writing for? While I understand that this phrase “theoclassical economists” serves as a nice self congratulating ego stroke to the cult of newly minted economic geniuses over at the self nominated “New Economic Perspectives,” I find it otherwise completely unilluminating.
This is the kind of demagogic insider speak in which one engages when one’s purpose is to whip up the readily inflamed emotions of a narrow ideological sect. This is not the kind of language you use when you think you have an issue of acute relevance to the broader public, and you want them to take the substance of what you have to say seriously.
I find the constant repetition of this contextually referentless phrase in this post distracting and annoying, and faintly insulting, and I’m not even a religious person. If it is meant to convey something in the context of this article, and not just serve as an all purpose insult to economists and practitioners of religion both (which is apparently acceptable), then say what you really mean.
The conclusion I’m left with is that anyone who thinks it’s actually productive to talk this way has no business pontificating on the byproduct of Yglesias’ undergraduate degree in philosophy, or its ethical component.
So, I’m not even going to waste any more of my time getting to the punch line of this joke. I’m done.
It also insults my intelligence because it urges me to judge something negatively purely on its proposed association with God and “religion.”
I’m sorry, but that doesn’t wash.
Ummm, I think what Black is saying is that Guys like Mankiw have elevated their economic ideologies into a quasi-religion, that is, a faith-based belief system that is impervious to evidence that would contradict it. It’s hardly the inflammatory or insulting barb that you paint it to be. With the caveat that I don’t really know Black’s stance on religion per se, I find nothing in his use of the term “theoclassical” that intrinsically insults religion or religious believers. It only attacks the concept that economic policy should be based on evidence-free beliefs (or worse, beliefs that are directly contradicted by evidence).
@roadrider.
Very well stated.
I thought you were done.
btw, I disagree with you. I read the term, thought about it, and made my own sense of what it meant. Believe it’s an echo of what Black said, that Mankiw/Yglesias fundamentally cannot accept the idea that business interests can include much less be driven by fraud. That’s a core belief of theirs, business is a holy process that can do no evil, and it enrages them to hear otherwise. My God!
I’m not an economist, that’s just how I read it, and then I moved on. Is it a common word? Is it a big whoopee? Black could have made it up on the spot afaik.
As someone who did a BA in philosophy (and psychology) as well, there is something to be said for training in ethics.
However, I decline to believe that MY was ever trained in ethics: he may have read philosophical essays in ethics, may have studied philosophers who wrote about ethics, but I dare say he was never trained in ethics.
Training in ethics would entail case studies of situations and how various ethics would result in what sort of ethical responses and results. One of my former classmates does ethical training for corporations, and that is exactly what is done, with emphasis on developing a corporate code of ethics (yes, there are companies that do that seriously) because the company doesn’t want to deal with lawsuits because someone cut corners when they weren’t supposed to.
To indulge in polemics and ad hominem, MY is a willing tool of fraudsters in the hope that they may deign to continue to provide him with a very comfortable life pontificating on things he knows little about.
It’s quite obvious that he knows very little about ethics.
Not defending Ygelsias.
I’m saying Black shouldn’t stoop to the level of riding anti-religious sentiment on the so-called “liberal” or “left” side of the political spectrum when his points can stand on their own.
I assume he agree with that, and he can afford to drop this tawdry tactic.
I think it’s a fair point, although I don’t think Bill intends “theoclassical” as a slam on religion, but rather on those economists who take their secular theories on faith. The bigger issue, to my mind, is that someone who doesn’t regularly haunt these circles may have no idea WTF Black is talking about when he uses that word. Confusing and potentially off-putting use of insider lingo is always an issue to be aware of, especially when writing for a general audience.
That said, mockery can be an effective rhetorical tool, and ISTM that Yglesias, Mankiw, et al. are worthy of mockery. At least Black and Hudson aren’t falling into the “politeness” trap of addressing bad actors as though they were acting in good faith that Yves addresses in her post today on Senators Warren and Cummings. However, as you point out, they may be swinging a bit too far in the opposite direction, from a rhetorical point of view.
I do have sympathy for the occasional ad hominem attack, being a somewhat hot-blooded SOB myself. I’ve often found myself referring to Wall Street criminals with colorful epithets when discussing economics with friends and family. In the heat of the moment, it’s hard not to…at least for some of us. But your right, it does tend to reduce your intellectual credibility.
Oh, my dear chap, have you never run into the phrase “Bad Religion”?
One of the most fertile areas of current theology is the use and misuse of people’s religion. It’s normally misguiding otherwordly fervor toward partisan or profitable ends. Identifying personal advantage as a holy goal, then broadcasting it. The creed of greed, in this case.
Most cults have to do with identifying ecstasy with spreading for the guru. Some, however, spread pernicious doctrine in the guise of higher wisdom.
