Our Fate Is in Their Hands?

Last month, Representative John Shimkus spoke out against regulating carbon dioxide emissions on the grounds that carbon dioxide is plant food. “So if we decrease the use of carbon dioxide, are we not taking away plant food from the atmosphere?” Shimkus is on the House Subcommittee on Energy and Environment, which means he has a vote on these issues.

In the wake of a financial and economic crisis of at least generational magnitude, our government will be rewriting the rules of the financial industry. And “our government” includes not just the pedigreed scholars in the executive branch (Larry Summers, Christina Romer, Austan Goolsbee, etc.), but Congressional representatives like John Shimkus – “like” in the sense that they were selected for their jobs, and for their committee seats, in exactly the same way that Shimkus ended up discussing the crucial role of fossil fuels in sustaining plant life on this planet. And when it comes to legislation, Summers, Romer, and Goolsbee have exactly zero votes between them; Shimkus has one.

Planet Money had an interesting interview a while back with John Campbell, one of those people on the House Financial Services Committee. Campbell reminded me of a college student who’s about to take a really hard math class, and knows he isn’t a math whiz, but is fairly confident that if he studies hard he can probably figure out enough to do a decent job.

I’m not sure even in my own mind – if I were king – I’m not sure what I would do at this point and I don’t think I’m alone in that viewpoint. This stuff is not easy; there are a number of different alternatives, a number of different thoughts on how to do it. . . .

One of the debates . . . is if it’s too big to fail, can it be regulated enough that it won’t fail. Maybe. I’m not sure. . . .

To me, it’s an intellectual exercise, too, which I find very fascinating, and it’s a problem-solving exercise, which I’ve always liked to do . . . I was in business. I was essentially a startup and turnaround guy. I went into businesses that were in trouble and tried to figure out how to turn them around. And so right now we now have an economy in trouble, and this is a little bit the same sort of thing on a much bigger scale. [Laughter.]

The first time I heard that interview, I was terrified.

Now I don’t mean to be hard on Campbell. Few people sound as smart on a microphone as they do with the benefit of reflection and the backspace key (the writer’s best friend), and to some extent he’s just saying he has an open mind, which is a good thing. I didn’t find Campbell particularly insightful, or particularly dumb. He just seemed like a normal, well-meaning, earnest guy.

But on reflection, maybe that’s the way it should be. When it comes to our representatives, the point of our particular kind of democratic system isn’t to select for expertise, or intelligence, or ability to understand policy issues. If it were, we should all be profoundly depressed, because it has obviously failed. The point is to ensure accountability, which  means that the people making decisions have to answer to someone.

What alternative is there for redesigning our financial system? Imagine you instead entrusted the job to some committee of professional economists from Harvard, MIT, and all those other fancy places. How would you decide who would be on the committee? And do you really want a bunch of economists? Some people would want to include people from Wall Street; others would want to include people from other disciplines, like psychology and political science and history; others would want to include people from Main Street. Any group you managed to convene would be assaulted with charges of bias. And anyone who didn’t like the outcome would claim he wasn’t bound by its ultimate decisions.

Expert commissions have to have their work approved by Congress before it becomes law, because Congress, for all its imperfections, is the tool we’ve got for ensuring accountability and thereby creating political legitimacy. Which brings us back to John Campbell.

First, Congressmen do have staffers, many of whom are very knowledgeable about their areas of expertise, particularly when you get to the committee chairmen. They are getting all sorts of intellectually reputable input – from the executive department, from hearings, from think tanks, from the newspapers, and maybe even from the Internet. They are also getting input from their constituents, who presumably are representing their own legitimate interests. (Let’s pretend we don’t have problems of false consciousness for a moment so I can avoid a huge tangent.) At the same time, however, they are also getting input from lobbyists and major campaign contributors. Ideally, we want them to make decisions that are in the best interests of their constituents and the country as a whole (probably in that order).

Ultimately, I think this means two things. First, the policy discourse – even when it deals with something complex like systemic financial regulation – has to be conducted in terms that a non-specialist Congressman can understand. Second, the process by which Congressmen gather information and make decisions has to be as transparent as possible. A policy debate conducted in the open, where the public understands the issues at stake and understands who is voting for which position and why, should be one where it is harder to reward major donors and special interests.

