Irrational Exuberance? You Got That Right!

No problem. Perhaps it is a failure of my imagination. Or perhaps I'm just being realistic. I'm all for working towards an economic system that prizes honor and community-mindedness. There's no reason a capitalist system cannot go hand in hand with these things. What you seek is not to discard capitalism, but to change the way we operate within the system.

you make good observations here, and i wish i had more background on economics to contribute more discussion, but I am curious as to how the gospel of Christ supports self interest (not selfishness).. i'm not saying that sarcastically, i'm just curious as to what your thoughts are.. thanks

Bill, I don't think that self-interest is even discussed in the Bible. The Bible seems to assume that people are interested in staying alive by having food and shelter. And they are interested in keeping those they love alive. That's one aspect of self-interest. But it can also include what many people would consider a good life. Because God made us social beings, we want to have friends and have some respect from them. Self-interest can include spiritual survival, which would mean obeying God and accepting Christ as Savior. Don't we want salvation out of self-interest?

Self-interest can turn into selfishness if carried to extremes. It's like CS Lewis wrote about all sin: it is the distortion of the good that God created. Self-interest is necessary for survival; but if distorted it becomes greed, covetousness, envy, selfishness.

Think about what it would mean to deny self-interest and live exclusively for others. We would have no shelter because we would give everything we possessed to others. We could have no clothing. We would not eat because we would give all of our food to others so pretty soon we would die.

In sum, I would say that self-interest is the natural desire to not only live, but to enjoy a good life. That's the idea Adam Smith had in mind. The free market can force a selfish person to control his selfishness in order to further his self-interest.

"...there is a continuum between pure capitalism and pure socialism and many combination of the two are possible."

That, it seems to me, is simply a perpetuation of the false dichotomy--every economic arrangement is either some form of socialism, some form of capitalism, or some combination. What I've been saying is that this is not true. There are economic arrangements that are neither capitalist or socialist in any commonly understood form. Your 'only other option' is certainly not the only other option.

But I'm not going to waste my time discussing it with you. I'll save my typing fingers for people who don't already think they have all the answers.

I could ask you the same question. I mean, I'm not sure that you even read what I wrote here, especially my comment that capitalism and socialism aren't the only possible economic arrangements out there.

I'm so, so glad you know so much more than the rest of us.

Capitalism doesn't allow corporate domination, and neo-liberalism is nothing but socialist-lite. I'm sure you don't think you are socialist. But I have tried to point out that your ideas about capitalism came from Marxists first and were adopted by other socialists. They are simply wrong, too. Socialists have no more right to define capitalism than do Muslims to define Christianity. I'm trying to tell you what capitalism is by how capitalists define it. You insist that the only possible definitions are those invented by socialists. That's simply dishonest.

Besides, if you parrot the definitions, worldview and conclusions of socialism, then why are you ashamed to be called a socialist?

And did the market speak to you to tell you that Keynes and I have never read Smith? You have no idea whose work I have read nor anything about my understanding of economic theory. I have indeed read Keynes and Smith and Galbraith and Friedman. I also have some fundamental understanding of economic concepts having achieving a Masters in Business Administration from a top 100 university.

I do feel confident in saying that "The Wealth of Nations" is a flawed work in that it was published in 1776. But I really don't think God much cares about the wealth of nations. I believe he cares about each nation's individual citizens, about each human being. If a nation is wealthy but doesn't care for the least of these, then that nation is indeed poor in God's eyes.

Do you not know that the sin of Sodom for which God condemned her was not homosexuals (whom you would call dishonest,) but rather an unfair and uncaring economic system. "Behold, this was the guilt of your sister Sodom: she and her daughters had arrogance, abundant food and careless ease, but she did not help the poor and needy." Ezekiel 16:48-50

Peace of Christmas, Emanuel.

"There is no "free market" since there are numerous barriers to the market and each player seeks to gain advantage by generating market power."

Market power is very different from state power. Market power cannot force people to buy your products. It can only give you economies of scale. Onlly the state has coercive power. We have very little of the free market left in the US because of state intervention, that much is true.

"Keynes pointed out the shortcomings of Smith's theories, most importantly that, "in the long run we're all dead."

Keynes had never read Smith. According to Hayek (who admired Keynes) and others who knew Keynes personally, we was hopelessly ignorant of economics and especially economic history. His statement about being dead in the long run was not a critique of any economic policy; it was just his typical way of dismissing serious objections to his nonsense with flippant remarks. Keynes knew that flippancy always is a better defense than reason.

"Of course American's worship individualism, which is closely associated with materialism and Adam Smith's invisible hand. "

I've never know an American who worshipped individualism, and Smith's invisible hand had nothing to do with materialism. You debate like your idol, Keynes, never having read Smith you feel confident in criticizing him.

You're right, though, the US is so socialistic that I would die if I tried to avoid even a tiny amount of it.

Of course I do. But where do you draw the line and who has the authority to draw it? It seems to me that is a matter between a believer and God.

I am reminded of Walter Wink's maxim: The Powers are Good. The Powers are Fallen. The Powers, they can be redeemed.

There are things larger than us, though they are composed of many of us.

But markets are a great testament to how we are to behave and how we do behave can be very different things indeed. Yes, evolution is driven by our own self interest, and the self interest of every organism, and it works. But is this not precisely why that monstrosity of so-called Social Darwinism consistently fails? For Darwinian evolution results in extinction as much as it leads to speciation. Currently 99% of all organisms that ever existed are extinct. And while self-interest might lead to the development of the strongest and fastest and the one with the coolest chemicals, it leads to the deaths as often as it leads to life.

And do I truly want an edifice of human morality built on the backs of the oppressed? Alone among the animals I have eaten of the Tree of the Knowledge of good and Evil. I know what I do to be wrong or right, where the monkey and the dog and the chameleon and the worm do not. Even if I could create a perfect world, a utopia free of pain and suffering, but it must be done with unimaginable suffering of one unwilling individual, would it be worth it?

No. Evolution might be a beautiful theory. It might be how the world came into being. It can never be a model for how we should treat our fellow man, our brothers and sisters.

I guess I need a definition of "laissez-faire".
I thought it meant free market without government interference.

Your reply indicates that some practice being "as old as humanity" somehow disqualifies it from being laissez-faire.

So what EXACTLY does "laissez-faire" mean to you?

"The point was the point of working was to have something to share, not so we could buy more junk or hoard so we could buy power."

But we're not to feed and clothe ourselves and our families? I'm not accusing you of intending that; I'm just taking your statement literally and to the logical extreme. Of course we are. So what would you call the motivation to take care of yourself and your family that doesn't amount to selfishness? After all, the body is the temple of the Holy Spirit and Paul claimed that those who didn't take care of family are worse than infidels. Can you give me a term to use for that motivation and I'll gladly use it.

"Regarding the very American worship of individualism or "self-interest,"

There is no one who worships individualism or self-interest. Never has been. Even if you conflate self-interest with selfishness, Adam Smith never promoted, glorified, admired, advocated or in any way recommended selfishness. Not a single pro-free market person since has either. By that, I mean a serious economist. There were some silly poets in the 19th century who did so, but there economic reasoning for it was just as silly. Smith assumed the existence of selfishness, he did not promote it. He asserted that competition within the Dutch system of natural liberty would control mankind's natural selfishness better than could any corrupt bureaucrat or law. That's the only claim he made. Smith did not believe he could change human nature. He only wanted to limit the damage that evil men can cause.

That said, you would have good grounds for accusing modern mainstream economics of promoting selfishness. I can't give an economics lesson here, but let me say that mainstream economics is nothing but variations on Keynesian economics. Keynes was a socialist and predatory homosexual. I only mention the latter so that you will have some idea of why he was so dishonest. Keynes claimed to save capitalism by having the state intervene in the markets, but his books betray him and make it clear he wanted nothing less than a socialist economy. Mainstream econ today is based on Keynes' socialist ideas. And mainstream econ teaches that people must spend every dime they make plus every dime they can borrow or the economy will crash. They blame the latest crisis on the assumption that Americans quit spending and started saving.

Economics before Keynes taught a very different story. It taught that economic progress, by which it meant alleviation of poverty, came through savings and investment that would raise wages. That tradition of economics has been carried forward by what is now called Austrian economics. If you want a good intro to Austrian econ, view the videos on the front page of the fee.org site.

What it means to me is not important. What it meant to the originators of the idea is important. Allow me to use laissez-faire, capitalism and free markets as synonyms. Capitalism has always required the rule of law. Adam Smith assumed it, as have all capitalists since. The rule of law does not necessarily mean law passed by a legislature. That's positive law. The rule of law means the action laws that prohibit theft, fraud, murder, physical violence, rape, etc. And the rule of law requires equality of all people before the law, honest judges and police to adjudicate and enforce the law. Free markets are nothing but the implementation of property rights.

Socialists since Marx have tried to redefine laissez-faire and capitalism as advocates of lawlessness where the most powerful rule by force. That is very dishonest. No capitalist or advocate of laissez-faire has ever in history advocates anything like it. Modern socialists try to claim that capitalism is big corporations who evade the law and buy special favors from politicians. Again, that is exactly the opposite of what every promoter of capitalism has advocated for centuries.

"Classic examples are negative environmental externalities, and inefficient duplication and/or de facto monopoly (say electric wires for a city, and roads). There are also issues with regulation, which is necessary at some level due to the otherwise asymmetry of information."

That is the standard line from mainstream economics. However, advocates of free markets would disagree. Free markets would handle "environmental externalities" through the courts, and that is exactly what we did in the US until the creation of the EPA. When pollution damaged private property, the owners sued in court and got relief. The system strengthened property rights. Where the system didn't work was on public lands. Had that land been private property, the system would have worked. So the problem wasn't the market, but the expansion of state-owned property and the lack of private property.

The problem of running electrical wires around a city was a false problem that never existed, or would not have existed without eminent domain. In other words, eminent domain (state control of private property) created the problem. Without eminent domain, electric companies would have to negotiate with property owners for easement rights for their wires. No property owner is going to give easement to dozens of electric lines.

The same is true of roads. Roads were privately built and owned for decades in the early days of our country. State ownership of roads has resulted in overbuilding and under maintenance. We have thousands of "bridges to nowhere" and roads that go to the same place. The history of state funded roads is one of pure corruption and waste. Roads are always rewards for political support. In addition, state road building crushed passenger rail service which would have been far more efficient.

I'm not sure what you refer to with "asymmetry of information" other than to say that without asymmetrical info profits couldn't exist. The guy with the better information usually profits.

Your reply confuses goals and means. If the goal is to maximize growth, then Joe Stalin got it right. Misery along the way is justified in service to that goal.

Chuck noted that a period with rather less government regulation than now was also accompanied with various abuses. The people cried out in anguish and demanded protective regulations -- i.e. invented government to protect them from abuses. Your answer is not to dispute the abuses, but rather to argue that that period had a faster rate of growth.

"Please tell me of a period before that in which Americans, or anyone, was better off."

Were pre-industrial peasants happier, on average, than people in your time-range? I don't know. There are too many intangibles. Why would this be relevant?

"If there is anything that continues to enjoy a high degree of "irrational exuberance," it has to be the belief that an unrestrained, free market holds the answer to all of our economic woes and uncertainties."

It's highly revealing that Chuck bases his view of markets on that of Cox. Cox would think Chuck a complete idiot for believing the Bible is true, let alone the word of God, So I'm really curious as to why Chuck holds him in such high regard.

But just because Cox is anti-Christian doesn't mean he is wrong. He is wrong because he is dishonest. No one has ever held the market to be omniscient, omnipresent or omnipotent. Cox's entire argument rests on his exaggerations and misunderstanding of financial jargon. He confidently builds a straw man and then proceeds to make fun of it. I can't believe that passes for intellectual discourse.

Chuck, there is no one in economics, business or finance who believes "that an unrestrained, free market holds the answer to all of our economic woes and uncertainties." That's simply deceitful. What people do hold to be true based on the science of economics is that a free market operating under capitalist institutions will do the best job of defeating poverty and providing justice for all. And free markets fail to accomplish that when the state intervenes to direct outcomes to please socialists.

Chuck: "there is no reason to assume that these relations will be carried out in a moral, and more importantly, Christian manner. Of course, history bears this out. One thinks of the abuses under the laissez faire capitalism of the early 20th century."

No one claimed that a free market would turn every sinner into a saint. Can you provide a system that would accomplish that? And the "abuses" of laissez-faire are nothing but myths in the fevered brains of Marxists.

Chuck: "However, all of scripture in general and Jesus in particular tell us that, to be imitators of God, we are to be motivated not by our own self-interest, but rather by the interests of others. As long as we intend to be followers of Jesus, we cannot embrace systems that sanctify self-interest."

Does the Bible not tell us to work to provide for our own food, clothing and shelter and that of our families? What term would you use to define that motive if not self-interest? As with all socialists, you conflate self-interest and selfishness. Self-interest can become selfishness if carried to the extreme. But the Bible encourages self-interest and condemns selfishness. Socialists have conflated self-interest and selfishness for centuries as a way of attacking Adam Smith's "Wealth of Nations." But they are being dishonest. Smith intended to demonstrate that self-interest in a free market controls selfishness and limits the damage that selfish behavior can cause. In fact, it's easy to read Smith as a guide to poverty reduction.

