On Winning the Argument and Losing the War
Count me in as one who feels that Peter Schiff and Richard Epstein have actually done our side a disservice. They are brilliant men and they have made a compelling utilitarian argument against the welfare state and against government regulation that strangles the economy.
But in their presentation style they seem to reinforce the core of the Marxist claim that we who believe in free markets and individual rights are greedy, selfish, and without virtue.
It is not true. Although true saints are seldom attracted to business as a divine calling, capitalism could not survive unless most of the people engaged in the private economy valued and practiced what Dierdre McCloskey and Gerry Miller call the bourgeois virtues.
We bourgeois do things, we build things that other people actually want, we value self respect, and we value the respect of others. We make the world a better place. We not only claim to be able to do these things, we do them. Marxists may love MANKIND, but we are far more likely to care about the people around us. We respect other people’s right to make their own choices.
Milton Friedman claimed that the duty of business is to make a profit for its shareholders. Does that mean that we followers of Friedman approve a CEO taking a $4 million bonus as the company and its shareholders are plunging into bankruptcy? Don’t we have an agency problem here?
And Friedman did not believe that people create and operate businesses merely to make money. Money is not a good; it is a means of exchange for other goods. Think of the analogy to Grotius’ Just War Theory. Once you are in a war, your goal is victory, and once you are in business your goal is to make a profit. But Grotius goes on to consider Jus ad bellum, and Jus in bello. Before you consider going into war, you must ask whether the cause is just, what are your chances of prevailing, at what cost, and what is the downside risk of defeat? We know that we seldom have enough information prior to the onset of a war to answer these questions definitively, but we must ask them. In business we need to do a feasibility study – if only on a single side of paper. Once we are in war, an ethical person considers what methods for pursuing victory are morally permissible. In conducting business we recognize similar restrictions on our actions as moral agents. Business is much better than war at least in part because there are no killing fields and so the downside risks are more ethically palatable. We conservatives know that the flowered fields of Flanders can be profitably used to grow flowers for export – but hopefully not poppies.
One of the reasons why bourgeois societies seldom go to war with each other is because they can trade to their mutual benefit. That is not possible without ethical players.
We are the defenders of individual liberty and free markets. Whatever the shock value of a Schiff and Epstein interview, it is probably better not to seem to abandon the moral high ground which is rightly ours. Schiff and Epstein may win the argument but lose the war for the hearts, as well as the minds, of people.
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Comments:
Jun '10
Re: On Winning the Argument and Losing the War
There's nothing wrong with a $4 million bonus during a downturn, if you earned it. The question at hand is whether a CEO deserves a reward "as the company and its shareholders are plunging into bankruptcy?"
Imagine your favorite NFL team signed a free agent QB to a contract that says he gets a $4 million dollar bonus if the team makes the playoffs. After a few weeks of terrible play he's benched, and the team finishes 4-12. Then the owners announce they decided to give him the $4 million anyway because he's such a nice guy. Don't you think the fans would be outraged?
Bonuses are supposed to reward good performance. Driving your own company into bankruptcy pretty much defines poor performance. If you can do that and still get rewarded, people begin to smell something fishy.
Aug '11
Re: On Winning the Argument and Losing the War
shorteddy: I enjoyed this post. I think you end up with three basic tiers of rules:
1. Government rules (and free markets have government rules, like laws against fraud)
2. Moral rules (you may have a contract that enables you to screw your business partners, shareholders and the public - but that doesn't make it good)
3. Free rules (feedback of the marketplace)
Right-wingers (like myself) tend to see 'Free Rules' and see government rules as stifling the creation those rules create.
What we often forget is the moral layer. It is the moral layer - the free acceptance of unspoken rules of behavior - that makes free societies function over time. It is also the acceptance of this rule that does a *FAR* more effective job of productively limiting the exploitation of Free Rules. · Nov 2 at 4:10pm
These are the layers I am addressing. It is not that capitalists must make "socially responsible" products. They provide things other individuals freely choose to buy. They do so, largely within the moral constraints of bourgeois society.
Oct '11
Re: On Winning the Argument and Losing the War
I think it is a non-issue, because Ideas aren't really defeated because you debunk them or explain them in a nice manner. For all the debunking of the Austrian crowd in the 1890-1920 we still had an URSS.
I think that whatever sins of Mr Epstein and Schiff are minor, because I believe that Steven Crowder is more important.
Laugh goes farther than persuasion and ridiculing the adversary position goes a long way.
PS: Mr Epstein is brilliant and it would be unfortunate to have his words watered down for cosmetic sake, someone else can do the rhetoric.
Edited on November 3, 2011 at 1:29amMar '11
Re: On Winning the Argument and Losing the War
Joseph Stanko
Bonuses are supposed to reward good performance. Driving your own company into bankruptcy pretty much defines poor performance. If you can do that and still get rewarded, people begin to smell something fishy. · Nov 2 at 4:44pm
The bonuses to CEOs of big banks (or even the continued employment of those CEOs) after ruining both their companies and a good chunk of the wider economy is an unequivocal travesty. But I don't believe that better morals on the part of the boards of these companies would have prevented it from happening.
The crisis in banking was precipitated in part by a generous helping of government manipulation on several levels. By the time we arrived at the stage of bank CEOs receiving their bonuses, the banking industry did not resemble a free market in the slightest. Thus I have difficulty accepting that these bonuses demonstrate a "failure" of free market capitalism.
Aug '11
Re: On Winning the Argument and Losing the War
Nyadnar17:
1. What does morality have to do with economics? When has examining the morality of a situation ever helped us pass better laws governing our economic systems?
2. If the CEO only agreed to enter into contract with a company under certain conditions and the company(and thus the shareholders) accepted those conditions why should we be defending the company(and the shareholders) from having to honor its obligations?
Edited on Nov 02 at 03:19 pm
-- As Nathanial Wright pointed out Adam Smith's Theory of Moral Sentiment provided the foundations of his Wealth of Nations and the Wealth of Nations are full of moral arguments. It is only after Marx that capitalists stripped their economics of morality.
-- I don't assume that there was a contract with the CEO who took the bonus. If there was such a contract which allowed for massive bonuses as a reward for the company's collapse, I would indeed make a moral judgement against both the CEO and the Board of Directors. As a shareholder I might not take them to court, but I wouldn't invite them into my home for tea.
Mar '11
Re: On Winning the Argument and Losing the War
Beasley
Mendel:
Many businesses have few qualms about lying to their customers, or gouging prices, but they are forced to act "ethically" for fear of losing customers.
I think the broader point, is that no one is inherently moral. I'm curious about what example of "price gouging" you're referring to? · Nov 2 at 3:09pm
Edited on Nov 02 at 03:42 pm
I'm thinking specifically, of course, of spikes in gas, water, food or battery prices that regularly occur (or used to before most states forbade it) in anticipation of a catastrophic event like a hurricane. While I certainly understand the behavior (demand is going up but supplies are static, so prices should rise), it is easy to imagine that those customers feel it is unethical to exploit someone in danger.
Oct '10
Re: On Winning the Argument and Losing the War
I don’t believe Schiff and Epstein did us a disservice; however, they were more preaching to the choir. I agreed with everything Epstein said, but I am afraid a liberal would not have been able to absorb so much, so quickly. I would be surprised if they changed anyone’s mind.
“Our opponents frame the issue as a comparison between a system where smart, benevolent people in government control and regulate the market to protect us, and that the alternative to the regulatory state is anarchy and chaos, with the rich running roughshod over everyone.
We have to make the case that what you're really choosing between is a regulatory regime run by central authorities using force, and a regulatory regime that emerges from the interactions in the marketplace, free from coercion but just as powerful.”
Dan Hanson has the right tack. To paraphrase Milton Friedman, “What makes you think that political self-interest is somehow more noble then economic self-interest, and just where will we find those angels to organize society for us?”
Mar '11
Re: On Winning the Argument and Losing the War
cbc, the Left will claim whatever is in their political self-interest to claim, whether it is true or not. Get used to it -- it's who they are.
Oh, and they'll call you a racist too. And an oppressor, and a paid minion of the Koch Brothers, and any other label that puts you back on your heels.
Don't shelve your best arguments, or bench your best arguers, just because of a little name-calling.
Apr '11
Re: On Winning the Argument and Losing the War
Dan Hanson: We have to make the case that what you're really choosing between is a regulatory regime run by central authorities using force, ...
If we try to convince people that Capitalism only works because capitalists are good, moral people, we'll lose the argument. ...
The free market has countless regulatory mechanisms. We need to explain to people how they work, and how they're a better alternative to central authorities. Bringing the morality of the actors into the argument is a distraction.
