Tag Archives: Richard Posner

Does Democracy Corrode Moral Character?

Yes, and I’ll offer a few points as to why. Consider it the flip side to the forum hosted by the Templeton Foundation on a different, though also important, question. They ask whether liberty corrodes moral character; I take it that they wish to know whether free markets bring out the worst in us. A host of intellectuals of diverse persuasions answer yes, no, maybe, including Michael Walzer, Tyler Cowen, and Garry Kasparov, and elsewhere, the likes of Gary Becker, Richard Posner and Will Wilkinson have all said their word.  Most of the answers are disappointing. Respondents spend a lot of time discussing the virtues and vices of business men as compared to politicians, which is an interesting game of moral hotornot, but such answers also evade the question. There are more professions than these. And what I think is more important, the forum overlooks a fundamental problem: just as most people confuse the current American health care industry with a free market in heath care, so too do our respondents confuse our current society with a completely free one.  Yes, commercial society pervades western culture, but it’s also balanced by the prevalence of democracy in politics, by which I mean representative government. Both institutions–the market and Super Tuesday–have their influence on the manners and mores of the West. So it’s patently silly to consider one without the other.

Wilkinson makes a critical point–namely, that we must distinguish moral means from moral ends. He writes: 

The moral ends worth caring about are the various constituents of human welfare–longevity, health, wealth, pleasure, happiness, a sense of purpose and self-efficacy, the realization of potential, creativity, love, friendship, etc. Moral character, or virtue, is a means to achieving moral ends. As the socioeconomic structure shifts, the means of achieving moral ends shifts.

I have no quibbles with these ends. We may allow for some pluralism,  but such an approximation will do. Now consider the influence of democratic institutions on our character as a means to these ends and ask yourself whether the behaviors cultivated by politics lend themselves to the promotion of such worthy goals. Could it be that much in democratic politics brings out the worst in us? Are the Democratic Vistas barren ones? O Templeton! O Whitman!! Let us count the vices democracy cultivates. 

  1. Fear–demagogues flourish in democratic societies and it is their professional science to whip the mob up into a mad crowd of witch-burners. Together, the herd and the herdsman hunt perfectly innocent victims. Elections become wild orgies wherein each side attempts to substitute a new and worse, though largely imaginary fear for the one that previously prevailed.
  2. Envy–the democratic man takes an unhealthy interest in the superiority of his fellow man. Demagogues and academic philosophers thrive on creating the illusion that your neighbor’s success comes at the cost of your own and that the prosperity of the country requires tearing that man down.
  3. Helplessness–once the demagogues have convinced the public to fear a minority and once they have whipped up their envy of the wealthy and superior, the skilled politician next claims that he is the only one who can save the public from these menaces. This is change you can believe in.
  4. Ignorance–largely convinced politicians will solve his problems, the democratic man doesn’t follow the far-reaching and slow-moving consequences of his ballot. Meanwhile, he is bamboozled and exploited by a small but disciplined group of rent-seekers and special interests. 
  5. A lack of integrity–first in politicians, whose overarching aim is to retain their jobs. If a politician can hold onto his office by lying, he will hold on to it by lying. Moreover, he will preach harmful policies to gullible men he knows to be idiots, provided that this will win him the election. No issue is too absurd, no principle untouched, if the votes will come around. And similarly then in the democratic man himself, we see a crack in his purity. He loses his sensitivity to dishonor. Faced with a myriad of government scandals, the democratic man becomes inured to public vice, simply shrugs, murmurs something about how they all do it, and then continues to vote for his man. Of course, if the democratic man were to consider hiring this venal buffoon, he wouldn’t even give the consideration a second of his time. 
  6.  Profligacy–yes, the government is wasteful but that’s not what I mean. I refer to the opportunity cost. Thousands of years of life and I daresay trillions of dollars have been wasted pursuing laudable goals with improper machinery. Political victories are often phyrric. There will always remain a great if…what could have been accomplished if these talents had been used somewhere other than the state house, Congress, or even law school. 
  7. Nosiness–the democratic man lusts for ways of controlling the merriment of his fellow men. He suffers knowing others, somewhere, are having fun. Thankfully, he knows no joyful behavior will go unexamined. Smoking…drinking…sex…carousing…how you drive your car…who you pay for what pleasure…who you hire for a job…it all comes within the purview of the democratic man’s moral legislation. He begins to believe it his divine right to regulate such things. 
  8. Cowardice–the institutions of democracy provide many buffers to protect the mob from confronting those they exploit. If they had to meet their victims face to face, a full nine tenths of their idiotic legislation wouldn’t stand a chance. This holds true on any issue from immigration to taxes. 
  9. A low self-worth–many decent men are converted into criminals for performing acts that are natural but deemed subversive by the demagogues and the witch-burners following them. 
  10. Nationalism and xenophobia–there are no better scapegoats than those who live outside our walls. No successful demagogue can let outsiders have a space at federally financed welfare tough. 
  11. Intolerance–the democratic man increasingly fears and loathes the followers of opposing ideologues, which is natural since every proposition is win-lose.
  12. A lack of charity–why be generous and solve problems through the institutions of civil society when we have guns to point at people to force them to cough up seven tenths of their paycheck? 

