That very much depends on how much you wish to meliorate income inequality.

The post that you link to defines hunger as

“The other two-thirds typically had enough to eat, but only by eating cheaper or less varied foods, relying on government aid like food stamps, or visiting food pantries and soup kitchens.”

Eliminating that is probably at least as or more difficult than eliminating the business cycle.

Even eliminating this

“About a third of these struggling households had what the researchers called “very low food security,” meaning lack of money forced members to skip meals, cut portions or otherwise forgo food at some point in the year. ”

type of hunger is a very complex and difficult problem.

Like WFB said [paraphrase] “What do you want me to do? Brush their teeth for them?”

I am not happy about that and actually agree with your general POV in this post. But the difficulties are so enormous, that I can also completely understand, why some folks shrug their shoulders and say it isn’t possible.

And you want to meliorate income inequality way more than that.

Also, I think a very large number of conservatives have absolutely no problem with #2. Just change the words a little eliminating social justice. As long as they don’t happen to be the ones being asked to do the right thing. They are no different from anybody else in that regard.

If so, this seems highly implausible to me.”

Dan, it’s almost the textbook definition of what people like this do that it involves the search for profit, while incurring the risk of financial disaster. There are just not that many ways to get immensely wealthy, as an investor, without incurring pretty serious risk. (You are with me so far? And yet you say this is highly implausible.)

Maybe I just need to change your ‘would’ to a ‘could’. But that’s trivial. No one really knows the future, especially not in a case like this.

As to the pollution model: the idea would be this. I make an investment of, say, $100, knowing there is a 1% of getting totally cleaned out but a reasonable shot at a giant upside. You can do the numbers different ways, but it doesn’t take that much of an upside to make a 1% total wipeout balance out and then some. It can very easily be rational to make a $100 bet under the circumstances. Now suppose that, if I lose that $100, then 10,000 other people will be cleaned out as well. What is more, they are not voluntary parties to the bet and won’t benefit from the upside. Now the bet got a lot ‘riskier’ and also less profitable, hence less rational, if you construe the betting party to include, in effect, the rest of these folks being roped into the risk, the catastrophic event. In a certain sense, the bettor is playing with other people’s money, in that the downside of the bet is very bad, and won’t be borne by him, in the event. This is Posner’s picture of what happened. This is why we call it a negative externality – risk pollution – rather than risk. It’s bad stuff borne by uninvolved third parties. Posner’s point is just that rational agents can %#$@#$ up the financial environment with risk pollution, just as factory owners can do it with regular pollution. All it takes is: not caring what happens to others in the environment.

First of all, ‘the world falling apart’, i.e. a second Great Depression, is just another example of a Big Bad Thing. If you are willing to admit that we should have basic safeguards against a Big Bad Thing, then you have more or less granted the principle, and now we are just haggling over details (degrees of Bigness and Badness).

But beyond that, my point – which I could have filled out more explicitly and fully – is that Posner actually is an infidel in this sense. I do concede that once you establish a moral equivalence between trying to moderate the business cycle and doing something about poverty, then there are two consistent positions: doing something about both. Doing nothing about either. I take it that the former is the more appealing consistent position. But libertarianism does have a certain contrarian purity to it, I concede.

Thiago is right that Posner is substantially off the libertarian reservation at this point. He’s turned Keynesian, to at least some degree.

I think it is not accurate to portray Posner as a libertarian thinker—at least not anymore. Hasn’t he written a famous piece with the complete self-explanatory title: “How I became a Keynesian”?

http://www.tnr.com/article/how-i-became-keynesian

In fact, he is now advocating “old keynesian” p0licies, and has even been a vocal suporter of Obama’s 700 billion stimulus—which was “too shy” in Posner’s opinion(!).

The grounds are determined by reasoning, on a case by case basis. As I see it, all that’s been established here is that Posner is not a pure 100% fundamentalist fanatic. Which is not all that surprising, since he is not a complete idiot. But it doesn’t make him a liberal, he is still a hard-core libertarian.

Lenin introduced NEP, yet he was still a communist.

If you were a principled right-libertarian I think you’d say “let’s appeal to the self-interest of all those potential soup-kitchen organisers who would value the warm glow they would get from organising soup kitchens more highly than the financial loss involved”. Which would carry the risk of there not being anyone in that category, but (as a principled Rlibertarian) you’d trust the invisible hand to equilibrate supply of moneyed altruism and demand for same.

The point is that you can’t really say “we must do something about this” if you’re a libertarian (right or left), because [a] ‘must’ is fundamentally uncool and [b] who’s ‘we’? who’s going to make me be part of your ‘we’, huh, statist-boy? But you can, apparently, say “we must do something about this” if you’re Richard Posner. I read John as saying, “if you can ask that question, can you presumptively rule out some values of ‘this’ and ‘something’, and if so on what grounds?”

And you’re stretching waaay too far on the opposite side too. You know perfectly well that the statement “inequality is bad” is, in fact, controversial, very much so. So, instead you talk about hunger. ‘Hunger’ and ‘inequality’ are not the same. If I am a principled libertarian, my response is: sure, let’s organize soup kitchens. Preferably financed by charities.

If so, this seems highly implausible to me. We in fact know of quite a few people who predicted imminent financial disaster, and their behavior was very different from that of the people who exacerbated it. On the contrary, the doomsayers were able to make a great deal of money out of the crash by in effect betting against the risk-takers. Their bets helped pop the bubble—cutting the mania short before it got even more out of hand, and thus limiting the damage to the global economy—and simultaneously made them far more money after the fact than those left holding the bag when everything went south. (Whether government bailouts that disproportionately benefited the reckless maniacs reversed the doomsayers’ net profitability advantage is a different matter, of course.)

Part of the problem here is that “risk” isn’t itself a risk-free asset (or liability), but is in fact subject to risk in its own assessment. The people who were gobbling up toxic assets a couple of years ago weren’t rubbing their hands with glee because they knew they were enriching themselves at the expense of the world economy. On the contrary, they genuinely believed that they had found a “sure thing”—that they had eliminated risk, rather than creating it—and that they were in the process of making a killing by spotting that lack of risk and taking advantage of it more quickly and decisively than other investors. Had they known otherwise, they would never have created the bubble in the first place, let alone ridden it all the way to its collapse. And had the government known otherwise, it would have been a simple matter to pop the bubble (say, by raising interest rates) before things got too out of hand.

But that’s simply not always (or even often) possible. An economic system that reliably prevents people from throwing their money away on foolish investments would have to pretty much eliminate normal economic activity. And if people can throw their money away on bad bets, they can—and eventually will—do so en masse, to disastrous effect.

But Henri, suppose I fire back that we shouldn’t try to moderate the business cycle because no doubt there’s some oddball out there who is doing well enough in the down trough, who sort of likes the rollercoaster thrill of it all.

Do you really want to say that, say, people going hungry is so controversial as a ‘bad thing’ that we shouldn’t just agree that, in general, it’s a bad thing? I tried not to wander into territory that would actually be controversial in the post. That’s actually an important feature of what I’m proposing.

So, what’s a “positive outcome”? It’s a subjective judgment. What’s positive to Posner may be negative to Holbo.

I think this is wholly incorrect. It is becoming more and more obvious to rational people that the current oil-fuelled, global-warming-causing lifestyle in the US is unsustainable. It would be a lot easier to cast 95% of the US into poverty than to figure out what a sustainable, non-poor post-petroleum society looks like. And certainly less disruptive for wealthy companies and people.

And, to be honest, there has always been less utility in being rich in an extremely rich nation than there has in being rich in a poor nation. When you are rich in a rich nation, you are still constrained by laws, and by the fact that people can always find another job if they don’t want to work in your company. When you are rich in a poor nation, in general there tend to be one set of laws for the poor and one set (which is to say, whatever you want as long as you don’t piss off other rich people) for the rich.

This situation is certainly developing in the US, to such an extent that a lot of our justice system is beginning to look like a third-world nation’s. This is much less possible if people are educated and well-enough-off that they can afford to look up from their jobs once in a while.

So yes, I think there are plenty of people who consciously believe that increasing income inequality is a positive good for them personally, and plenty more who don’t so much consciously believe that but whose actions show that the assumption underlies many of their conscious beliefs.

-fred