Morality is important. People want--need--to believe that they a living in an environment that encourages moral behavior and in which moral behavior produced good results. Polemically, the task is to smack down the distortions and lies of the left:
Schiff in his encounter with OWS took a more Socratic approach and conceded a lot for the sake of an a fortiori argument that was doubtless lost on his audience. Richard Epstein is good, because he rejects the leftist cliches of the journalist and shows that his premises are correct and produce better results.
Edited on November 3, 2011 at 3:22amJun '10
Re: On Winning the Argument and Losing the War
Mendel
The bonuses to CEOs of big banks (or even the continued employment of those CEOs) after ruining both their companies and a good chunk of the wider economy is an unequivocal travesty. But I don't believe that better morals on the part of the boards of these companies would have prevented it from happening.
The crisis in banking was precipitated in part by a generous helping of government manipulation on several levels. By the time we arrived at the stage of bank CEOs receiving their bonuses, the banking industry did not resemble a free market in the slightest. Thus I have difficulty accepting that these bonuses demonstrate a "failure" of free market capitalism. · Nov 2 at 5:33pm
I completely agree, but to the point of this post I think we need more prominent conservative leaders and candidates out there making this case. Instead they often fall back on charges of "class warfare" that completely miss the point. I think most Americans are angry about the preconceived cronyism and corruption and we need to offer a solution.
Dec '10
Re: On Winning the Argument and Losing the War
Joseph Stanko
Bonuses are supposed to reward good performance...
This is the problem with morality arguments and non-involved third parties making judgement calls based on words. Just because the money is called a bonus doesn't mean that the company isn't contractually obligated to give it. It just means that certain conditions have to be met before the money is paid out. The question that hasn't been asked by those denouncing bonuses for CEOs when the company performs poor is "Why do these companies pay Ceo bonuses in the first place?" If it wasn't in the companies best interest to make these type of arrangements with Ceos then why are they doing it?
cbc
-- As Nathanial Wright pointed out Adam Smith's Theory of Moral Sentiment provided the foundations of his Wealth of Nations and the Wealth of Nations are full of moral arguments. It is only after Marx that capitalists stripped their economics of morality.
Give me some examples. Give me an example of where morality as oppose to incentives/disincentives explains an economic system?
Apr '11
Re: On Winning the Argument and Losing the War
Mendel
Beasley I think the broader point, is that no one is inherently moral. I'm curious about what example of "price gouging" you're referring to? · Nov 2 at 3:09pm
Edited on Nov 02 at 03:42 pm
I'm thinking specifically, of course, of spikes in gas, water, food or battery prices that regularly occur (or used to before most states forbade it) in anticipation of a catastrophic event like a hurricane. While I certainly understand the behavior (demand is going up but supplies are static, so prices should rise), it is easy to imagine that those customers feel it is unethical to exploit someone in danger. · Nov 2 at 5:54pm
Then the fact that the customers are moral ignoramuses needs to be addressed. To avoid shortages at times of high demand, someone has to bear the opportunity costs of stockpiling. If the merchant does, he has to charge higher prices all the time. If the consumer does, he's paying a higher price.
Does price gouging actually happen, or do the low-price merchants sell out first, and late-comers find themselves at high-price sellers they ordinarily wouldn't patronize?
Mar '11
Re: On Winning the Argument and Losing the War
Joseph Stanko
Mendel
I completely agree, but to the point of this post I think we need more prominent conservative leaders and candidates out there making this case. Instead they often fall back on charges of "class warfare" that completely miss the point. I think most Americans are angry about the preconceived cronyism and corruption and we need to offer a solution. · Nov 2 at 7:06pm
Yes, and what frustrates me is that no one seems to be able to step up.
I think everyone can agree that there are bad actors in the market. The main difference between the left and the right is who should keep those actors in check: the government or the market itself. No one on the right seems capable of explaining how market self-regulation works, they either just pander to those who already believe or avoid the topic all together.
Mar '11
Re: On Winning the Argument and Losing the War
Grendel
Mendel
Then the fact that the customers are moral ignoramuses needs to be addressed. To avoid shortages at times of high demand, someone has to bear the opportunity costs of stockpiling. If the merchant does, he has to charge higher prices all the time. If the consumer does, he's paying a higher price.