I have read Sojourners' "Faith and Finance" study guide, and several posts on this and other blogs and am really curious about something: why do these "evangelicals" completely ignore the science of economics and have such utter disdain for it? Is this the outcome of what Mark Noll complained about in "Scandal of the Evangelical Mind?" I have yet to read anyone related to Sojourners quote an economist, except for a rare nod to the socialist Paul Krugman.

I don't have a problem with child labor laws, I just don't think they're needed. It is a historical fact that the market ended child labor. Legislation was redundant. Anyway, in most factories women and children were given the safe, easy jobs. Abuses were the exception. To believe that abuses were the rule, you would have to believe that the parents of the children were monsters.

Bill, I don't think that self-interest is even discussed in the Bible. The Bible seems to assume that people are interested in staying alive by having food and shelter. And they are interested in keeping those they love alive. That's one aspect of self-interest. But it can also include what many people would consider a good life. Because God made us social beings, we want to have friends and have some respect from them. Self-interest can include spiritual survival, which would mean obeying God and accepting Christ as Savior. Don't we want salvation out of self-interest?

Self-interest can turn into selfishness if carried to extremes. It's like CS Lewis wrote about all sin: it is the distortion of the good that God created. Self-interest is necessary for survival; but if distorted it becomes greed, covetousness, envy, selfishness.

Think about what it would mean to deny self-interest and live exclusively for others. We would have no shelter because we would give everything we possessed to others. We could have no clothing. We would not eat because we would give all of our food to others so pretty soon we would die.

In sum, I would say that self-interest is the natural desire to not only live, but to enjoy a good life. That's the idea Adam Smith had in mind. The free market can force a selfish person to control his selfishness in order to further his self-interest.

One has to wonder what Gutenson would suggest as a righteous alternative to the free market. Socialism perhaps, communism maybe, what other choices are there?

The trouble with this thinking is that it excludes the fact that man is fallen and sinful. No matter what the economic system one chooses, there will always be someone trying to game the system and hoard wealth. The notion that everything would be just and fair if economies were not a free market is simply not based in reality or in God's wisdom.

Keep in mind that what Jesus taught about economics is that those who utilize or invest what they have been given by God and increase it will continue to prosper. Those whole bury their talents for fear or lack of effort and thus do not increase their wealth, will have what they have been given taken away from them.

Also, another scripture clearly teaches. If you don't work, you don't eat.

David : Don't worry be happy! Isaih 61:1-3

Further, the opposite to the claim that capitalism is all about "powerful rule by force" is actually true. Socialism, communism, and other alternative forms of governance is predicated on the idea of force. True capitalism is about equality of freedom, not the freedom of one group of people to have power over another group.

Happier may not be the right term. "Better off" on the whole might be a better goal, because that's all that capitalism promises: that as a whole, society, and everyone with it, has become at least somewhat better off.

By definition, trade creates wealth. I'm speaking on an individual basis at this point, but the truth holds for larger groups. Trade wouldn't happen if the would-be trader found himself worse off through the trade. It's why we decide to buy a loaf of bread one place instead of another. (Purchasing is simply trading one thing for another.) When people are free to make decisions, and they willingly make those choices, and thus are better off. When a higher authority (government) makes the decision for them, it is less likely to make a decision that is actually beneficial, because it has less incentive to do so. Power to the individual is the idea; government can certainly protect that freedom, but apart from that, government simply gets in the way of progress and growth.

The laissez-faire market did not create slavery. Slavery is as old as mankind. However, free markets had made slavery unprofitable, which is why many had abandoned it. George Washington complained about the financial losses he endured as a result of keeping slaves too old to work.

As for sexploitation, I don't know what you're talking about.

And laissez-faire did not invents child labor. Again, it's as old as humanity. What laissez-faire did was to increase the wages of working men to the point that they no longer needed to have their children work in factories.

Actually, Chuck wrote about the early 20th century, not the 19th. Child labor laws didn't do much because families were already keeping children home as wages increased. The biggest intervention by "progressives" (who were too embarassed to be honest and call themselves Marxists, which they were) was the creation of the Federal Reserve that gave it a monopoly on money. The most serious interventions in laissez-faire didn't hit until Hoover, then Roosevelt, tried to ssave us all from the Great D.