For the opposite, we need look no further than the Commodity Futures Modernization Act of 2000 – passed, unread by anyone except the lobbyists who drafted it, in the dying moments of the Clinton administration. And that bill was even sponsored by Phil Gramm, a onetime economics professor.

This is how I learned to live with John Campbell. This isn’t particularly insightful to anyone who’s thought about representative democracy, and I’m sure some of our readers will find it painfully naive. But I like to think that maybe there are people on the House Financial Services Committee who are secretly not so sure about the difference between preferred and common stock, and maybe they will read Financial Services for Beginners, and maybe that will help them understand what’s at stake so they can make an informed decision rather than just voting the way the lobbyists want them to vote.

By James Kwak

33 responses to “Our Fate Is in Their Hands?

  1. Even if they recognized their deficiency, they probably would not dwell too much on it. Politicians tend not to think in terms of mechanics because mechanical discussions do not lend themselves to swaying public opinion. Story-telling does. Whatever we end up with will derive from them picking the most appealing narrative and running with it.

  2. If there was a peoples lobby, a lobby who was funded by some exceedingly small divergence of taxmoney from the superrich, the predator class, that was then commissioned to contract of a PR firm, or law team, or some perception management group to coagulate and promote and advance the best interests of the American people – with real political contributions, and the real purchased congressional influence of say the gun lobby, or the lumber lobby – then the people who possibly have real representation in the government. Now our government is bought and paid for by this or that lobby industry PR firm with access to large pools of cash to influence (purchase, bribe) congressional support. There is NO people’s lobby. The people have no power, no influence and no representation in the government, and no voice in the conduct of the government.

    It’s not education that will change the hearts and minds of our representatives, and influence their decision making, – it is cold hard cash. The myriad lobbies have tons of it, the American people none, – so now, and going foward, our socalled representatives will always vote “…the way the lobbyists want them to vote”

  3. Well, the credentialed economists like Summers have not done a particularly good job, and also do not have the ability to admit their mistakes (for example Mr. Summers’ mockery of his colleagues for pointing out problems in the economy-e.g Raghuram Rajan). Also, economists and professionals have not done such a stellar job running large university endowments that they were in charge of. So, I am glad they are not the ones making policy at the end.

    Also, the assumption is often made in all this that professionals like economists are somehow more objective and less likely to be beholden to lobbyists than career politicians. I don’t think this is a good assumption. Economists are also human, and can also be tempted and bought (and probably have been in the past). When they are placed in positions of power, they will be subject to the same pressures and temptations as anyone else. If anything, they are better placed to game the system than a more “normal” politician, to their ends if they choose to do so.

  4. Guy-Philippe Goldstein

    James, you are right on the money in this post. But you are being too moderate here, perhaps because as you hinted you are hoping that somehow you could influence the lawmakers through your blog run with Mr. Johnson ;). Since I myself am not in the market for influencing public leaders, let me have the freedom to be blunt. First let’s immediately put down the staffer argument (that could be influenced..) : this is the same as the one we heard around 2000 when a sub-par candidate got elected. This goes against the very definition of responsability – since the ultimate reason why you select leaders is to pick up the ones able to process very complex information and take decision with imperfect information better than you do – which doesnt mean there is no information to be understood, on the contrary. So, if they cant process better than you, they shouldnt be decision makers and shouldnt be presented by main parties as congress (or presidential) candidates. This is the general argument. Now to finance.
    We understand today that because of the systemic risk to the economy, the banking system always relies on an inherent bail-out insurance from the state coffins which in democratic states is the taxpayer money under the supervision of parliament. We also understand that the main rules of the finance industry are written by the same parliament members. So why on earth do they lack any professional qualifications or credentialization to fulfill that role? In the finance industry, investment roles frequently requires CFA certifications (or FSA in the UK). BUT the most critical tasks in the financing industry – saving the system in times of potential systemic risk and writing its rules – is attributed to people who for some of them have absolutely zero qualifications for it. Just to say to have the democratic legitimacy is not sufficient. Modern liberal democracies are established on the principle of representative democracy, ie the creation of a set of elected professional politicians who will specialize themselves in understanding and managing the issues of the state. A certain pre-requisite for this role has been crudely determined two hundred years ago in the US by having at least 30 years old to become senate member, for example. This is obviously not sufficient today. As we see in other professions – finance, or even medical profession with CME and a move for re-credentialization of skills at set time period – it is high time that we have a further professionalization of the politician class, at least when dealing with taxpayer money. It is not contrary to the democratic sanction, but complementary. Parties should present to elections candidates for parliamentary positions with the required knowledge in finance and the required skills to manage taxpayers’ money. Because this is ultimately what their core responsability is, especially in times of most intense duress.

  5. A third of the House (and any other legislative body, for that matter) is dead wood. (They don’t let these people meet with foreign delegations.) Maybe a quarter are people who don’t do policy well but can do politics – these can serve a valuable function in getting the wheels to turn. Another quarter do a particular corner of policy pretty well, generally the corner that comes before their committees. And the remaining 10% or so are national assets (at least if you agree with them), the people who can cover the field in policy and are operational (i.e., can get a piece of legislation passed). Some committee chairs (e.g., Obey at Approps, Waxman at Energy & Commerce, Frank at Financial Services) come from the latter category. They are still human beings, and they are still constrained by the system they operate within. But they are devoted and knowledgeable public servants. It matters far more who has the gavel than what some mouth-breathing back bencher in the minority party (e.g., John Campbell) thinks.

    Notice that I did not commend every Dem committee chair. And realize that GOP majority ran things differently in its last incarnation – Tom DeLay and his staff mattered; everyone else, not so much. In that case, you had a much smarter and more ruthless version of John Shimkus running the asylum.

    I agree with your second conclusion: in general, the the more transparent the process, the better the outcome. But this is only in general – public attention and anger is a volatile force that can be harnessed to all sorts of ends.

    Your first conclusion – that the policy debate needs to be dumbed down for non-specialist Members – is not as true. There is too much legislation, even in normal times, for any human being to follow. In a lot of votes, Members will follow their district, their contributors, or their leadership. When none of the above considerations apply forcefully, Members (and their staffs) figure out that they generally agree with Rep. X on the relevant committee and vote with him or her. Again, that’s why it matters who has the gavel. Frank has been Rep. X for the Dem caucus in the House on most financial issues.

    Finally, you’re dead on with your overall point about the role of democratic bodies in policy-making. No one has found a reliable supply of philosopher kings – expert panels tend to be captured by various interests. (That’s often one of the reasons they’re established in the first place.) Even if it doesn’t originate all policy, Congress can and sometimes does serve a valuable oversight role. (One of the tragedies of the Bush – DeLay era was that oversight was viewed as treason.) It’s an ugly and imperfect system, and you can make a good argument that the single biggest thing we could do to improve the quality of our government would be to fix our campaign finance system. But the beauty of representative democracy is that, if the people in power screw up badly enough for long enough, they have to go away. That’s not trivial.

  6. You’ve got to be kidding. The main failing in your thesis is the 2nd word in the second to last sentence–”should.” If you mean that’s your ideal, OK. Thanks for the input. But you glance over the authority behind the should. Perhaps re-writing the constitution, imposing a fascist technocracy??

    Who exactly is to impose upon political parties that they must certify their candidates are fully fluent in economics, warfare, space exploration, social engineering etc etc.

    I found the Kwack piece to be a bit dumb as well. I’d say the maligned Campbell acquitted himself well–willing to be informed by the all-knowing economist class (most of whom had no clue this catastrophe was upon us.

  7. “…pedigreed scholars in the executive branch (Larry Summers, Christina Romer, Austan Goolsbee, etc.)”

    An academic pedigree may garner respect in academic circles, but it means nothing outside of that. Particularly when it is in a discipline that has thoroughly disgraced itself in its real-world flailings.

  8. While we are on the topic of “pedigreed scholars”, it seems that Greg Mankiw (former chairman of Bush’s Council of Economic Advisors) just publicly advocated an inflationary monetary policy in the NYT.

    http://www.nytimes.com/2009/04/19/business/economy/19view.html

    “If all of this seems too outlandish, there is a more prosaic way of obtaining negative interest rates: through inflation. Suppose that, looking ahead, the Fed commits itself to producing significant inflation. In this case, while nominal interest rates could remain at zero, real interest rates — interest rates measured in purchasing power — could become negative. If people were confident that they could repay their zero-interest loans in devalued dollars, they would have significant incentive to borrow and spend.