Does price gouging actually happen, or do the low-price merchants sell out first, and late-comers find themselves at high-price sellers they ordinarily wouldn't patronize? · Nov 2 at 7:38pm
I agree with your explanation, but I doubt the majority of the public does. They see greedy merchants taking advantage of helpless customers, regardless of what the economic realities might be. Thus does a straightforward economical transaction become immoral.
And calling those who don't understand the point ignoramuses isn't likely to persuade many people over to our side.
Dec '10
Re: On Winning the Argument and Losing the War
Mendel
I agree with your explanation, but I doubt the majority of the public does. They see greedy merchants taking advantage of helpless customers, regardless of what the economic realities might be. Thus does a straightforward economical transaction become immoral.
And calling those who don't understand the point ignoramuses isn't likely to persuade many people over to our side. · Nov 2 at 7:55pm
Calling them ignorant won't persuade them but if we ourselves don't understand that the problem is one economic ignorance and not one of morality, we will lose the battle to educate people even if we win the argument. The moment we let any discussion about economics turn into a discussion of morals we have accepted a flawed premise and lost the war.
Aug '10
Re: On Winning the Argument and Losing the War
Nyadnar17
"Give me some examples. Give me an example of where morality as oppose to incentives/disincentives explains an economic system?"
First, I'd like to point out that you are stealing a couple of bases here by asserting that incentives/disincentives are not partially moral constructs. If I were to accept that premise, then you might well be right. You also might not be. If you wish, I can dig out my copies of Smith -- both Sentiments and Nations -- and look up the several sections discussing how morality informs economic decisions -- as well as what underlie moral choices in the first place.
I'd rather not do a seminar on Enlightenment philosophy -- as we'd have to bring up Hume, Richard Hooker, Locke and a number of others -- but if you require such a discussion I might have time for one during Winter Break.
It's not a bumper sticker discussion, it is a philosophic one. You can accept the purely Machiavellian construction of the "natural and ordinary desire to acquire" being the sole source of motive -- though I would argue that not even good ol' Nicky believed that -- I do not.
Apr '11
Re: On Winning the Argument and Losing the War
Mendel
Grendel
Mendel
Then the fact that the customers are moral ignoramuses needs to be addressed. To avoid shortages at times of high demand, someone has to bear the opportunity costs of stockpiling. If the merchant does, he has to charge higher prices all the time. If the consumer does, he's paying a higher price.
Does price gouging actually happen, or do the low-price merchants sell out first, and late-comers find themselves at high-price sellers they ordinarily wouldn't patronize? · Nov 2 at 7:38pm
I agree with your explanation, but I doubt the majority of the public does. They see greedy merchants taking advantage of helpless customers, regardless of what the economic realities might be. Thus does a straightforward economical transaction become immoral.
And calling those who don't understand the point ignoramuses isn't likely to persuade many people over to our side. · Nov 2 at 7:55pm
Addressing the fact that they are ignoramuses doesn't require berating them as ignoramuses. We have to show them the costs they do not appreciate, that what they are calling justice is really charity, and that what they are demanding is really injustice.
Dec '10
Re: On Winning the Argument and Losing the War
Nathaniel Wright: Nyadnar17
I'd rather not do a seminar on Enlightenment philosophy -- as we'd have to bring up Hume, Richard Hooker, Locke and a number of others -- but if you require such a discussion I might have time for one during Winter Break.
If you have the time later I would appreciate it. I have not read much Hume, Hooker, or Locke. Most of my economic education comes from Any Rand, Thomas Sowell, and Walter E Williams. I have never been exposed to moral economic arguments that(IMO) helped clarify the issue before.
Even just some reading recommendations might be helpful.
Mar '11
Re: On Winning the Argument and Losing the War
Mendel
I'm thinking specifically, of course, of spikes in gas, water, food or battery prices that regularly occur (or used to before most states forbade it) in anticipation of a catastrophic event like a hurricane.
Actually, price "gouging" is a market solution - almost a perfect one. When prices spike, it limits expensive hoarding, and it provides a market signal for companies to work very hard and fast to supply that commodity for the short term profit incentive.
Without these price spikes, we end up with hoarding and much worse shortages.
Aug '11
Re: On Winning the Argument and Losing the War
"I'd rather not do a seminar on Enlightenment philosophy -- as we'd have to bring up Hume, Richard Hooker, Locke and a number of others -- but if you require such a discussion I might have time for one during Winter Break."
Nathaniel, If you start this seminar, I will promise (without taking an oath) to kick in on the Scottish Enlightenment in particular.