Of course, this list is not exhaustive. Nor do I believe the Templeton foundation will continue the discussion any time soon. Tho I wish they would.



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Posner Calls It a Depression

The honorable judge has gone a bit daffy. He writes

By undermining faith in free markets, the depression opens the door to more government intervention in the economy and eventually to higher taxes (though probably not until the economy improves). These are not necessarily bad things. Obviously neither the optimal amount of government intervention nor the optimal level of taxation is zero.

So if we accept that the optimal amount of government intervention is not zero, then what?  In a leap of idiocy, a non sequitur of numbing grossness, the judge concludes the optimal level is somewhere between the Truman presidency and the Johnson years. What a joke. 

So taxes will have to rise. Federal taxes as a percentage of Gross Domestic Product are no higher today than they were in the 1940s, 1950s, and 1960s—periods of healthy economic growth. The marginal income tax rate reached 94 percent in 1945 and did not decline to 70 percent until 1964 (it is 35 percent today). A modest increase in marginal rates from their present low level would increase tax revenues substantially…

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Hedge Fund Managers Deserve Their Salaries Because They’re Smarter

The ever insightful Richard Posner writes

I do not think that the government does bear much responsibility for the crisis. I fear that the responsibility falls almost entirely on the private sector. The people running financial institutions, along with financial analysts, academics, and other knowledgeable insiders, believed incorrectly (or accepted the beliefs of others) that by means of highly complex financial instruments they could greatly reduce the risk of borrowing and by doing so increase leverage (the ratio of debt to equity).

Posner fails to consider a host of contributing factors originating from government sources: the moral hazard Freddie and Fannie create, perverse tax incentives (starting in ’97) to overstimulate investment in housing, and the Clinton administration’s policies (again, starting in ’97) to increase home ownership among the poor. Still, the venerable Judge has a point. If all these mortgages were suspect, then why did all those Ivy Leaguers on the trading desks eat them up? Shouldn’t their 150 IQs have included a bullshit detector? Quoth the Seventh Circuit Judge:

It should be noted that because of the enormous rewards available to successful financiers, the financial industry attracted enormously able people. It was not a deficiency in IQ that produced the crisis.

But are they able enough? And were the rewards high enough to attract the most able? The New York Observer has been the first to buttonhole Tom Wolfe and ask him what he thinks of the current crisis. (It’s about time someone got a hold of him, fer Christ sake. Whenever there’s a Wall Street story, a thousand reporters invariably trundle out references to the Bonfire of the Vanities and the Masters of the Universe.) Wolfe has a peculiar theory about the failure of investment banks–it’s brain drain, he says. Instead of turning into cubicle donkeys, the best and the brightest in finance have all found their way to hedge funds, leaving space at the trading desks for all the second-raters out of Harvard. Herr Wolfe:

 there’s nothing as second-rate as investment banks. Every smart and ambitious young man—and forget young women because they don’t play any role in this—wants to be in a hedge fund. And I’d be surprised if the hedge funds implode, they’re just smarter. … What bright guy wants to be an executive for a firm like Lehman Brothers, where you have to hold the hand of disgruntled employees, you hold the hand of disgruntled directors, you’re constantly nice and wearing the right clothes? That’s for real second-raters. … It’s only the bottom of the barrel that’s left in these companies. The new Wall Street is Greenwich, Conn. You don’t need these big glass silos full of people. Look at the number of employees. Lehman? 28,000! And a Greenwich hedge fund can handle the same amount of money with 20 employees. 

And just for kicks, Wolfe adds, “Did I mention to you I’m pimping out my cars?”

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