    Having the central bank embrace inflation would shock economists and Fed watchers who view price stability as the foremost goal of monetary policy. But there are worse things than inflation. And guess what? We have them today.”

    I am shell-shocked.

  9. Yes… Compelling narratives trump facts – that’s why so many people still think Reagan was a fiscal conservative. And the race is already on to find the most compelling narrative:

    Brad DeLong:

    http://delong.typepad.com/sdj/2009/04/three-possible-financial-narratives-for-the-obama-administration.html

    Krugman on DeLong, and Yglesias:

    http://krugman.blogs.nytimes.com/2009/04/15/too-many-narratives/

    Dani Rodrik (about our beloved SJ – with some unnecessary snark):

    http://rodrik.typepad.com/dani_rodriks_weblog/2009/03/simon-johnsons-morality-tale.html

  10. It’s time for scholars to learn how to present issues to the public. On the other hand, no amount of transparency will protect us from politicians who are incapable or unwilling to protect the public interests.
    Shimkus and the like of him in politics are an offense either because they think their voters are stupid or because they demonstrate that the process that got them there is stupid. As far as I know all state department jobs require passing an exam. Why can a congressman pay his way into his job?

  11. Behold the underlying problem. The predator class mistakenly imagines that they are immune and untouchable, and that the merciless abuse and robbing and pillaging of poor and middle class Americans will go unanswered because the people are numb, tramatized, and/or ignorant. This is a lethal miscalculation.

    Imagine and conjure all you want, but -
    desperate people do desperate things – and – there will be blood, a reckoning, and a balancing.

  12. It is important for academics (and I count myself among the ranks) to communicate their ideas in a persuasive and understandable way. Jargon can sometimes be useful as a shorthand for insiders, but it isn’t necessary. And once a theory has been proven, the mathematical equations aren’t really all that important either to the lay policymaker. In other words, there is nothing about this debate and the policy responses that cannot be explained to the Campbells of the world, as long as both parties are game. And being forced to explain one’s ideas to an outsider is _always_ a useful exercise. Furthermore, you get forced to explain any stupid assumptions you need to make your model work….

  13. The only thing remarkable about this post is that it suggests that the author is just now figuring out that the folks who run government don’t know how to run our economy or when to leave it alone. Even those who are intelligent enough to think things through will stop at the “will this get me re-elected” part. Government will not change, no matter how many “scholars” you send to Washington.

  14. “… But there are worse things than inflation. And guess what? We have them today.”

    If we get inflation, it will be in addition to those “worse things” and we’ll get even more to boot.

    All of the inflation narratives I’ve seen sound like a silly fairy tale, without the charm.

    I’m sure we’ll get plenty of opportunities to debate the finer points, not to mention the ugly ones, in a more relevant thread.

  15. Your arguements are probably the driving force behind the founding fathers’ insistence on a limited government. The only compromises for a stronger federal role came with the concept of trade promotion and providing for the common defence, for wich a national line of credit was required. Beyond that incompetance and/or corruption is garaunteed.
    The reliance on an “intellectual” governing body is paternalistic and the greater reliance you place on that, the less that is expected of the people. No, much better to let the idiots run congress and caveat emptor for free enterprise. Government is highly unproductive and if they suck up all the brain power through regulatory circus, that leaves a lot less growth. Don’t try to hold up China as an example they are simply releasing pent up demand and it is quite an honor that their A-Team in Government is battling our B-Team.

  16. You know who also have staffers and votes? Congresswomen.

  17. In many senses, govt. in the 18th century US was much more paternalistic at the state and community level.

    The Founding Fathers were also, if anything, highly practical. And practically speaking, the world is vastly more complex than it was in 1780. The language of global pollution threats, nuclear weapons, net neutrality, genetic cloning, were not even in their vocabulary.

