Skip to main content

The inherent stupidity of free market economics

by Ari Rutenberg

"I made a mistake in presuming that the self interest of organizations,
specifically banks and others, was such that they were best capable of
protecting their own shareholders and the equity in the firms"- Alan Greenspan, Prepared opening remarks of testimony given before the House Oversight committee, October 23, 2008

Yeah Alan, a lot of people could have, and tried to, tell you that. Including many serious economists who you dismissed out of hand. They could have, and did tell you, that greedy assholes cannot be trusted to make the rules of the game as they go along. The free market never was and never will be. There will always be things, like people with way too much money, that prevent the mythical perfectly operating market. Whether it is skewed towards the government, the church, or the corporation some large actors always exist to thwart the will of small actors. The point is to create a balance that allows innovation and profit without sacrificing basic rights, to not give any side too much power. The problem is that Greenspan gave credit to people who are really moral cowards, avariciously attracted to obscene amounts of money and willing use any justification for their ugly ambition. So they didn't care who their philosophy screwed as long as they gotl rich.

The idea that these people could simply police themselves is willfully ignorant, or the result of epic myopia. For Greenspan to not have understood this indicates only one thing: he has no fucking clue what he is talking about. Non-free market economists have been saying this for decades, only to be mocked by the very same greedy sons-of-bitches who have created this panic. People like Noam Chomsky, George Soros, and even Paul Krugman have been mercilessly slammed by the right-wing and the corporate shills for trying to speak sense to their greed-is-best philosophy. People can continue to argue that he and he ilk are experts, but through the very predictable results of stupid policy, we can see that they know nothing.

"I found a flaw in the model that I perceived is the critical
functioning structure that defines how the world works. That's
precisely the reason I was shocked...I still do not fully understand
why it happened, and obviously to the extent that I figure it happened
and why, I will change my views"- Alan Greenspan before Congress

The reason he doesn't understand the flaw in his model is because the
flaw is his model. It is not some arcane bit of calculus or some
unmeasured statistic that he has missed. It is the basic argument of
his model that simply does not fit the world. First, his model assumes
that nothing outside of what is being modeled exists. Economists call
these things externalities. The problem is that externalities are
everything in the world not in the model. So the problem with his
model is that it fails to take account of the world. Pretty big
fucking flaw.

The second problematic assumption is that economics is a natural
science with natural laws. It is not. It is a social science whose
very existence affects the subject being studied. Physics is physics.
Studying it and telling people what you have found does not change
those laws. The same is not true in economics. The study affects the
subject, and people are not predictable using mathematical laws. We
created the economy, therefore it is completely subject to our whims
and desires. To pretend otherwise would be, and was, very dangerous.

Greenspan and his people are still trying to figure out why all their
models failed. They claimed they have worked for 30 years, but its not
true. They have only succeeded in concentrating wealth at the top and
straining our infrastructure to the breaking point. Its just that every time someone pointed out a failure, they said "well we just have
to get rid of all those externalities (you know, the world) and the
model will work fine." But you can't get rid of the externalities.
You can't remove morality from your decision making. You can't just
tell the world to go away and let you and your friends get rich of its
(the world's) collective labors. That would be unbelievably stupid,
and that is why this bankrupt philosophy has failed yet again.

Like I said before, Greenspan, and for that matter all the other experts, have no fucking clue what they are talking about. They should really shut up and let some grown-ups (you know, people who realize you can't dismiss reality because its mathematically inconvenient) take a shot a running the show.