Monday, October 06, 2008

Mad Maddie Bunting goes madder

As silly comments go, Maddy Bunting's idiocy is generally good for a giggle. So thanks to the email correspondant who pointed out this quite, quite brilliant article, containing a quite nervously brilliant quote...
Hayek became the founding father of a model of economic management which has brought us to the current crisis; Polanyi, with extraordinary prescience, warned that the crisis would come; he rejected the idea that the market is a "self-regulating" mechanism which can correct itself. There is no "invisible hand" such as the neoliberals maintain, so there is nothing inevitable or "natural" about the way markets work: they are always shaped by political decisions.

I really wish people would stop this obsession with equating capitalism with markets: they are not the same thing. A market is a natural thing that springs up whenever people trade anything.

They are, in fact, entirely fucking natural: markets were not suddenly invented by someone and they didn't suddenly spring up overnight. Nor were they implemented by some far-sighted socialist government (ha!) for the benefit of all.

Markets have been around, even in the most basic form, since men learned to communicate with each other. In fact, markets have certainly been around far longer than organised politics.

A free market is self-adjusting because it is unconstrained: sure, markets may take a little time to adapt to changes, simply because they are evolutionary systems but it is because of this very trait that they always do adapt.

The thing that often stops markets adjusting is regulation: laws and regulations provide a stop—a barrier beyond which traders are unable to pass. Regulations distort markets and, all too often, break them (in that the market is unable to adapt and so fails).

Hayek and his ilk were evangelists for free markets, and those we have precious few of. The banking market was most certainly not a free market, and this was especially so in the last few years (after the collapse of Enron, etc.).

Markets may well be "always shaped by political decisions" but free markets are not. Those of us who extol the virtues of free markets find ourselves pretty undaunted by the attacks of the Left: there was no free market, and so it has not been shown to fail.

This paragraph by Maddie is massively confused in any case: conflating the "invisible hand" with the failure of the money markets is just barking. Still, I guess that's how Mad Maddie Bunting got her name.

The idea of the "invisible hand" is not a complicated one, Maddie, but it has very little to do with the regulation of markets. Here is the outline of it, in the words of Adam Smith...
It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages.

The invisible hand encompasses the idea that society benefits through the selfish actions of an individual; or, as Wikipedia puts it...
Once in The Wealth of Nations and other writings, Smith demonstrated that, in a free market, an individual pursuing his own self-interest tends to also promote the good of his community as a whole through a principle that he called "the invisible hand". He argued that each individual maximizing revenue for himself maximizes the total revenue of society as a whole, as this is identical with the sum total of individual revenues.

That Mad Maddie Bunting is allowed—in fact, is paid—to write this pig-ignorant tripe in a national newspaper, where it will be lapped up by lefty morons the country over is a fucking travesty frankly.

I would prefer that she were hung from a tree and then "neoliberals" (does she mean libertarians?) beat her like a fucking piñata; it would be even more fitting were she to be blindfolded, since she might then feel that she was being enthusiastically beaten to death by an invisible hand. Or several, actually.

Fucking hellski...

12 comments:

Ryan said...

Didn't Hayek also believe in sound money based on a gold standard? And that a national currency is a public resource and therefore should not be inflated by bankers?

max the impaler said...

You know one thing emerges from all of this..you can have an M.A in economics and a Ph.D in politics,and still be a total fuckwit of the highest order.

backandtotheleft said...

you make a good point about the relation between free markets and evolution; many have pointed out the similarity. Michael Shermer, one of the world's foremost defenders of the theory of evolution has a book called the Mind of the Market on the very topic.

http://www.amazon.co.uk/Mind-Market-Compassionate-Competitive-Evolutionary/dp/0805078320/ref=sr_1_1?ie=UTF8&s=books&qid=1223305811&sr=1-1

Anonymous said...

Our current unsound money is not a result of a free market but is imposed on us by politicians and banksters.

It is illegal to refuse "legal tender" for the payment of a debt.

You are not allowed by law to ask for payment in an asset of your choice such as gold for example.

No one would willingly choose to be paid in something that they know will decline in value.

Katabasis said...

Good post DK.