Bad Religion.
You denounce Black because, to you, he’s a member of a sect, yet take umbrage at “theoclassical” as an insult to religion or the religious, though you claim not to be religious.
Could it be that your real problem is not with Black’s language, but his ideas? Since clearly, from the rest of your comment, he is not likely to be writing for you in any case (nor do you give a reason why he should, so far as I can tell).
Hudson does the same thing when he writes or speaks on Utube-type videos. They name-call throughout their posts. It’s disappointing. They really have a great deal to say, but their careless name-calling makes them hard to read. Everything comes off as propaganda even though, except for the silly name-calling, it’s serious argument.
Yglesias is a pretentious twit, desperate to ingratiate himself among Washington insiders to make up for having missed becoming Ezra Klein.
” If the CEO has an incentive to loot (which he nearly always does) then he is “irrational” (not “moral”) if he refuses to loot.”
While Mankiw may think that it is rational for CEOs to loot, does he think that this looting is good for society and should be condoned by society? If not, then surely he would agree that society should provide compelling disincentives for CEOs to loot, namely vigorous prosecutions and lengthy prison terms.
No doubt this is why Bill Black referred to this paradoxical comment as an oxymoron.
I’m currently reading Mankiw’s Macroeconomics textbook. I don’t want to waste too much energy on how disgusting it is. All I will say is that society, ethics, morals, common good, etc. have no part in modern economic theory. Just profit maximization. If it makes money it is good. End of story, end of discussion. If the market demands war, famine, pestilence and misery, then that is what we will get. Profits before people. We are seeing the results of the first religion completely divorced from the natural world. It is a religious system set up not to define man’s relationship with nature, or man’s relationship with man, but with man’s relationship with his own ideas. And when your idea is profits before people…
“Catch-22 says they can do anything we can’t stop them from doing.”
I thought that was the Beatles.
Nothing you can do that can’t be done
Nothing you can sing that can’t be sung
All you need is love
Love is all you need
Love is all you need
Love is all you need
Love is all you need
Love is all you need
Yes you can
Defeats Catch-22
Perhaps the wrong place to present this idea, but here goes. We proles have it pretty good. The lights come on at the flip of a switch. Hell, our lame ideas end up stored indefinitely in some server. We eat so damned well that we’re fat. A plethora of energy resources make our lives quite a bit easier than those who lived just a few centuries earlier. Our modern world may be far from perfect, but we all or at least most of us, want it to go on more or less as it is. That is, there is a comfort bias for maintaining the status quo.
Further, 2008 scared some folks. It is all too easy to visualize a world without ATMs, a world without jobs, a world without stacks of Cheetos at the grocery store. These conditions are imaginable, but at the same time unthinkable. Hence, the king (crony capitalism) may be horrid. He may reek of sin, be covered with sores, be ugly and mean, but he keeps the Huns and Vandals out. Long live the king!
There will always be small men like Yglesias, willing to overlook the king’s sins. What we need Bill is to work to put the lie to the king’s virtues – that without crony capitalism and its princes, we would be relegated to dumpster diving. What happened after you put hundreds of banksters in jail in the 80s? Did the U.S. economy crash – or grow? Did faith in the markets decline, or grow? I am simply suggesting that Mr. Yglesias’ morality is situational, driven by a fear that if you, Mr. Black were today roaming the regulatory halls, the world would as he knows it (warts and all) would end. He is not alone in this clinging to this fear-driven frame. You could put the lie to this fear. Show that putting banksters in jail is good. Good for justice. Good for the economy. And good for markets.
That might be more effective than beating the poor boy senseless.
A post in the “Alternate History” genre would be useful for this purpose.
Oh, he does that too, in just about every other post. Yglesias de-bunking is just a pastime :)
“We proles have it pretty good”
Yes, but please remember it didn’t just fall out of the sky. There’s been a lot of sweat on the shovel, furrows walked, coal loaded, nails driven, late nights on the road, books cracked, bodies tended, crates hauled, hay thrown, fruit picked, trees felled, steel poured, iron hammered, and blood on the picket lines to make that happen. If we sit on our hands, it’s going to be stolen.
Advantage implies responsibility.
I agree with Bill Black except for the following hedge. I keep remembering Hank Paulson and Ben Bernanke going hat in hand to the Senate Banking Committee and begging for TARP money, saying that if it wasn’t forthcoming there would be martial law. And Chris Dodd looking like a big red-faced lizard in a white wig. The fraud was so massive and all tied up in “national interest” (thanks Skippy) that going after the CEOs of the TBTFs doesn’t mean as much as it should. It is closer to a kill the chickens to scare the monkeys tactic. Justice has failed us. Our laws and regulations have failed us. And even if we sent all those CEOs to jail, where they belong, the system would recede back to its comfort level wherein the ends justify the means. I want a better justice. I no longer care if the banksters go to jail, but I want all of us great-unwashed poor people to be fully compensated and have the benefit of good laws going forward. And a democratic sovereign banking system. That’s the hard part.
