Thursday, November 28, 2013


I was reminded of  Andrew Mellon's infamous prescription for the Great Depression in Thomas Frank's analysis of the Baggers, Pity the Billionaire, and this part stood out:
Mr. Mellon had only one formula: ‘Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate’.He held that even panic was not altogether a bad thing. He said: ‘It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people’
This seems to be the attitude of conservatives & libertarians well before the development of the so-called Moral Majority. David Stockman, former Director of OMB for Reagan, applied this sense of morality to government spending:
'What happens is the politicization of the society. All decisions flow to the center. Once we decide to allocate credit to certain activities—and we're doing that on a massive scale—or to allocate the capital for energy development, the levels of competency and morality fall. Then the outcomes in society begin to look more and more like the work of brute muscle.'
I do think this is preposterous given the amorality of the free market (Mandeville is a greart early example) but Mellon and Stockman aren't the most eloquent defenders of this ideology which seems to be accepted by many economists, as Daniel M. Hausman points out in his concise survey of economic thinkling,The Inexact and Separate Science of Economics, page 66:
Suppose (1) that one accepts the identification of individual well-being
with the satisfaction of preferences and (2) that one accepts the moral
principle of minimal benevolence: other things being equal, it is a morally
good thing if people are better off.  Then it is, other things being equal, a
morally good thing to satisfy an individual's preferences. So (3) Pareto
improvements are (other things being equal) moral improvements and
Pareto optima are {other things being equal) morally desirable. Given
(4) the first welfare theorem (that perfectly competitive equilibria are
Pareto efficient), one can conclude (5) that, other things being equal,
perfectly competitive equilibria are morally desirable and market imper-
fections that interfere with the achievement of competitive equilibria are
morally undesirable.
Note that this is a weal: defense of perfect competi-
tion, it is not as it stands a defense of a policy of iaissez-faire.
UPDATE: Frank also points out that Robert Bork in Slouching Towards Gomorrah also thinks that a "deep economic depression" would bring about "moral regeneration."

No comments: