No comment: an apology

by Daniel on September 22, 2008

I suppose that I ought to make this clear; I’m not going to be writing anything, on CT or any of my other blogs, about the current global financial markets meltdown. This is basically because of my professional commitments; as you know, I’m a stockbroker by trade, and what with one thing and another, I’m in a more responsible position than I was when I started blogging. Going through my reasons in a numbered list:

1. I don’t have the time. To state the obvious, market conditions like these make significant demands on my time and energy; this is probably the most intense couple of weeks I’ve ever seen, with the possible exception of August 1998.

2 It would be unethical (1). Clearly, I’ve got an economic interest in the unfolding situation in the market. I don’t really want to discuss the nature of that interest (except to note that it isn’t through any of my personal assets being invested), but I’m not a neutral party. Since I can’t declare an interest, and I don’t think it’s ethical to write about matters where you have an interest without declaring it, I’m conflicted out.

3. It would be unethical (2). Even if I were able to declare an interest, I am still not a fan of the practice of “talking one’s book” (publicising the analysis that led you to an investment decision, in the hope that others will agree with that analysis, thus moving prices in your favour). This is a grey area, of course – everyone in the market obviously talks to everyone else all the time, and to a certain extent therefore everyone talks their book – but publishing on a website seems to me to be clearly the other side of an important line; other people draw the line differently and don’t have any problem with publishing their analysis, but I do.

4. I don’t believe it’s possible to simultaneously sell something and give it away for free. This is also a further ethical issue; on the specific subject of the current crisis there are a number of people who have paid quite a lot of money for access to my research. They did so in the reasonable expectation that they would be getting something exclusive and I’m basically going to honour that reasonable expectation.

5. I would have absolutely no control over what happened to the information once it was published. In particular, I would be horribly worried that I’d post something, then the situation would change and render it out of date, but then someone would come along and make some decision or other based on inaccurate information with my name on it. I can’t possibly take on an ongoing open-ended obligation to keep CT up to date with the very latest reaction to developments (particularly because my views might change on the basis of information that I can’t post because it isn’t mine to share), so I’m not going to set that ball rolling.

6. I don’t provide advice to private individuals or to the general reading public. Although not everything one writes about the market is investment advice within the regulatory meaning of the term, there is once more a fine line here and it’s easy to accidentally step over it. Additionally, I personally would use a much more restrictive standard than the regulatory one in terms of thinking about what I’m happy to have on my conscience. Over the course of my career, I’ve come to realise that people really don’t understand the markets very well, and that a non-specialist reading a market commentary written by a market participant has at least an odds-even chance of substantially misinterpreting it. It’s possible to write things simply and correctly for the layman, but it takes more time and effort than I’m currently willing to put in. particularly for a project that could be rendered out of date at any moment.

7. I’m scared of losing my mojo. This is actually probably as important as any of the others. To write about the current crisis and its causes would involve taking an abstract view, looking at things in the long term and thinking about them sub specie aeternatis and at an appropriate level of generality. At present, everything I’m thinking about is very specific and very short term, concentrated on the here and now; I’m reacting, not thinking, and I’m in no position to analyse the psychology of the market because I’m part of that group psychology. Hopefully I’ve got just enough critical distance to be one step ahead, but “one step” is about as far ahead of the markets as it’s ever safe to be, and much more so at the moment (for example, someone who saw the bailout coming on Wednesday would have made a ton of money, but someone who saw it coming last week would probably have lost his shirt, having been forced to close out his position in the meantime). So I’m intentionally not thinking very much about the big-picture stuff at the moment, for fear of gaining a perspective that will cost me money.

I realise that this is presumably pretty unsatisfactory to people who’d been wanting to read what I thought on the blog and I’m sorry about that. I’m not going to hide behind the bloggers’ usual “it’s free/I’m not getting paid” excuse – I do think that CT readers (and my fellow contributors) had a reasonable expectation that I would write something about the crisis on a reasonably timely basis, and I apologise for disappointing you.

{ 148 comments }

1

P O'Neill 09.22.08 at 6:29 pm

It does raise the general issue of how much lobbying is going on in the quotes that various analysts seem happy to supply to the meeja.

2

Daniel 09.22.08 at 6:32 pm

Not much in my experience – these are usually just lobbed out when someone calls you up on the phone (I have a standing policy for the last while of not talking to the press unless asked to by my firm’s press office, but getting quoted in the press is a valid means of promoting yourself) and are typically just ad lib stuff which doesn’t typically have a lot of thought or planning behind it.

3

hardindr 09.22.08 at 6:40 pm

Daniel, who would you recommend to us to read about the current crisis? I usually read Doug Henwood, but he doesn’t have anything out that I know of on the proposed $700 billion bailout, and he hasn’t updated his RSS feed from his radio show in a while. Anybody else in mind?

4

Doug 09.22.08 at 6:41 pm

Well, dang.

I wasn’t sure where “market bailouts” came in on the axis between “shorter hours&bigger pies” and “everything else,” and I was looking forward learning.

Also, what D2 says about media jibes with my experience when I was in the markets, more than a decade ago. Also also, it’s very difficult to underestimate the prevalence of talking one’s book. As a reader, you should always assume that a market participant is talking his or her book, unless you have a really compelling reason to think otherwise. Caveat lector.

5

Daniel 09.22.08 at 6:42 pm

If you don’t mind, I’m going to dodge that one in order to avoid implicitly giving an opinion by proxy. Again, sorry.

6

The Modesto Kid 09.22.08 at 6:48 pm

Wow: thanks, Daniel. This post is exceptionally honest and well-phrased. (Well your posts in general are both; but something sets this one apart from them. Perhaps you are stepping out of character to address the audience?)

7

MattF 09.22.08 at 6:53 pm

Interesting. What about a public policy/greater good argument– shouldn’t the people who actually know about what’s going on in the market have a say or an influence on what’s going on now in the public sphere? Note that I respect the reasons you’ve given and I’m not trying to persuade you to do something you regard as unethical– just curious about your thoughts on the question.

8

Lex 09.22.08 at 7:01 pm

Can we at least assume that if it does turn out to be the end of civilisation at we know it, you’ll at least give us a brief heads-up before joining the flight of the global elite to the secret space-station orbiting on the dark side of the moon…?

9

Harry 09.22.08 at 7:05 pm

I second what Modesto Kid says — not just honest and well-phrased, but enlightening (but only about those things you intend to be enlightening about). I don’t think an apology is necessary actually, but the post is appreciated anyway.

10

Kevin Donoghue 09.22.08 at 7:08 pm

Daniel, who would you recommend to us to read about the current crisis?

Since Daniel won’t answer, I suggest starting at Krugman’s NYT blog.

11

chris 09.22.08 at 7:12 pm

All understandable.

A couple of months from now can you give us scoop? History is always more interesting than current events anyway.

12

LizardBreath 09.22.08 at 7:20 pm

I was going to ask the same thing as Chris — if you can work out a way for it to be ethically possible, I’d be interested, next spring sometime, in a “Here’s what I thought happened last fall” post.

13

Monte Davis 09.22.08 at 7:21 pm

at least give us a brief heads-up before joining the flight of the global elite to the secret space-station orbiting on the dark side of the moon…?

And be accused of pumping if Virgin Group should go public again?

14

Jonathan 09.22.08 at 7:53 pm

Has anyone come across any arguments that insufficient executive compensation (not just overtaxation) is responsible for the current crisis?

15

Adam Kotsko 09.22.08 at 7:56 pm

I hope this doesn’t affect John Emerson’s crush on you.

16

joejoejoe 09.22.08 at 8:09 pm

I’m going to bury my money in a coffee can in the back yard.

Can you recommend a good brand of coffee in a can?

17

The Modesto Kid 09.22.08 at 8:15 pm

Prince Albert.

18

Steven 09.22.08 at 8:21 pm

May I insist on looking forward to the eventual book?

19

John Emerson 09.22.08 at 8:35 pm

I already wrote Dsquared’s refusal for him on the other thread. And all I said was that Dsquared is less nasty, brutish, and short than you’d expect from a Welshman.

20

Rich Puchalsky 09.22.08 at 9:18 pm

Have you considered getting another job? One that doesn’t make you conceal what you think that you know from a public that you think might benefit from knowing it?

21

taj 09.22.08 at 9:24 pm

I suppose this means more blogging about Zambia.

This is such a shame. Considering how dsquared feels, IIRC, about people writing about things outside their realm of expertise (eg Eric Raymond), its kind of funny that he can’t blog about his day job just when it gets particularly interesting.

22

Walt 09.22.08 at 9:30 pm

The shocking revelation here is that someone pays to find out what dsquared thinks. I guess investors haven’t heard the old saying about the cow and the milk.

23

stostosto 09.22.08 at 9:33 pm

Good sources of financial commentary for the unversed reader:

Krugman (http://krugman.blogs.nytimes.com/), Brad DeLong (http://delong.typepad.com/), Mark Thoma (http://economistsview.typepad.com/), Nouriel Roubini’s site (http://www.rgemonitor.com/)

24

abb1 09.22.08 at 9:36 pm

What a beautiful, beautiful post. It almost makes me feel ashamed for not having any moral scruples whatsoever.

25

Anurag 09.22.08 at 10:00 pm

I’d recommend Calculated Risk for those looking for up-to-date information on goings-on. Second the thought of looking at Krugman’s NYT blog.

26

dsquared 09.22.08 at 10:02 pm

18: No, not for a second, frankly. I don’t see what possible system of ethics would make anyone think that the public have a right to my analysis (which is basically the only thing I have any talent for at all, viz, my only way of earning a living) just because they might benefit from them (and this last point is highly debatable, see point 6 in my original post). I can only further apologise for my part in creating this completely unreasonable expectation by, as #20 mentions, constantly bombarding an unwilling world with my opinions on other subjects.

27

Barry 09.22.08 at 10:32 pm

Jonathan 09.22.08 at 7:53 pm

” Has anyone come across any arguments that insufficient executive compensation (not just overtaxation) is responsible for the current crisis?”

I haven’t, but that’s because I don’t read the WSJ editorial page.

28

John Emerson 09.22.08 at 11:21 pm

The profit from Dsquared knowledge mostly comes from the difference between what his clients knows and what someone else knows.

29

John Emerson 09.22.08 at 11:27 pm

If we act like ignorant peasants, it’s because that’s what we are. Basically, the general public is fucked to the extent that the important knowledge is on the market. At most you get what you pay for.

If you watch TV you pay nothing and get less than that. If you read the Times, you pay — what, a dollar? — and get a little something. But you’re still at the mercy of someone who can afford the pros.

30

Mill 09.23.08 at 12:07 am

On the plus side, we can interpret this as a signal of some sort. Consider: “I can’t give you this information for free when rich people are willing to pay me for it” is perfectly valid when the information is non-essential or artistic, it’s monstrous and immoral when the information is more along the lines of how to protect oneself from a disease that’s about to go epidemic.

So, unless you think Daniel is monstrous and immoral (and he’s never come off that way to me), we can conclude that he thinks that the effects of this crisis won’t be too bad for the little guy, and so has no ethical qualms about staying loyal to his richy-rich employers.

(Well, either that or he thinks that things are already so bad that there’s nothing the little guy could do with his information anyway, so not telling them is no worse than telling them.)

31

John Emerson 09.23.08 at 12:14 am

Most of us basically just are going to sit and watch and hope the roof doesn’t fall in on us personally, and we can do that withiut Dsquared’s help.

32

Daniel Rosenblatt 09.23.08 at 12:27 am

Another fairly extensive take on what’s going on:
http://www.dailykos.com/storyonly/2008/9/21/9322/74248/245/602838

33

nnyhav 09.23.08 at 2:46 am

Speaking as a currently former financial risk management consultant, sidelined whilst the playing field is relandscaped, the best out there is Yves Smith:
http://www.nakedcapitalism.com/
The blogroll there is also the most select.

(No I don’t blog on it myself, for many of D^2 reasons, as well as others.)

34

Rich Puchalsky 09.23.08 at 4:30 am

“18: No, not for a second, frankly. I don’t see what possible system of ethics would make anyone think that the public have a right to my analysis (which is basically the only thing I have any talent for at all, viz, my only way of earning a living) just because they might benefit from them (and this last point is highly debatable, see point 6 in my original post). “

Were the comment refs shifted by 2? I’m going to assume that this was an answer to what I see as 20 and that the reference to 20 was actually Walt’s 22.

In answer, I’d say that no, the public doesn’t have a right to it. But, you know, it’s possible to arrange your life so that you get paid for analysis that you give out more or less freely, working for academia or for a nonprofit or for the media. The question of whether the public would find any value in it is more or less a red herring, right? I mean, your clients do, and there are ripple effects from informing the expert part of the public that generally help the rest.

35

Walt 09.23.08 at 5:12 am

The comment number did shift. My comment was originally #20. I think what happens is that some innocuous messages get caught in the spam queue, and when they get approved, they throw off the numbers. I’ve seen it happen before here at CT.

36

nick s 09.23.08 at 5:30 am

This is a metacomment, but I’m going to quote Chris Matthews from today:

We can’t understand it. I’m one of them. I don’t get it. What are all these derivatives and all this short selling and all this complicated financial … skigamadoo or whatever you call it. What is it? … I’m just wondering if it’s above our pay grade? I think Carly Fiorina may have been right. These guys can run for president but they can’t be Secretary of the Treasury…. Even elected presidents can’t master this financial game. It’s too complicated.

In essence, the political talking heads don’t have a fucking clue and so engage in metacommentary on the political repercussions of whatever happens in Congress and on the markets, without understanding he consequences; the number of pols with up-close experience to judge the legislative side will leave your counting fingers underemployed; the economics professors can discuss this in general terms; and anyone with skin in the game is either basically in Daniel’s situation, or out talking his/her book.

Which raises the question of whether we’re being asked to buy the box containing Schrödinger’s Cat, or whether we are Schrödinger’s Cat. Or none of the above, of course. As flies to wanton boys, we are to the gods of finance.

37

dsquared 09.23.08 at 5:35 am

it’s possible to arrange your life so that you get paid for analysis that you give out more or less freely, working for academia or for a nonprofit or for the media

yeah, but those jobs all involve equally serious ethical compromises; I certainly wouldn’t trust myself if I worked for a thinktank. The only way I would be able to be totally candid about financial markets is if I became incredibly rich and was live off an independent income like Nicholas Taleb, and I am happy to confirm that this is indeed my goal, albeit currently somewhat a remote one.

38

Walt 09.23.08 at 5:44 am

It’s not that hard to understand, NickS. Sure, it’s that hard for Chris Matthews to understand, but so’s politics. The only information we don’t have is specific knowledge of which institutions are exposed to what, which would be important in judging the imminence of collapse.

The government presumably does have that information, but the government also had all kinds of secret information about Iraq as well. But who called the Iraq War right? Armchair generalists (including, famously, Daniel) discussing things in abstract terms.

39

nnyhav 09.23.08 at 5:45 am

Rich, you’re conflating nonfungible kinds of practice. The alternatives (that is to say red herrings) you suggest work off disparate information bases using a different mix of analytical tools.

40

agm 09.23.08 at 6:36 am

This is quite possible the most polite and least entertaining thing I’ve read by d^2. Alas, what times we live in when even the stalwart curmudgeons turn coat.

41

agm 09.23.08 at 6:37 am

(Which is, to say, I entertain d^2’s normal mode of writing, and was hoping it would show up on this topic as well. Oh well.)

42

Marc Mulholland 09.23.08 at 10:18 am

I’d simply like to know whether it’s the case that the tax payer is now effectively going to subsidise the extension of home ownership even to the relatively financially insecure. (And has the whole crises been brought about by a historic project of social engineering in pursuit of the conservative property-owning democracy?) Or does the bail-out not effect the rate of repossessions? (Having said that, I don’t really understand how mortgage providers have got stuck with bad credit in the first place. Couldn’t they just repossess?)

No chance of me inadvertently leaking market sensitive wisdom … !

43

Ray 09.23.08 at 10:43 am

(IAND2)
Bad credit was extended in the first place because, if the property market is rising, it doesn’t really matter whether or not a mortgage will be paid in full – the bank makes money on the repayments that do come in, and when the home-owner stops paying, they still have an asset worth more than the outstanding mortgage.
When the property market starts to fall, if a borrower stops making repayments, the remaining asset is worth less than the remaining debt, so the banks are open to being stuck with losses.
As I understand it, the Paulson plan is for the government to buy all these mortgages, taking on whatever losses that entails. That wouldn’t have any effect on the rate of repossessions. One of the ideas being floated around is to allow homeowners to go to the courts to renegotiate their mortgages or repayment schedules or something, which is an attempt to reduce repossessions.

44

Jacob Christensen 09.23.08 at 11:05 am

I’ll throw in Barry Eichengreen for good measure:

http://www.voxeu.org/index.php?q=node/1684

45

Matt McIrvin 09.23.08 at 12:25 pm

This is such a shame. Considering how dsquared feels, IIRC, about people writing about things outside their realm of expertise (eg Eric Raymond), its kind of funny that he can’t blog about his day job just when it gets particularly interesting.

This is a general problem with professionals, though; there are usually both potential conflicts of interest and a danger of revealing confidential information when they talk about the things they know most about. An exception is that academics are unusually free to gab about their subject of expertise, but even they can’t talk about something that might cause them to get scooped on a work in progress. It does put a limit on how informed free public chatter can be.

46

J Thomas 09.23.08 at 12:36 pm

I don’t want to try to change d^2’s decision, but I do want to point out that it’s sometimes possible to give information for free and still get paid for it.

This happens a lot with software. Something can be released open source, and then people who want to depend on it pay for support — upgrades, bug fixes, etc. You don’t pay for exactly the same thing you get free, but a lot of people would have trouble understanding the difference.

D^2’s #4 is not exactly true. But some of his other concerns still trump, particularly #7. If he has to spend his efforts on specific details and short time-frames then he can’t tell us about the big picture. His specific details would be mostly useful for investment advice, which fits all his concerns — if his free advice is as good as his paying advice, why pay? If it’s delayed, is it right to advise people to do things to make him and his customers rich? If people follow his delayed avice and get burned, it’s on his conscience. Etc.

I’d be interested in advice for citizens, about what we can do to improve the situation for the USA and the world. When there’s time.

47

novakant 09.23.08 at 1:08 pm

This is a general problem with professionals, though (…) It does put a limit on how informed free public chatter can be.

I’m not saying that there aren’t potential conflicts of interest etc. especially when it comes to law and finance, but I know a lot of professionals who are very outspoken about what goes on in their field of expertise. They tend to use disclaimers like
the views and opinions expressed herein do not necessarily state or reflect those of my employer
.

48

Pete 09.23.08 at 1:21 pm

#30: there’s a third option, which D2 himself mentions: that he believes there is a signifigant risk that his advice might be misinterpreted, in which case it would do more harm than good and it is very moral for him to keep quiet and let people make their own decisions.

49

Lex 09.23.08 at 1:31 pm

@47: but he’s paid for his views, by people who want his views, not “his employer’s”. That’s rather the point.

Rarely have I seen such a sensible and self-evident OP quibbled about so pathetically…. And yet no one has managed to come out with “He’s a witch, burn him”, which, given the press coverage of the last few days, would seem like a consensus view in some parts. Failure of imagination all round, I say.

50

Rich Puchalsky 09.23.08 at 1:38 pm

“yeah, but those jobs all involve equally serious ethical compromises”

They do? You chose “thinktank”, perhaps in order to pick out the job in which presumably all of your reports are bent to fit an ideological mold. But Krugman, say, has equally serious ethical compromises to make? Or any economics professor? (Krugman, of course, does have responsibilities. That’s a different matter.)

I suspect that this lengthy and over-justified apology represents existential bad faith, actually. Rather than just say that you’ve chosen a high-paying job in which you serve rich clients, not the public, you’re making up all kinds of reasons why no matter what you do, it just wouldn’t work, or would be equally confining, any other way.

The Bush era has seriously decreased my tolerance for justificatory apologies. You just couldn’t help it, everyone was doing it — well, no.

51

novakant 09.23.08 at 1:43 pm

Lex, I was responding to Matt’s comment, not the main post.

52

Walt 09.23.08 at 3:15 pm

He’s a witch. Burn him.

53

Lex 09.23.08 at 3:16 pm

Turned me into a toad, he did.

54

abb1 09.23.08 at 3:20 pm

Too late, suckers, he’s already on the mothership.

55

rea 09.23.08 at 5:16 pm

Dateline: London, 2028: Loking back from te persepctive of 20 years on the Great Crash of 2008 and the ensuing Great Depresssion II, we can see that theee was one menemt when everything might have been changed; one man with the wisdom, strength and knowledge to save the world from catastrophe, who nevertheless decliend to act. You know him now as the fabulously wealthy Duke of Llanfairpwllgwyngyllgogerychwyrndrobwllllantysiliogogogoch, whose stock market clients came to rule us all in the aftermath of general financial collapse. Back in ’08, however, he was still merely Daniel Davies, and he explained his reasons for not sharing his wisdom with the world in this post on the obscure blog Crooked Timber . . .

56

J Thomas 09.23.08 at 5:26 pm

….there is a signifigant risk that his advice might be misinterpreted, in which case it would do more harm than good and it is very moral for him to keep quiet and let people make their own decisions.

That only works if people would be more likely to understand correctly if he said nothing than if he told the truth.

57

abb1 09.23.08 at 5:39 pm

whose stock market clients came to rule us

Don’t miss this once in a lifetime unique opportunity to become one of them. CALL NOW. Only $69.99.

58

Rich Puchalsky 09.23.08 at 6:21 pm

No one thinks that Daniel would really be likely to change anything if he had a different job that allowed him to speak out. Certainly I myself wouldn’t know enough to be able to use his advice, and, as he says, most people are in the same condition. Also, he could be wrong, etc. etc. etc.

At the same time, the reason that our society is in the condition that it’s in is because of the decisions of many, many people, all making similar excuses for themselves. Would Daniel himself be able to change anything? Probably not. Is this non-apology apology absolutely representative? Yes, it is.

59

dsquared 09.23.08 at 6:37 pm

Rather than just say that you’ve chosen a high-paying job in which you serve rich clients, not the public

I do actually say this, in points 4 and 6 above. And I don’t really accept this characterisation of my job unless it’s meant in the same utterly harmless sense in which the coat-check girl at the Ritz also serves rich clients rather than the general public. I do write for this blog and contribute free content in the spirit of the Internet, and I do genuinely regret that I’m in a position where I’ve got a conflict of interest between my job and this blog, but I don’t see how anyone can realistically believe I’ve got any implied duty to the general public to write essays about the credit crunch. I’m also unlikely to start apologising for having (at the moment of writing this post) a job as a stockbroker, because it’s an entirely necessary and socially worthwhile job, albeit one that’s not generally well understood.

60

The Modesto Kid 09.23.08 at 6:48 pm

Don’t despair, nnyhav! We could still see some trademarked D^2-style abuse in this thread.

61

The Modesto Kid 09.23.08 at 6:49 pm

I mean agm, not nnyhav.

62

praisegod barebones 09.23.08 at 6:58 pm

I’m also unlikely to start apologising for having (at the moment of writing this post) a job as a stockbroker, because it’s an entirely necessary and socially worthwhile job, albeit one that’s not generally well understood.

A post on why this is nothing to apologise for might be worth reading…and presumably not one that it would be unethical to write. Or would it?

63

Markup 09.23.08 at 7:19 pm

Perhaps a more historical direction would change the thoughts of some towards serial abdications.

http://www.globalresearch.ca/index.php?context=va&aid=10316

64

dsquared 09.23.08 at 7:36 pm

#62: it would just be very short. People want to invest in productive assets, but they also want liquid and tradeable claims. In order to reconcile firms’ desire for long-dated and stable capital with savers’ desire for liquid instruments, you need to have a stock market, with intermediaries who have the job of matching buyers with sellers. In turn, those intermediaries are going to want to employ people who are experts in a) the valuation of those claims, and b) in the current owernship structure of the market for claims on particular firms, in order to protect themselves against risk of loss. That’s my role. It strikes me that more or less any form of economic organisation not based on central planning or household production is going to end up with a role for something like stockbrokers working in it, which I think demonstrates that it’s a necessary and socially useful role.

65

Rich Puchalsky 09.23.08 at 7:38 pm

“I do genuinely regret that I’m in a position where I’ve got a conflict of interest between my job and this blog”

Perhaps some terminology would make this more clear. Your post isn’t an “apology”. An apology is where you regret having done something wrong. This post is a list of reasons or rationalizations for why what you’re doing is perfectly OK, although you regret that you aren’t at liberty to do something else.

Now, when I pointed out that in fact you are at liberty to do something else, over the long term — i.e. by getting another job — you came up with more reasons or rationalizations why this wouldn’t really make the situation any better.

Why all these reasons or rationalizations? Well, I suspect that it comes down to: “I don’t see how anyone can realistically believe I’ve got any implied duty to the general public to write essays about the credit crunch”. You earlier phrased this by asking whether the public had a right to receive your work for free, and I said no. Now you’re asking if anyone can believe that you have a duty to use your knowledge for the benefit of society, and I have to say yes.

Every person with your education and skills faces the same choice. The ones who choose to serve the public do so at some personal cost. The rest offer regrets-not-apologies, and upcoming lectures about how stockbrokers serve society by doing their jobs (just as everyone serves society by doing their job, in some sense).

66

The Modesto Kid 09.23.08 at 7:42 pm

An apology is where you regret having done something wrong.

Socrates might disagree.

67

Roy Belmont 09.23.08 at 7:50 pm

Being a police is an entirely necessary and socially useful job. Being a soldier, a scientist, a doctor etc, as well. Even bodyguards.
There is though a little who when where aspect.
Police shooting down striking workers, soldiers massacring innocent peasants, scientists experimenting on unwitting human beings, Mengele was a doctor, crime lords have bodyguards.
The system in which your ethical striving reaps its nice rewards is corrupt, possibly beyond redemption, and that corruption is doing immense harm to innocent people.

68

LizardBreath 09.23.08 at 8:14 pm

Hey, d2, looks as if you are commenting on the crisis after all.

69

dsquared 09.23.08 at 8:20 pm

An apology is where you regret having done something wrong

Not necessarily at all. You might very well find yourself in a situation in which, through no fault of your own, you caused offence or inconvenience to other people, in which case (I hope, at least) that you’d apologise. Nobody thinks that the mere act of apology constitutes an admission of culpability, except a minority of solicitors for car insurance firms.

The system in which your ethical striving reaps its nice rewards is corrupt, possibly beyond redemption

Counterpoint: no it isn’t.

Police shooting down striking workers, soldiers massacring innocent peasants, scientists experimenting on unwitting human beings, Mengele was a doctor, crime lords have bodyguards.

I am beginning to agree with you that your experience of the Bush years may have robbed you of some of your sense of perspective, Rich. Striking workers have a right not to be shot, innocent peasants have a right not to be massacred, unwitting human beings have a right not to be experimented on, but the general reading public doesn’t have a right to read essays written by me.

If anyone was hoping to read a lot of coverage of the US election polls, I’m not going to be writing that either, by the way – in this case, it’s because the subject bores me to tears rather than anything else, but if someone was looking forward to that, then I also apologise, though I similarly do not recognise any duty to give a fuck and will not be arranging my life for the convenience of people who think I ought to.

70

dsquared 09.23.08 at 8:22 pm

68: who me? must be some other bugger with the same name ;-). Possibly the lead guitarist of “Year Long Disaster”, who I gather has finished his recent tour opening for Foo Fighters.

71

dsquared 09.23.08 at 8:25 pm

Actually just to clarify:

Now you’re asking if anyone can believe that you have a duty to use your knowledge for the benefit of society, and I have to say yes.

Nope, disagree totally. I might choose to drink the rest of my life away and never think about this bloody market again, starting tomorrow, and it would be no bloody business of society’s (until I ran out of money and needed to start claiming benefits, and I think I would even go as far as to argue the stronger case that they would have very limited rights to tell me what to do even then). This is a pretty fundamental tenet of political liberalism; we’ve got a duty to obey the law and pay taxes and beyond that, it’s up to us.

72

nick s 09.23.08 at 8:38 pm

Now you’re asking if anyone can believe that you have a duty to use your knowledge for the benefit of society, and I have to say yes.

That’s the same argument I’ve heard recently from people busily spitting on the grave of David Foster Wallace for his failure to provide them with additional novels.

73

Rich Puchalsky 09.23.08 at 8:45 pm

“I am beginning to agree with you that your experience of the Bush years may have robbed you of some of your sense of perspective, Rich. “

I don’t think it’s my perspective at fault there, since you’re actually replying at that point to Roy.

At for the rest, I see that we agree. You think that you have no duty to do anything but obey the law and pay your bills. I agree that you appear to be the kind of person who believes that they have no duty to society other than to pay their bills and obey the law. But no, by the way, that isn’t really a tenet of political liberalism at all — liberalism has progressed since the 19th century. I mean, I wouldn’t force you to do not drink the rest of your life away, not serve the upper class as a stockbroker, etc., and so perhaps it’s a tenet of liberalism in that sense, but it doesn’t mean that you don’t have duties that you’re neglecting.

74

Roy Belmont 09.23.08 at 8:47 pm

Counter-counterpoint: yes it is.
“Let the free market carry out their corpses to the gutter. And mine too, perhaps, for as a magazine writer I depend on the thoughtlessness and blind-mole cupidity of credit-card consumerism – the credit system now imploding – to feed the ad-market that feeds the magazines that pay my bills. Without dumb blondes buying Manohlo Blahniks and metrosexuals fawning over prawns in overpriced restaurants, my paycheck turns to dust.
But the fact is that our economic system is a lunatic and suicidal system, and it deserves to go down.
Why lunatic and suicidal? It is predicated on the delusion, accepted on every level in every modern society, that unlimited Mahnolo Blahniks are possible on a planet of limited resources.
Growth without horizon is simply not possible, but the delusion remains in force, a mass glue-huff and consensus trance hallucination. Endless growth on planet earth is by definition entropic; it implies its own end. Its pursuit is therefore suicidal.”

Hank Ketcham, Counterpunch http://tiny.cc/SK3Ou

75

dsquared 09.23.08 at 8:59 pm

73: sorry about that, yes, confused “Rich” with “Roy”. I think we’ve pretty much reached a point of reflective equilibrium here.

76

Walt 09.23.08 at 9:06 pm

It’s because markets are incomplete. The market will never be truly efficient until we can short Manohlo Blahniks. (The shoes themselves, not the company.)

77

dsquared 09.23.08 at 9:14 pm

In principle I don’t see why you couldn’t borrow a pair of Manolo Blahniks from your sister and sell them on eBay, buying a pair back when she demanded their return.

78

Harry 09.23.08 at 9:17 pm

It strikes me that more or less any form of economic organisation not based on central planning or household production is going to end up with a role for something like stockbrokers working in it, which I think demonstrates that it’s a necessary and socially useful role.

How would a centrally planned economy function without something like stockbrokers? Badly.

But you can’t conclude from the fact that any (well functioning above subsistence) economy would need stockbrokers that it is, in our actual society, a socially useful role. And I disagree about the intepretation of political liberalism — many of us think that obligations go considerably beyond obeying the law etc.

That said, I’m a philosophy professor, so I have absolutely no moral authority in making that point.

79

Rich Puchalsky 09.23.08 at 9:24 pm

All right, we’ll leave moral philosophy aside. But as to whether the economy needs stockbrokers, I think that it depends on what, exactly, those stockbrokers are doing. For simply buying and selling, they appear to be classic middlemen that a computer could replace. For advice, I’ve seen studies that say that money managers always end up managing your money worse, on the average, than just buying an index fund.

So really I think that the hat check person at the Ritz is probably more useful to society, since stockbrokers appear to actively cost society money. But, whatever.

80

Larry Teabag 09.23.08 at 9:32 pm

What an oddball post. Positively sombre. I’d have been happy with “I’m keeping mum/get stuffed”… obviously you take your blogging resposnibilities more seriously than most.

81

Roy Belmont 09.23.08 at 9:37 pm

Hank Ketcham originated the “Dennis the Menace” comic, with its nastiness toward smart girls, and its snarkily facile boyish one-upmanship.
Christopher Ketcham wrote the piece the quote in #74 is from.
My apologies to him for the error and any resultant confusion.

82

dsquared 09.23.08 at 9:38 pm

Well no, not “whatever”. I’ve just explained to you (I thought pretty clearly but apparently not) that stockbrokers provide a useful service to society – the service of making it possible to fund long-term investment projects out of liquid savings. You’re now asserting that “stockbrokers seem to cost society money”. What do you mean?

83

TheIrie 09.23.08 at 10:20 pm

d2 did usefully explain the role of stockbrokers above in #64. They match a companies need for stable capital with an investors need to be able to put money in and take money out at their convenience. That sounds fine. However, I suspect that the proportion of the population that would chose to speculate with whatever capital they have, as compared with the proportion whose primary concern is a mortgage and pension so that they can live a relatively stable and comfortable life but are effective forced to participate in the market (count me for one) is small. That is, I’m asserting that it is a minority of wealthy people who require the second role of a stockbroker. In that sense, I can’t help but believe that stockbrokers are instruments of the rich and privileged, whose “socially beneficial role” is largely restricted to a small part of society.

Now for a question about short-selling. Oliver Kamm today wrote this: “… short-selling is a simple idea. It means, first (and usually) borrowing a share that you do not own, from an existing holder of the stock, who receives a fee for lending it out. You then sell the share in the hope that the price will fall and that you will be able to buy it at a lower price before you have to return it. Once you have adjusted for the cost of the transaction, the difference between those prices is your profit.” The question – what kind of a damn fool would buy something from a hedgefund manager?

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lemuel pitkin 09.23.08 at 10:20 pm

It strikes me that more or less any form of economic organisation not based on central planning or household production is going to end up with a role for something like stockbrokers working in it, which I think demonstrates that it’s a necessary and socially useful role.

I thought we at least got a choice between stock market-based and bank-based financial systems?

85

Rich Puchalsky 09.23.08 at 11:11 pm

You wrote: “In order to reconcile firms’ desire for long-dated and stable capital with savers’ desire for liquid instruments, you need to have a stock market, with intermediaries who have the job of matching buyers with sellers.”

That’s the part that I would think could be done perfectly well by a computer. We may need a stock market, but we don’t need stockbrokers for that.

“In turn, those intermediaries are going to want to employ people who are experts in a) the valuation of those claims, and b) in the current owernship structure of the market for claims on particular firms, in order to protect themselves against risk of loss. “

Those experts have done a spectacularly bad job at valuing claims, as evidence our current crisis. More to the point, they always seem to do a bad job of valuing claims, to the point that active money management when studied by academic economists always seems to cost more to pay the managers than the person getting the advice gets in benefit.

Which isn’t to say that stockbrokers are socially worthless, quite. They appear to serve a few significant functions:

1. Legitimation. Hiring expensive experts preserves the mystique of money.

2. Insurance. Who knows, maybe someday you’ll need a human being for advice. It only costs a relatively small amount; the rich can afford it.

3. Insider trading. The real way to make money in the market is to have access to information, i.e. gossip, that other people don’t have yet.

86

lemuel pitkin 09.23.08 at 11:32 pm

Rich Puchalsky does actually raise a legitimate point: this is kind of a funny moment to be talking about the social benefits of stockbrokers.

Suppose the alternative is a state-run banking system that accepts deposits with low but guaranteed returns and lends to households and businesses according to some set of legally established criteria covering collateral, documentation of income, etc. Sure, it would be less efficient than the current system in lots of ways (harder for start-ups to get funded, etc.) but how much inefficiency would be worth eliminating the risk of crises like the current one? How do we know we’re on the right side of that tradeoff?

87

Walt 09.23.08 at 11:37 pm

Dsquared: That’s not sufficient. What a complex dynamic economy like ours needs is special footwear intermediaries known as “shoe banks” that enable shorting. Plus, I don’t have a sister.

88

Walt 09.23.08 at 11:49 pm

Note that “stockbroker” is a fairly specific job, and doesn’t cover every single person on Wall Street. Stockbrokers are not particularly at fault in the current crisis.

At the same time, Daniel’s defense is more of a general defense of the existence of financial intermediaries and financial markets than it is of stockbrokers in particular. Lemuel’s right that a bank-based system can serve the same purpose.

89

Rich Puchalsky 09.23.08 at 11:51 pm

“Suppose the alternative is a state-run banking system […]”

Note that I wasn’t even arguing against a stock market.

Humorously enough, I do stock research of a sort as well. Part of my work involves helping to figure out corporate pollution records for socially responsible investors, using funding sources that allow sharing of that information with anyone who wants it.

90

lemuel pitkin 09.24.08 at 12:05 am

Note that I wasn’t even arguing against a stock market.

Well, I was presenting an extreme case, to sharpen the argument. But what is undeniable is that the history of capitalism presents with a full range of financial systems, from intermediation overwhelmingly through arms-length transactions in markets, to a mix of markets and (relationship-based) banks, to strongly bank-based systems with minimal markets, to intermediation through the state in the context of generally capitalist economies.

The present day US and UK are obviously located at one extreme of this continuum. There are alternatives. A defense of intermediation in general doesn’t suffice as a defense of the particular form of it in which stockbrokers play a major part.

91

dsquared 09.24.08 at 5:25 am

That’s the part that I would think could be done perfectly well by a computer.

well why don’t you invent a computer that can do it, get rich, and set up a thinktank which I will apply for a job at? Computers more or less did take over a lot of the jobs done by foreign exchange traders and plenty of money brokers, and algorithmic trading has been a big development in equities trading over the last ten years. But so far it’s been impossible to get rid of the human element in equities, not least because it’s not possible to get rid of the human element in managing companies. It might happen in the future, but it hasn’t yet and I think you might be underestimating the difficulty.

Sure, it would be less efficient than the current system in lots of ways (harder for start-ups to get funded, etc.) but how much inefficiency would be worth eliminating the risk of crises like the current one? How do we know we’re on the right side of that tradeoff?

If we say that the dot com/tech bubble would have been impossible without equity markets, and that the current crisis was caused by them (neither of which I believe, but the two are at least consistent with each other), then we’re on the wrong side of that tradeoff if this crisis leaves us worse off than we were in 1999. Even then actually I think I’d argue that there isn’t a Laffer curve here and that it might be the case that we just needed a slightly different regulatory environment. There has been quite a bit of literature on this and IIRC, functioning equity markets are quite an important stage in development.

92

dsquared 09.24.08 at 5:25 am

More to the point, they always seem to do a bad job of valuing claims, to the point that active money management when studied by academic economists always seems to cost more to pay the managers than the person getting the advice gets in benefit

what on earth does this have to do with stockbrokers?

93

Naadir Jeewa 09.24.08 at 7:21 am

I announce the launch of Crooked Timber Hedge Fund LLP. Can readers deposit monehs forthwith. Can we buy your reports now?

94

Rich Puchalsky 09.24.08 at 12:24 pm

What on Earth? In advisory or discretionary dealing, stockbrokers advise clients on what trades they should authorize, or just make the trades for them based on their investment goals. People who actually study how good they are at this have found that, on average, clients lose money by employing stockbrokers in this way because their fees outweigh any benefit gained.

As for the “why don’t I invent a computer” bit — already been done, being done. Stockbrokers persist, as far as I can tell, because of what you call the human element in equities, and what I call (in 85 above) legitimation, insurance, and insider trading. But that does represent a net cost, and it’s possible that the next shakeout will remove another good chunk of the business.

95

abb1 09.24.08 at 12:45 pm

Can we buy your reports now?

Eh, I wonder if these reports are ‘on one hand/on the other hand’ kinda thing. Yeah, you can do this, or that, or the other, but be aware of the great risks involved no matter what you do.

Nah, this is not how one gets rich; give us some good insider info, mister.

96

kate 09.24.08 at 3:13 pm

look, as a lurker of long-standing, I just want to attest that dsquared in my blogcrush because I am as nasty brutish and short as you can expect a welshie to be. john emerson can just watch himself. and well, dd, you don’t have to blog about american politics or the global economic meltdown as long as at some point you mention cricket, snooker and rugby. hopefully all in the same post and with lots of footnotes and maybe make some comment about breakfast puddings and reference the american midwest.

its the only reason i hang around here.

alright, i lie.

but it is a big reason.

(and christmas crackers. growing up in the states. i love christmas crackers. surely you can link cricket and christmas crackers. and that is a skill worth paying money for).

97

lemuel pitkin 09.24.08 at 3:28 pm

If we say that the dot com/tech bubble would have been impossible without equity markets, and that the current crisis was caused by them (neither of which I believe, but the two are at least consistent with each other), then we’re on the wrong side of that tradeoff if this crisis leaves us worse off than we were in 1999.

Wow. So without the stock market, there would have been no growth over the past years. Zero. The stock market is responsible for *all* economic growth. That’s a, um, bold claim. Probably without stockbrokers we would all have died of Ebola by now, too.

Even then actually I think I’d argue that there isn’t a Laffer curve here and that it might be the case that we just needed a slightly different regulatory environment. There has been quite a bit of literature on this and IIRC, functioning equity markets are quite an important stage in development.

Indeed there has. And a major strand of it, starting with gerschenkron, has concluded tht while stock markets were a suitable form of intermediation for early industrializaers like the US and UK, later industrializers have needed increasingly centralized, relationship-based forms of intermediation — big banks and the state. It’s unquestionably true that in the episodes of highest sustained growth in the 20th century, stock markets played little or no role. E.g. Japan’s post-war boom, when the vast majority of household savings werre channeled throught he postal system, and investment was financed overwhelmingly through alrge banks. Stockbrokers didn’t figure.

Anyway, the main point is just that intermediation is possible without stockbrokers, so arguments for the former aren’t encessarily argumetns for the altter. And in particular, around the world today there are financial systems with larger and smaller roles for stockmarkets. And the most market-based ones are in the most trouble today. So your “without stockbrokers, we’d all be living in caves” approach doesn’t fly.

By the way, I personally agree with your 71, and don’t care what you do for a living. But if you are going to defend it, you shouldn’t do so in bad faith or in a way that insults our intelligence. Just say “f*ck off” and be done with it.

98

dsquared 09.24.08 at 4:09 pm

The stock market is responsible for all economic growth. That’s a, um, bold claim

Well given that it’s one that I specifically said I didn’t believe, in the actual passage you quoted, well done Sherlock. So is the claim that stockbrokers are responsible for a whole load of crap in the mortgage market that clearly has nothing to do with us.

It’s possible to come up with all sorts of arguments pro or anti the equity market, just as you can make a decent case for vegetarianism or state-subsidised cinema. However, in the economic system in which I actually live, people want hamburgers, Hollywood rom-coms and reasonably liquid equity markets, and therefore there is a perfectly legitimate economic role for the men and women who provide them. I am simply not going to acknowledge an iota of the completely unjustified self-righteousness of people who work for universities, thinktanks or nonprofits, with respect to the rest of us. After all, plenty of developed and developing economies get by without so very many tenure-track research positions or tax-free foundations, too.

99

Harry 09.24.08 at 4:29 pm

Just to add to daniel’s irritated final sentence: what is it that we leftists want?: a world in which all stockbrokers a right-wing arseholes? Or a world in which there are articulate left-wing stockbrokers who can comment intelligently on the economy and the financial system during normal times and, if there ever were some left wing movement (some hope) could usefully contribute to whatever a left wing government wanted to do. I’d sooner have one left wing stockbroker than 50 left wing philosophy professors (to name my own profession again).

100

lemuel pitkin 09.24.08 at 4:43 pm

After all, plenty of developed and developing economies get by without so very many tenure-track research positions or tax-free foundations, too.

I, however, am a government bureaucrat. And nobody gets by without those! Anyway, like I said, I don’t care what you do for a living. You’ve provided me with a lifetime’s worth of free ice cream already, and anyway it’s none of my business.

I interpreted the clause “we’re on the wrong side of that tradeoff if this crisis leaves us worse off than we were in 1999” to mean that under a non-stockmarket-based financial system, we would now be equally well off as we were in 1999. Evidently you meant something else. What?

101

dsquared 09.24.08 at 4:50 pm

I meant simply that there is an anglo-saxon growth premium which can’t be assumed out of existence, and that stock markets certainly look like they might be part of the reason for that premium. Bringing in the dot com bubble was simply meant to point out how daft it is to blame the current real estate crisis on stock markets (they have them in bank-centred systems too you know, ask the nearest Japanese person).

102

lemuel pitkin 09.24.08 at 5:05 pm

they have them in bank-centred systems too you know, ask the nearest Japanese person</i.

And they might respond that it was precisely the move away from bank-centered finance in Japan in the early 1980s, due to financial liberalization and other changes that made it easier for big firms to raise capital in the market, that produced the bubble there. Andrew Glyn has a good discussion of this in Capitalism Unleashed.

On the larger point, you are of course right that the prestige of market- vs. bank-based financial systems tracks relative growth rates between the US/UK and other industrialized countries pretty exactly. The “anglo-saxon growth premium” looks a lot more impressive over the past decade than over the previous several decades or, I suspect, over the decade to come.

103

chris y 09.24.08 at 5:06 pm

I can’t believe this thread is 100 comments long. Daniel made a simple statement of intent, supported it (apparently unwisely) with a number of reasons related to client confidentiality and professional standards, and everybody starts jumping up and down as if he’d suggested voting for John McCain. Get a life, people.

104

lemuel pitkin 09.24.08 at 5:20 pm

You’re new to this whole “blog” thing, aren’t you Chris Y?

105

Harry 09.24.08 at 5:39 pm

Bloody hell, you mean he’s voting for John McCain too? Traitor.

106

geo 09.24.08 at 5:56 pm

The Irie’s question @83 shouldn’t be overlooked. Who, exactly, benefits from stockbrokers? Stock ownership is overwhelmingly concentrated in the wealthiest 10 percent of households, and most of the rest of us have (lazy and unenterprising) mutual funds, not stockbrokers. That doesn’t by itself make stockbrokering immoral; and even if the institution were immoral, that doesn’t by itself make all stockbrokers immoral. (Unless you believe in individual moral responsibility, which I hope everyone on CT is too enlightened to do.) But it does mean that stockbroking isn’t socially useful, in any socially useful sense.

107

dsquared 09.24.08 at 5:56 pm

And they might respond that it was precisely the move away from bank-centered finance in Japan in the early 1980s, due to financial liberalization and other changes that made it easier for big firms to raise capital in the market, that produced the bubble there

Well at that point, I would certainly give up discussing the matter with them, as it would be clear that neither of us was ever going to persuade the other, and so I think I shall now.

Harry, chris – it’s actually substantially worse than that; I think my next planned post is basically going to be in support of a vote for Nader.

Kate: I will certainly try to work a black pudding reference in there somewhere.

108

dsquared 09.24.08 at 6:01 pm

Oh and just for completeness, Walt (#87): I’m sure that if you asked around hard enough and were prepared to pay money, you could find someone who could put you in touch with a party prepared to lend you the shoes – finding the borrow on stocks you want to short isn’t always a picnic either. Or alternatively, if you really wanted to live on the edge, you could naked short the Manolos by stealing a photo off a Google image search and putting up an auction on eBay with 28 days delivery, gambling that you’d be able to source a cheaper pair before the settlement date. I suspect that this would do a lot of damage to your buyer rank though and might even actually be illegal, but that’s naked shorting for you.

109

Sebastian 09.24.08 at 6:13 pm

“Suppose the alternative is a state-run banking system that accepts deposits with low but guaranteed returns and lends to households and businesses according to some set of legally established criteria covering collateral, documentation of income, etc. Sure, it would be less efficient than the current system in lots of ways (harder for start-ups to get funded, etc.) but how much inefficiency would be worth eliminating the risk of crises like the current one?”

There is no reason whatsoever to believe that such a system would eliminate or even substantially reduce the risk of crises like the current one.

110

geo 09.24.08 at 7:09 pm

There is no reason whatsoever to believe that such a system would eliminate or even substantially reduce the risk of crises like the current one.

To a layperson, that sounds strange. Wouldn’t the proposed system minimize financial speculation, in particular leveraging, and isn’t such speculation largely responsible for the current crisis?

111

Harry 09.24.08 at 7:41 pm

You’re going to refer to black pudding in a post arguing for a vote for Nader? It gets better and better.

112

lemuel pitkin 09.24.08 at 7:42 pm

Ah well, I guess the inherent superiority of stock-markets over bank-based financial systems is one of those things that must simply be taken on faith.

I must say, dsquared’s comments on this topic have offered some pretty strong, if inadvertent, corroboration for points 2 and 3 (and maybe 7) in the original post…

113

dsquared 09.24.08 at 8:44 pm

Ah well, I guess the inherent superiority of stock-markets over bank-based financial systems is one of those things that must simply be taken on faith.

and vice versa, apparently, even to the point of coming up with gerrymandered “no true Scotsman” cases to get round the real world examples.

114

nnyhav 09.24.08 at 8:44 pm

Equity markets are in this crisis more symptomatic or barometric of bank-based financial systemic problems anyway. Don MacKenzie (who d^2 brought to my notice 4-5yrs ago on faith-based finance kthx) can inform:

LTCM: http://www.lrb.co.uk/v22/n08/mack01_.html
CDOs: http://www.lrb.co.uk/v30/n09/mack01_.html
LIBOR: http://www.lrb.co.uk/v30/n18/mack01_.html

It’s the blowout in LIBOR (reflecting cash hoarding) that’s of real concern at the mo …

115

engels 09.24.08 at 10:36 pm

I’m intentionally not thinking very much about the big-picture stuff at the moment, for fear of gaining a perspective that will cost me money

Would that more ‘left wing philosophy professors’ could be as honest as that!

116

Rich Puchalsky 09.24.08 at 11:05 pm

“what is it that we leftists want?: a world in which all stockbrokers a right-wing arseholes?”

How about a world in which “leftist” means more than “thinks your only duty to society is to pay taxes and obey the law”?

117

kate 09.25.08 at 6:40 am

Doesn’t have to black. I feel white pudding is entirely overlooked.

118

Chris Bertram 09.25.08 at 7:21 am

Daniel doesn’t need my support here, but I’ll add a word on “left-wing philosophy professors”, like me, since there’s been so much said about people working for the upper class etc. Most of us, who choose to work in the better institutions, when we can, are directing our educative efforts not at the great unwashed, but at the children of the rich and powerful. Of course, we could opt out and get jobs at some community college with a proletarian intake, but we don’t.

119

novakant 09.25.08 at 9:44 am

No need to worry, Chris, you can always invoke Rudi Dutschke and tell yourself and others that you’re on the “long march through the institutions” and you’re sorted.

120

arthur 09.25.08 at 10:45 am

64: “People want to invest in productive assets, but they also want liquid and tradeable claims. In order to reconcile firms’ desire for long-dated and stable capital with savers’ desire for liquid instruments, you need to have a stock market, with intermediaries who have the job of matching buyers with sellers.”

Since desire for long dated capital can be offered by banking consortiums, quite likely with greater stability. So we are really left with saver’s desire for liquid instruments as a justification. So is the stock market just a convenience for rentiers, or is there another economic justification?

121

Dave 09.25.08 at 11:17 am

@118: “Most of us, who choose to work in the better institutions, when we can, are directing our educative efforts not at the great unwashed, but at the children of the rich and powerful…”

So, how is that working out? What’s your success rate at converting overprivileged entitlement-gits into thoughtful soul-searchers? High enough to justify your salary, you feel?

122

J Thomas 09.25.08 at 11:42 am

So is the stock market just a convenience for rentiers, or is there another economic justification?

The very first time I ever bought a stock, three days later it briefly went up to ten times what I paid for it. I didn’t catch that in time but I did manage to sell for three times what I paid for it. Later that day the price went right back down to what I paid, and I bought it back. Whee!

It turned out the company management had switched its focus from selling computer parts to manipulating its stock price. Some years later the price stayed at 50+ for over six months, reaching a high around 66 but it’s currently at 6.5.

It’s legal gambling. And if you buy lottery tickets you’re statisticly certain to lose over the long run. But when you buy ownership in US companies you might not lose at all. When the economy is improving and increasing numbers of people are putting increasing numbers of dollars into the stock market, it can be a positive-sum game.

123

dsquared 09.25.08 at 12:04 pm

So is the stock market just a convenience for rentiers, or is there another economic justification?

Since the economic system is built around rentiers, this does rather matter.

Hey, I’ve had an idea. We could base mortgage finance on mutually-owned banking institutions providing “Savings” and “Loans”. What would we call these things? I’m sure they would never require a bailout.

124

Harry 09.25.08 at 12:31 pm

Well, dave, lets all complain to one another about each others jobs. Chris’s point, like mine, was just that people giving Daniel a hard time might want to think about their own career choices. Mine is like Chris’s (most of my students are somewhat less privileged than most of his, but it is marginal in the grand scheme of things).

125

J Thomas 09.25.08 at 12:55 pm

We could base mortgage finance on mutually-owned banking institutions providing “Savings” and “Loans”. What would we call these things? I’m sure they would never require a bailout.

“The power to tax is the power to destroy.”
John Marshall, Daniel Webster, etc.

But isn’t it also true that the power to regulate is the power to destroy?

So the US government can bring any economic entity to the brink of destruction, and then require a bailout. If they choose to. With the possible exception of the illegal drug industry, which is largely untaxed and unregulated.

Legalise drugs now.

126

Walt 09.25.08 at 12:59 pm

“Long march through the institutions” isn’t Gramsci? My entire life is a lie.

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Rich Puchalsky 09.25.08 at 1:07 pm

“people giving Daniel a hard time might want to think about their own career choices”

I did think about my career choice, back when I was picking out a career. I followed my own advice. Telling people that they have that choice too, and should be making it, now counts as sanctimony according to Daniel.

I’ve noticed that there’s nothing easier than posturing against sanctimony. Anyone can say stuff like “if I’m going to drink my life away, it’s my own choice!” and enjoy the feeling that they are better than those sanctimonious people. But at the end, they’re still actually drinking their lives away.

How about a simpler explanation? Daniel’s professed attitude is a neo-liberal one, as befits his chosen occupation. As a left-liberal, I don’t feel particularly sympathetic to it, nor to his non-apology apology. He doesn’t have to be a right-wing git in order to still be in service to the same ideals that are about to cost my kids their share of $700 billion.

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The Modesto Kid 09.25.08 at 1:15 pm

legalize drugs now

The prospect of a federal bailout of the consciousness-enhancing-drug industry is enough to lighten my heavy eyelids this morning.

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abb1 09.25.08 at 1:16 pm

Hi. I’m Diana Christensen, a racist lackey of the imperialist ruling circles.
I’m Laureen Hobbs, a badass commie nigger.
Sounds like the basis of a firm friendship.

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abb1 09.25.08 at 1:22 pm

Diana Christensen: I was married for four years, and pretended to be happy; and I had six years of analysis, and pretended to be sane. My husband ran off with his boyfriend, and I had an affair with my analyst, who told me I was the worst lay he’d ever had. I can’t tell you how many men have told me what a lousy lay I am. I apparently have a masculine temperament. I arouse quickly, consummate prematurely, and can’t wait to get my clothes back on and get out of that bedroom. I seem to be inept at everything except my work. I’m goddamn good at my work and so I confine myself to that. All I want out of life is a 30 share and a 20 rating.

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Harry 09.25.08 at 1:57 pm

Rich,

I’m not opposed to sanctimony (or whatever it is when it is not being described in a disapproving way). If you have some moral authority here, that’s good (but it doesn’t prove your point). I don’t, so I want to be clear about that; and I think that many people think they have moral authority when they don’t — I know I hear other people who are college professors whose jobs depend on their role in facilitating the maintenance of a ruling elite being sanctimonious about stockbrokers, and I think they don’t have a leg to stand on. When I thought about what career to choose (rather later than I might have) the one which matched those of my talents that I knew about to maximal benefit to others was closed to me, and instead I chose one which I enjoyed, thought would do little harm, and would allow me space to have a family and do something to advance various social goods in ways that have nothing to do with my work. As it turns out, my job has allowed me to do some real good (more, I suspect, than the career I judged to be more promising, but was closed to me, though certainly not more than other careers), but that has been mostly a matter of luck and accident, and not something I anticipated when choosing it.

I agree with you that advantaged people have (much) more stringent obligations than obeying the law and paying their taxes — I disagreed with Daniel about this further up the thread — and that career choice is one of the things they should attend to. (My suspicion, though, along the lines that Liam Murphy argues, is that for people who have the kind of talents that Daniel has, the right thing to do in our current social environment in which fundamental social change is very unlikely, is to make a great deal of money and give a great deal of it away to people who are much less well off; we just have no idea whether Daniel does that of course, you can ask if you like, but it is generally impolite to grill people about how much they give to charity, and anyway many people who give a lot to charity are reluctant to say so because they were well brought up). Daniel is not apologizing for his choice of profession; but he is apologizing for not writing abut the crisis, and giving what seem fair reasons for not doing so. I haven’t heard a good reason why he should apologize for his choice of profession. Some professions are almost certainly out-of-bounds for someone who is committed to a view of social justice that is anything like mine (which is a fairly stringently egalitarian one) but his is not one of them (I don’t think he establishes that with his argument, but I agree with him). There are ways of living a life that are also out-of bounds regardless of one’s profession; and neither you nor I have any idea whether Daniel lives his life in those ways. So the original accusation of bad faith (which I think you made, but if I go back up the thread to check I fear losing what I’ve written) seems off-base to me.

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novakant 09.25.08 at 2:01 pm

“Long march through the institutions” isn’t Gramsci? My entire life is a lie.

I don’t know really, as I’ve never read Gramsci – probably because I was one of those overprivileged entitlement-gits – though one of my friends from the hard left kept nagging me about it (he’s now a neocon, go figure) .

But here’s Dutschke claiming the phrase for himself.

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Rich Puchalsky 09.25.08 at 2:20 pm

Harry, I made a very specific accusation of existential bad faith, and it wasn’t “he has bad faith because he’s a stockbroker”. He was coming up with flimsy-sounding reasons why being a stockbroker wasn’t his choice, or at least why any other course would be equivalent.

That’s what makes his apology not an apology. He’s presented it as the sort of apology you give for inadvertently bumping into someone. “Oops, sorry I bumped into you — but 1) that guy over there jostled me, 2) there was a curb right here, 3) I really had no choice, it was out of my control, 4) but as a good person I will apologize to you anyways.” But this chain of events starts with his choice of profession. If his choice of profession makes him not speak out during a public crisis about what he knows most about, there’s something wrong with it, and he made a bad choice.

” (My suspicion, though, along the lines that Liam Murphy argues, is that for people who have the kind of talents that Daniel has, the right thing to do in our current social environment in which fundamental social change is very unlikely […]”

You’re burying the important point in your parenthetical. No, I don’t think that is true. He’s clearly able to write entertainingly when he wants to, as well as do analysis. I listed a number of high-status, high-paying careers in which he could use his talents, so I’m not saying that he should be a martyr.

“I hear other people who are college professors whose jobs depend on their role in facilitating the maintenance of a ruling elite “

I don’t think that’s the point. It is impossible to be a knowledge worker of some sort and not have, as one part of your work, the maintenance of society, and therefore the maintenance of the elite of that society. For that matter, it’s true of any work. But the question is whether you’re only working for the upper class, or whether you’re working for everyone.

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Donald Johnson 09.25.08 at 2:23 pm

“Harry, chris – it’s actually substantially worse than that; I think my next planned post is basically going to be in support of a vote for Nader.”

This thread has been interesting, but I think you should quit talking about your job and stop servicing the rich and get busy on that Nader post.

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Harry 09.25.08 at 2:39 pm

But he only knows most about it because its his profession. One of my earlier points was that if, for example, a social democratic party ever won power in Britain, I for one would want there to be people with insider knowledge of how these things work who would work with them enthusiastically

Well, in the case of professors in elite universities it is just about only the upper class that we serve (even me: almost all our students come from the top 20% of income earning households, and most from the top 10%). And stockbrokers: well, I don’t know who Daniel’s clients are, and presume that he can’t divulge it. Some work for large investors, including pension funds etc, and can argue reasonably that they are working, directly, for people other than the upper class. Even if not, and I did agree with this part of Daniel’s argument, the job he does produces public goods (and, yes, public bads, but that is true of many jobs, and the question of which dominates at any given time is empirical and contingent). Again, same as my job: many of our students go onto do things which produce wider benefits than just for themselves, and the education they get here probably contributes a little bit to their ability to do that well.

I didn’t mean to bury the important point. I can’t find your list; my point though was that its wrong to look at the career choice alone; you have to look at the whole life and the way the career plays into that, and accusations in the absence of that are unfounded. And, I’ll add, without I hope posturing against sanctimony, it is unseemly to direct them against Daniel online just because he’s available, when there are so many people about whom you have ample evidence that their lives as a whole are indeed corrupt against whom I’d be surprised if you make these accusations in person.

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Chris Bertram 09.25.08 at 3:03 pm

Leave ‘im ‘arry, ‘e’s not wurf it.

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Rich Puchalsky 09.25.08 at 3:17 pm

“And, I’ll add, without I hope posturing against sanctimony […]”

You’re willing to give Daniel credit for possibly giving away a lot of his money to charity in his life offline — but you’re unwilling to ask him — yet you’re not willing to give me credit for possibly confronting people face to face? Yeah, I think that you are posturing against sanctimony, really. Not sanctimony exactly, but the idea that it’s really possible to make the choices that it’s more comfortable to avoid.