I used to follow this blog, but nowadays I only check on it very occassionally because it became abundantly clear that Yves Smith philosophy is that it’s quite OK to do a character assassination of somebody, if she doesn’t agree with that person’s politics or other beliefs. If that requires getting quotes out of context trying to twist them in such a way that it sounds that the person lacks the most basic morals, so be it.
You can read the original Mankiw’s comment here:
http://www.brookings.edu/~/media/projects/bpea/1993%202/1993b_bpea_akerlof_romer_hall_mankiw.pdf
(Search of Mankiw’s, it’s a long document).
A bit more context:
“The paper offers many fascinating anecdotes suggesting that looting was part of the story behind the perverse business practices of the savings and loans. Indeed, given the incentives that regulators set up, it would be irrational or operators of the savings and loans not to loot.”
In other words, Mankiw never said anything like the savings and loans were being rational, therefore good. What he actually said they were being rational given their incentives, therefore the incentives they were given were morally wrong.
Now, you could debate and disagree with him on this point. But what is entirely unfair and reveals pretty low morals is picking a sentence out of context and implying that he defends these activities.
Are we going to see a public apology for gratuitous character assassination?
Let me get this straight. If I go into a bank and notice that its security is lax, the rational thing for me to do is rob it?
Mankiw’s argument fails at a couple of levels. First, because it is reductionist. An extremely reduced set of circumstances is set up as the only ones that govern the scope of rational activity. However, it is the very essence of rationality to look at situation more broadly and deeply precisely so a rational basis of action can be determined. In Mankiw world where profit maximization is all that counts, it is “rational” to steal the goose that lays the golden eggs, kill it for lunch, and then blame its rightful owners for not securing it from theft.
Second, as Bill Black notes, it was not the regulators who were at fault but legislators bought off by banks and banking interests. In other words, the CEOs constructed a system which incentivized looting. Then construing their duties as narrowly as possible and only in this one particular instance, they determined that it was “rational” for them to loot. That is not rational. It is criminal. It is using the law to subvert the law as stated in that great quote from Bastiat.
This is not character assassination rather it is in the tradition of Truman who said:
“I don’t give ’em hell, I just tell the truth and they think it’s hell”.
You summarize Mankiw by saying:
I just read Mankiw’s note at the link you provided. I don’t see where Mankiw said what you claim he said; indeed, one thrust of Mankiw’s argument is to deny that “looting” can be easily distinguished from “gambling for resurrection” by “bad businessmen” (a claim readily recognizable to connoisseurs of Bush-era obfuscation as “a few bad apples”), implying that there really is no moral dimension to the S&L crisis at all.
So, can you provide a quote or a paraphrase proving your claim? Because otherwise you yourself are performing character assassination, except on Bill Black.
If this is the best you can do in terms of logical reasoning and argumentation, you really should be reading other blogs. NC is over your head.
I love the little knife twist re “unintended consequences” of DEregulation.
bill black ftw
“Oh, better far to live and die
Under the brave black flag I fly,
Than play a sanctimonious part,
With a pirate head and a pirate heart.
Away to the cheating world go you,
Where pirates all are well-to-do;
But I’ll be true to the song I sing,
And live and die a Pirate King.
For I am a Pirate King!
And it is, it is a glorious thing
To be a Pirate King!”
Mankiw & co. took a Method approach to Gilbert & Sullivan, and Bastiat’s the drama critic who noticed.
As a general thing, the only people able to look upon crime with sang froid are people who imagine they are immune and those who think they’re benefiting.
I’m not sure which is true in Mr. Yglesias’s case. He might not have the financial sophistication to figure out the money being looted looks a lot like his, or he imagines he’ll be paid fees enough to make up for what he loses.
Either way, to misquote Ms. Helmsley, “Losses are for the little people….”
“It is difficult to get a man to understand something when his livelihood depends upon his not understanding it”
-Upton Sinclair
“The Yglesias column that Roger Erickson alerted me to shows that Yglesias is familiar with Frederic Bastiat’s work: Why I Don’t Love Frederic Bastiat
(Aug. 18, 2012)
I agree with Yglesias’ column on Bastiat,…”
Well, I’ve read over the wikipedia entry about Bastiat, and have read Y’s column on Bastiat, and it looks to me that, unlike what Y said, Bastiat clearly stated his assumptions, his conclusions, and gave clear examples. Y’s argument in his column seems like all sound and no substance.
Not sure why Bill agreed with Yglesias about Bastiat…