    Caveat Emptor for free enterprise faces grave challenges when complexity and opacity impair transactions in complex systems. Caveat Emptor in the monetary system is exceptionally perilous. The monetary system undergirds the contractual system of money (money is debt, a contractual obligation). The same arguments that undergird the system of courts also undergird the system of money. If you cannot depend on a high quality monetary system, all contracts are impaired. And this does not even begin to cover the other complex issues…

    The fact is we have a system of government designed for a world in which the primary problem was restricting government control. While this is still critical, many of our current primary problems are technocratic in nature.

    The great problem becomes empowering a representative government with the technocratic tools (and, even more challenging, the freedom from special interests) to act on behalf of the nation. This problem is hardly limited to matters of economics! We have many institutions whose primary job is to help Congress and the President understand key issues – the Council of Economic Advisors, the National Security Council, the Office of Science and Technology Policy, etc.

    It is hard to judge whether the past 8 years have been a system failure (aka, the American system is fundamentally flawed), or a failure among American voters to look for competence in elected officials. Certainly the technical aspects of the system, while not perfect, ran better under Clinton and Gore. Gore couldn’t deliver a speech to save his life, but he was a pretty decent technorati.

    Over the past 50 years, the Presidency has taken on more power precisely because of its ability to provide leadership in complex areas. Congress becomes more of a filter than an initiator (taking the role of initiation primarily on small legislation, or special interest-serving legislation). But between 2001 and 2007, we had a clown in office, who deliberately crippled the technical sources of competence in order to replace them with political cronies. And even when his advisors gave good advice, the clown basically ignored them.

    The result was far more disastrous than most people expected.

  18. Just a quick correction – the primary problem was restricting national govt. control, while at the same time giving national govt. enough power (financial and military) to protect the colonies from the British.

  19. More energy taxes! It just proves once again that it is wiser to certify and speculate to drive a Hummer, than work in labor and barely afford to drive to work

  20. You give Campbell a “by” on his inarticulate meanderings in front of the microphone and castigate Rep.Shimkus for the same thing. Shimkus is right. A carbon-rich environment is a plant-friendly environment (including rain forest plants that many are so concerned about). In the Carboniferous geologic era (get it?: CARBON-iferous) which had 3 orders of magnitude more carbon than today’s atmosphere, we know that plant life was hugely lush.
    CO2 is now a trace gas in our atmosphere and it has been shown and continues to be shown that its natural waxing and waning has little effect on climate and even less on humans, but since green plants need it for life, these minor fluctuations can have large effects on growth and abundance. Because Shimkus didn’t go into detail in his statement does not mean he doesn’t understand those basic concepts.

    Further, getting your information from an environmental organization with “skin in the game” is probably not the best source for objective scientific information. The recent rash of forest fires are a result of climatic factors coinciding with natural forest conditions (overstocking, insects, disease, etc.), just as they were in 1910, 1919, 1921, 1929, and 1934. The climatic factors alone would not have led to the extensive forest fires any more than the forest conditions alone would have.

    I won’t question your expertise in economics but I will observe that that expertise doesn’t translate very well to biological systems.

  21. “Imagine you instead entrusted the job to some committee of professional economists from Harvard, MIT, and all those other fancy places. How would you decide who would be on the committee? And do you really want a bunch of economists? Some people would want to include people from Wall Street; others would want to include people from other disciplines, like psychology and political science and history; others would want to include people from Main Street.”

    China has been working on its performance as a centralized planner for some time now. It’s conclusion: Gradualist policies designed by political-economic historians.

    Certainly China has made policy mistakes. It’s failures to properly forecast supply and demand has led to bouts of inflation for example. But in an era where centralized planning is needed, they seem to be quite proactive. Global trade and their dollar reserve growth are slowing and they know that their rural migrant labor needs to have a (much) higher income – so the Chinese government is focusing on developing its domestic demand without confusion or delay. China appears to be changing in the directions that distributed control would ultimately lead – but getting there faster and with less pain.

    The main problem with China’s centralized planning at this point is the ultimate ends it seems to be working toward. They are discussing the possibility of dollarization with Argentina right now. A similar discussion does not appear to be occurring with the fiscally disciplined Chile… China recently got into a spat with the IMF over who gets to make loans to the Congo… China’s current domestic stimulus package is partly fiscal. The other part consists of instructions to its state banks to make lots of loans to its citizens to finance their consumption…

    Therefore the people you want designing gradualist centralized policies would not only be political-economic historians, they would also be able to resist the temptation to use that knowledge to channel flows of wealth towards themselves. People like that, people like Rudi Dornbusch, are very hard to come by.

  22. I was about to quote the very same passage.

    This group of economists completely failed to see the housing bubble and the implications for the economy.

    All they know is inflation. The Fed will fix it all through inflation …

    These are indeed sad times. I’d prefer Campbell over these academics anyday.

  23. Another example of the elite “Economists” essentially suggesting the value of anyone who has saved dollars be wiped out in order to save the debtors.

    This article was the epitome of inane.

  24. Exactly. Government should stay OUT of trying to centrally plan the economy. It only makes things worse.

  25. I think one key point is being missed in this discussion. I think most people would agree that no matter what the complex decision in front of it at the moment, the economy, global warming, defense procurement, etc., Congress as a whole is not the ideal body to be making that particular decision. However, our system’s key advantage compared to most others is that we can change direction quickly. It takes only one or two elections to completely change direction.

    If you install technocrats or others with greater expertise and separate them as a class above for the purpose of making better decisions, you also risk those experts becoming invested in their own expertise and the quality of the decisions they make. A “Best and Brightest” effect, if you will. This is why China and other more centrally planned economies will, I believe, take much longer to reach full potential and compete with the US. You can see some of this effect in Japan, where the ministry level employees are chosen from the brightest college graduates and are set up as a higher authority in many respects than the legislators in the Diet. Japan has had great difficulty in changing direction in its policies which has exacerbated the effects of recessions past.

    So, if the choices made now are not correct, the American people will correct them relatively quickly. This is maybe not an ideal result, but it is a system that has stood the test of time.

  26. LOL – I rather strongly agree with Mankiw in this case. (And that is rare.)

    Creditors have two options, really:

    1) Take a modest hit due to inflation, but in the long run end up better off as the economy resumes growth.

    2) Lose even more money as all of their debtors default due to a deflationary cycle that causes real-interest rates to skyrocket (and asset values – including collateral for loans to plummet in value) while they are losing jobs/income.

    IMO, creditors – just like GM’s bondholders – will keep fighting against any penny-wise losses until they drive their debtors right into bankruptcy court, where they will prove the biggest losers.

    —-

    Recipe for controlled inflation:

    Massive govt. investment in infrastructure/energy, finance this by borrowing from Fed instead of sucking money out of private hands into T-bills (thereby pouring money into private hands), and coordinate with global regulators to implement a phased reduction in capital-asset ratios to prevent an inflationary rebound.

  27. This same line of argumentation shows up whenever we have a national crisis. “Wouldn’t it be nice if we have a meritocracy/benevolent dictatorship, they sure could act more quickly and efficiently. Plus they’d have the power to force all those uninformed Dumbos out of the decision making process”

    In a Democracy we trade efficiency, effectiveness, and duration of policy for better accountability and lower variation in policy. That is just how it is, but it certainly serves us better in times of plenty than it does in times of peril. This probably explains why we are much more tolerant of executive privileges(of all sorts) during wartime.

  28. Guy-Philippe Goldstein

    To StatsGuy: Thanks for painting the XVIIIth century background to the vision of founding fathers. You’re right to point to the many institutions created to offset the lack of technocratical expertise at the White House or Congress. I would also point to the most important economic institution, who is actually currently run not by elected officials but by scholars: the FED !
    To Ethan: sometimes one or two election cycle away is way too late to correct mistakes that can have rapid and catastrophic consequences. The best historical example is the Smoot-Hawley tariff of 1930 which further contracted global trade and deepened the depression till it brought world economy to its knees – and Hitler to power. By the way, a decision at the time opposed by a large consensus of economists who were duly ignored. And when the House rejected 228-205 the Paulson plan in September 2008 (with a majority of Republicans against!) it was hard not to think of Smoot-Hawley. So again, is it too hard to ask to elected representives of the Nation that they be held to the same levels of professionalism than your next-door accountant or asset manager, since they do manage your taxpayer’s money – including being first respondent in times of financial crisis?… That’s not calling for Chinese-like dictatorship: to the difference of liberal democracies, dictatorships have no problem censoring the free flow of information so that no whistle-blower can be heard – and who really knows what’s on the books of chinese banks anyway?! or who’s manipulating chinese stock exchanges.. – BUT it should be one the lesson drawn from this deep crisis that there has been much too far complacency with regards to the level of seriousness and professionalism required to congressmen who have relied far too frequently on lobbyist to form their opinions; and that this must be resolved by a further effort in the responsability and professionalisation of the politician class which is managing taxpayers’ money. This is simply recognizing that as any human system democracy is perfectible – and so it should be perfected and improved, so that mistakes of the past, old and recent, are not repeated at the costs of social tragedies across the nation.