“But he only knows most about it because its his profession”

I held Krugman up as an example. Does he only know about the economy because … wait a minute. That argument doesn’t hold up, does it? I know a whole lot about pollution databases. I’d know just as much, probably, if I had chosen to work for industry as an environmental compliance specialist. But then I couldn’t talk about it.

As for cooperation with a social democratic party, you’re ignoring the fact that Daniel’s stated ideology isn’t social democratic. Once again, you don’t have to be a right-winger, precisely, to be a neoliberal. If a social democratic party does take over, those people will cooperate enthusiastically anyways; they generally have their eye on the main chance.

“Even if not, and I did agree with this part of Daniel’s argument, the job he does produces public goods “

That wasn’t his argument, really. What his argument came down to was

“However, in the economic system in which I actually live, people want hamburgers, Hollywood rom-coms and reasonably liquid equity markets, and therefore there is a perfectly legitimate economic role for the men and women who provide them”

People want whores, too. Maybe there’s a good argument that there is a perfectly legitimate economic role for the men and women who provide sex on demand. But if the whores can only be afforded by the upper class, is that really a public good?

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dsquared 09.25.08 at 3:18 pm

hmmm, I feel the red mist beginning to descend. Before getting into details, I would like to a) specifically withdraw any implied apology I may have made to the world at large, from the specific individual Rich Puchalsky and b) specifically withdraw from him any implied future offer of any information about financial markets. If I change my mind tomorrow and write a whole big essay about the crisis, Rich is not allowed to read it.

Now, onward:

I did think about my career choice, back when I was picking out a career. I followed my own advice. Telling people that they have that choice too, and should be making it, now counts as sanctimony according to Daniel.

In your case it certainly does, because the “career choice” you’re talking about is in an industry entirely parasitical on mine, viz:

Part of my work involves helping to figure out corporate pollution records for socially responsible investors, using funding sources that allow sharing of that information with anyone who wants it.

Nobody would give a stuff about those records, and there would be no such thing as “socially responsible investors”, if there were not a liquid market for tradeable claims on the ownership of corporations. This is the position of a chef who looks down on the slaughterman.

So having established that the man who puts moules farci boudin noir on the menu is in the same game as the man who sticks the pig, we can move on:

He was coming up with flimsy-sounding reasons why being a stockbroker wasn’t his choice, or at least why any other course would be equivalent

Happy to confirm that this was my choice and I like it.

If his choice of profession makes him not speak out during a public crisis about what he knows most about, there’s something wrong with it

No there isn’t, and you’ve really not offered any reason why there might be other than your bald (and rather rude) assertion. Like any other producer of intellectual property, the fact that you want me to give it away for free and under a public domain licence doesn’t actually give you the right to it. Whatever positive duties I might have, this isn’t one of them.

But the question is whether you’re only working for the upper class, or whether you’re working for everyone

No, the real question is why don’t you stick it up your jacksie? This is the typical nonprofit ego trip and it’s just wrong. I’m simply not going to apologise for doing a job I’m good at and enjoy and which is legal and produces a valuable service. If pushed, however, I certainly might start making a few pointed inquiries into the social utility of what you do, Rich, and how the money spent on funding you might be more usefully employed.

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Rich Puchalsky 09.25.08 at 3:26 pm

“Nobody would give a stuff about those records, and there would be no such thing as “socially responsible investors”, if there were not a liquid market for tradeable claims on the ownership of corporations. “

It’s a good thing that I never argued against a stock market, then.

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Dave 09.25.08 at 3:33 pm

@132 – thanks for the info. Got you pegged then, sunshine. First up against the wall come the revolution. In the immortal words of Wolfie Smith, “Bot, bot, bot!”

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Sebastian 09.25.08 at 3:44 pm

I’m a little confused by the apparent belief that if we just stuck to traditional banking, everything would have been fine in the face of the housing bubble (or the more ridiculous claim that there would have been no housing bubble in such a case).

The US has had 2 major traditional bank crises already, and the S&L crisis to boot. And before you blame the demon deregulation, you should note that the regulations were changed under Carter because the regulations in place were actually killing the banks in question (5% fixed mortgage for income when inflation is 10-15% equals dead bank).

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geo 09.25.08 at 4:40 pm

Dear Daniel,

Like everyone else on the list, I adore your delicious snarky wit, except when it irritates the hell out of me. Rich’s objection — that someone with a (more or less) public platform has at least prima facie public obligations, at least during a grave crisis to whose resolution he might make his mite of a contribution — is at least plausible, and I’m certain I’m not the only person who finds your replies blustering and evasive. There are perfectly respectable answers available to you — Harry has supplied most of them; above all, that you have a living to make, like everyone else, and can probably use your ill-gotten gains to do more good than you could have done by foregoing them. But to pretend that a challenge to the ethics of your profession is simply out of bounds is simply tosh. Get humble.

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dsquared 09.25.08 at 5:47 pm

Get humble

Get … no, too easy. Also not going to happen, like all the other moral exhortations. No I don’t. What you had was a “reasonable expectation” – ie, you thought I would and it was reasonable of you to think that, which is why I apologised. Actually your expectation was factually wrong as I had never intended to, but you weren’t to know that before I’d told you.

This reasonable expectation on your part, though, was all you had. You don’t have the right to a blog post from me, that would be mental. Rich’s view is even more mental – he thinks that I have an obligation to rearrange my whole life and career in order to be able to make blog posts about financial subjects (despite the fact, of course, that if I didn’t do the job I do, I wouldn’t know anything like as much about the subject). Or even stronger, that everyone should avoid careers like mine (even though he himself earns his living in a way which would not be possible if nobody did jobs like mine), just in case they might find themselves in a spot where they had a conflict of interest that stopped them writing blog posts.

Get over yourselves, for Pete’s sake. This is madness. I have a genuine conflict of interest, outlined above, which is (and I think this is accepted by everyone, even Rich) a good reason for not writing about the crisis. I’m sorry that this disappointed everyone, but it came about as a result of a decision (to start a career as a stockbroker 15 years ago, and to do it well rather than badly) which was clearly mine to take. I won’t write anything about schools in the London borough of Camden either, by the way; are you guys going to tell me I shouldn’t have had kids?

All the rest is just various sorts of people trying to convince me that stockbroking is an intrinsically bad profession to belong to. Which a) it isn’t, and b) do you think I have never considered this or something? It doesn’t really surprise me that someone might want to argue that because a hypothetical bank-based system of financial intermediation might possibly have tolerable results, I am therefore specially morally compromised because of the job I do – people bullshit all the time. What does surprise me is that they then expect me to be polite and take them seriously in return. Bollocks to that.

“Get humble”. Why not spend the rest of the day lecturing random strangers on exactly how far they have fallen short of the standard of service you expected of them, then buttonhole them on the poor quality of their “non-apology apology”. See what it does for your reputation for humility. Then go and fuck yourself, obviously.

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Markup 09.25.08 at 6:02 pm

A pre-emptive apology opens a wide door through which many [additional] comments have been made. Many pots and kettles, none of whiche are perfectly clean o the bottom.

Perhaps a good stopping point was reached between post 1 and whatever this one is. 2¢; ain’t what it used to be.

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geo 09.25.08 at 6:18 pm

Why not spend the rest of the day lecturing random strangers …

But we’re not strangers! We’re both part of the big, warm, happy, communicatively-ethical CT family …

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lemuel pitkin 09.25.08 at 7:05 pm

It doesn’t really surprise me that someone might want to argue that because a hypothetical bank-based system of financial intermediation might possibly have tolerable results, I am therefore specially morally compromised because of the job I do – people bullshit all the time. What does surprise me is that they then expect me to be polite and take them seriously in return.

Dunno if this is directed at me but since I’ve been the main one going on about banks I suspect it might be. So for the record — I’ve never said anything about you being morally compromised. I don’t suppose you are, and more to the point, I don’t think it’s a question that I ought to have an opinion on.

But! When you claim that a big role for stockbrokers follows directly from the fact of intermediation, and that there is no alternative system, or at least none that’s not strictly inferior, where stockbrokers would play a smaller role — well, that’s a public claim, not a private one, which I’d think we’re all free to debate.

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J Thomas 09.26.08 at 6:53 pm

OK, I’ll argue that. I’m most familiar with NYSE. It was founded as a monopoly, by the brokers and for the brokers. Why should we have that?

Why not have an exchange that doesn’t specifically include brokers? Let anybody buy and sell, provided they’ve identified themselves and their money is deposited in the system.

You could still have brokers performing whatever duties people want to pay them for.

It would be more like a horse track. You go to the window and place your bets. You can pay as much attention to the race track touts as you want to, but you don’t have to give them your money so they can go to the window for you. (Though you can if you want to.)

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TheIrie 09.26.08 at 11:39 pm

Well, my comment above was probably ignored, but on the off chance Daniel did read it and take it personally, I regret that, and didn’t intend it. I know very little about how stockbroking etc works, and I was trying play the ball, not the man. No one should try to judge others, least of all others about whom you know nothing.

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