Personally I am sick.To.Fucking.Death of having to highlight the differences in meaning between Neo-liberal and Libertarian, Free market and "Free market", Capitalism and monetarism / corporatism. And on and on...

But no. This is "proof" that Marx was right all along. Apparently.

Guthrum said...

True very true

V said...

There is the posibility of a free market where regulations make everything equal - not that that happens very often!

I saw an example in our local corner shop. They only sell two types of fags. L&B and Gold Leaf. The market decides which fags sell, and some sellers take it to extreme and only sell the top brands.

This does limit choice, but again, the market allows for this by offering the other corner shop the ability to sell other brands to soak up the affected customers.

Where the real world takes effect is that there also exists a market for illegal regulation free fags - which, in this area, outsell both cornershops together.
The moral is that where simplistic free markets exist, in the real world, regulations just move any reasonable monitoring of a market out of focus.

The problem is, too many people think that by issuing regulation, people can be 'saved from the wrong choice' - however, the reality is, these regulators are much more interested in their will being served than they are in the 'stupid' people" and the market.

Anonymous said...

FFS. To argue that this present crisis is a result of deregulation is so fucking far from the truth it makes me want to hang the next pig ignorant piece of crap that says it from a lamppost. There are more fucking regulators, compliance people, risk managers than ever before in history in finance. What the present disaster stems from is the result of really bad fucking regulation (BIS II, VaR models) and gross stupidity (encourage sub-prime lending, then sub-prime fraud. End users dont know that they are buying fraudulent loans.) What the fuck does this have to do with fucking deregulation. Nothing.

I always said that VaR was a fucking crap way of managing risk. That was the lesson of bloody LTCM in 98. Fucking Gordo wants global regulation. FUCK OFF you ignorant piece of shit. BIS II was global regulation you stupid fucking twat.

Anonymous said...

This crisis stemmed from government and regulatory intervention.

The sub-prime lending at the heart of the American credit crisis is the direct consequence of the Community Reinvestment Act's attempts to ensure banks lent to minorities, without regard to such potentially racist and anachronistic measures as a credit record or income level.

The bulk of the increase in defaulting mortgages in the UK can be ascribed to the huge blocks of un-saleable and un-rentable city centre high rise apartments that were constructed - often in unenviable areas - as a direct result of the government's requirement that developments should be limited to brownfield areas.

Having created the potential for unrecoverable debts, governments then set about exacerbating its effects through the imposition of ludicrously loose monetary and fiscal policies. Because Chinese manufacturing held down consumer prices, this made itself known through an asset price inflation.

Labour compounded its error by changing the measurement of inflation from RPI to CPI, thus excluding mortgage interest payments, and ensuring that the effects of house price inflation were excluded from the inflation measure that the Bank of England was tasked with targeting, resulting in monetary policy becoming even more loose.

When the accounting standards changed to fair value accounting or mark to market, governments failed to adjust adequately the regulatory regime accordingly, with the result that the same capital ratios now apply to banks accounting under new and completely different accounting standards. This has resulted in the downward spiral of reduced asset prices being reflected in balance sheets, prompting pressure on capital rations, prompting asset sale, which reduce asset prices, which are then reflected....

Oh, and only a complete moron would separate the Bank of England's soft powers and funding capacity from the regulatory and oversight functions now fulfilled by the FSA, which is what Gordon did in 2001.

Furry Conservative said...

We have Liberalism, Progressive Liberalism and neo-Liberalism.

We all know what Progressive Liberalism is - the authoritarian use of State power to advance alleged Liberal goals.

Liberalism is easy also - this is classical liberalism.

What on earth is neo-liberalism though? Did Mad Maddie make this up? Is anyone else familiar with it? If it is the same as either of the above, then it is redundant; if not, then what on earth is it?

David Gillies said...

furry c - it's Hayekian free-marketeering plus a healthy dose of Whig pragmatism, but with added Yids. It's a hijacked term, in much the same way as muscular Jacksonian defence of Western society (with added Yids) is neo-conservatism. It's dog-whistle language that lets bitches like Bunting be anti-Semites while maintaining their impeccably right-on credentials.

Credit Crunch Investor said...

anonymous at 10:27

A first class summary of the present situation, sir.