  29. It may be hard for an expert to reconcile with a politician like the guy. I would also expect a member of a comittee to be at least fairly familiar with and thinking about what the comittee deals with. I guess it really works as in the funny movie with Eddie Murphy playing a dumb congressman, trying to make it to a powerful comittee just to get the ‘campaign’ money.
    Coming from a post-communist country I learned that a government of experts leads to dictatorship and corruption and errors in all kinds of policy. However, after the fall of communism I learned that a government lead by ‘common’ guys converges to corruption without regulation of the government itself. The way lobbiests interact with politicians in US might looked upon as a highly regulated environment. But it is not too great as well, of course. And there is no way out of this because leaving one leads to the other.
    It was a beautiful pre-crisis world where one could believe that limiting government, making politicians instead of leaders just managers of public life, and letting markets as some wizards of common interest decide, leads to stability and persistent growth and true democracy.
    There is a big hole in our way at looking at world now. And it will need to be fixed somehow. Same as banks and housing

  30. Irini Fountoulaki

    This view of scholars as the shining lights and others as having inferior views exhibits ‘Ivy Tomer’ arrogance.

    History shows that scholars can get it wrong. At times, scholars have been the most retrogressive and conservative forces to change. They often get locked up into conceptual paradigms that blind them from reality.

    Making carbon a pollutant and taxing it is a highly political issue that has little to do with science and rationality.

    Climate change on Earth has been dramatic over millenia long before the human species played any role. Even pedigreed scholars admit that the Sun plays the major role and has a force well beyond human means to control.

    Why people who finish Harvard and Columbia cannot understand these things is beyond me. I am a Penn alumnus myself.

    I suppose the difference is that Harvard and Columbia were originally theological schools and there still pervades the spirit of self righteousness whereas Penn was founded by Benjamin Franklin, who was of a practical, problem solving mind.

    God help us in the hands of the self righteous. There is something very wrong in the pedagogical approach of these schools.

  31. If you have a financial system that depends on a small group of people “redesigning” it right, then we’re in big trouble. Don’t add more rules and regulations, take them away – all of them. Put all of the responsibility for loans in the hands of the people making them and taking them on. I have more confidence in 300 million people individually figuring out what works, than a small group figuring out what works for all of us.

  32. Perhaps you’ll forgive my cynical reply, but an elected representative with financial expertise is actually more scary because they will use that knowledge to benefit their special interests. Anyone that believes politicians are running the country with your “best interests” in mind is crazy. A small federal government is the best solution precisely because the politicians have THEIR best interest in mind, not yours.

  33. This is a terrible post. The fact that you need to go through this much thought to realize that democracy, rather than technocracy, might be a tolerable form of government is a sad commentary on the state of our elitist educational system, or which I imagine you are a product.

    The reason that “the people” get to make the decisions is not that this is efficient or that it corrects for bias or anything like that. It is that they are they ones who are affected by the decisions. They are the ones who pay the price. If we believe that “all men are created equal,” then we also must accept the idea that no one has the right to tell another what his interest is. If you can’t convince people that Larry Summers, or some other savant is right, then too bad. Since everyone is equal, no one has superior knowledge concerning what anyone else should do or want. If you don’t like it, go live in China.

    The more interesting issue in the financial crisis is not whether Congressmen are smart enough to figure it out (I think they are because as this blog itself has pointed out it’s actually not that complicated). It is whether we should limit complexity ON PURPOSE in order to ensure that democracy – and the participation it requires – can survive.