A reader has pointed me to this fascinating site showing the impact of the Mont Pelerin Society on Iceland. According to the material prepared for its 2005 conference in Reykjavik, the Society’s intellectual influence directly guided those responsible for making Iceland what it is today.
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John Quiggin 
Alice,
Two things:
1) Are you involved in subprime? Are you in the markets today? Are you looking through the CDO documents that detail the underlying mortgage loans in these documents?
2) It is “Shaun of the Dead”. Good movie though.
“the Chicago School merely pointed out the massive failings in Government intervention and control. It’s popularity grew in the 1970s when in western countries the role of government continued to expand: the failings were evident to most people.” – SeanG
Not really.
Rather the opposite. In the 70’s the only place the Chicago School was going places was in developing countries like Latin America, and there it’s imposition (often at gun point) was spectacularly unpopular (as it is most places it goes).
“The public sector is decidedly inefficient in providing services at the public’s expense. It is anaemic to change. It is dominated by union control. Productivity is ignored in place for a gentler version of work. The public sector needs a radical overhaul to work efficiently and effectively.” – SeanG
Complete rubbish.
Just look at health care. Privatised in the US leading to a terminally bloated, inefficient, expensive and beaucratic maze with poor outcomes compared to the mostly publicly funded system here.
This is where the free-market dogma falls down – it’s so ideologically inflexible it refuses to see where there is a better way.
I am always amused by how libertarians resemble extremists of the left and other extremists — flat-earthers, holocaust deniers, creationists and so on. They are all faith-based ideologies, are extremely evidence resistant and all engage in the most torturous ex-post rationalisations for why things did not workout the way they claimed they would. If libertarians (Neo-liberals) were as harmless as flat-earthers we could simply enjoy them as part of life’s rich canvas.
Freelander. Well done. Associating libertarians with crackpot ideologies means you do not have to actually listen to what we have to say. This must save you a lot of time.
Michael @ 152: I can only assume you are referring to Chile. This brickbat of anti-capitalists of associating Friedman with Pinochet is nonsense.
http://www.reason.com/news/show/117278.html
Whatever you criticisms of free markets/libertarian/classic liberal ideas they are ideas based on voluntary action. To try to say that someone who believes action should be voluntary as much as it possibly can would somehow condone violence is just a shallow read of the facts.
Michael 152 –
You might like to refer to Chile as an example of libertarian ideology at the point of a gun but what about the Soviet Union? Cuba? How about Maoist China? Were these not implemented at the point of a gun?
Which has the more economically advanced economy – Chile or Cuba?
While I agree with you re: provision of healthcare. I do not take an absolutist view on the free markets or the government. Unlike yourself or Alice.
Regarding my post above “… more economically advanced economy” is obvious a bit of a sloppy way of asking “who has the most advanced economy”.
Alice. You say that Fannie and Freddie’s loans were not subprime. This is contrary to what internal Fannie Mae documents stated in 2006:
“Discussing the company’s successes, Mudd said one of Fannie Mae’s achievements in 2006 was expanding its involvement in the market for subprime and other nontraditional mortgages. He called it a step “toward optimizing our business.”
A month later, Fannie Mae outlined plans to further expand its activities in the subprime market. The company recognized the already weak performance of subprime loans but predicted that they would get better in 2007, according to another Fannie Mae document.
Internal documents show that even late in the housing bubble, Fannie Mae was drawn to risky loans by a variety of temptations, including the desire to increase its market share and fulfill government quotas for the support of low-income borrowers.”
http://www.washingtonpost.com/wp-dyn/content/article/2008/08/18/AR2008081802111.html
This article in bloomberg discusses the government mandates to Fannie and Freddie. Namely that 56% of their lending was to be directed towards low income households in order to fulfill obligations under the community reinvestment act.
http://www.bloomberg.com/apps/news?pid=20601087&sid=am8I9jQxtXvI&refer=home
Say what you will about the motives behind this policy, the fact is that it has left millions of families facing foreclosure and exacerbated the global financial crisis. One could make a case that if private enterprise were left to the job of creating wealth for us all we would all be a lot better off.
Ben S Says:
#154
Freelander. Well done. Associating libertarians with crackpot ideologies means you do not have to actually listen to what we have to say. This must save you a lot of time.
Ben S, I do not associate libertarians with other crackpot ideologies I simply observe, as many others have, the similarities I noted. Each of the other ideologies I listed would be similarly offended, as you are, to be grouped with the others. I have listened to what libertarians have to say and it has been a source of great amusement. The current consequences of others taking what they say seriously is not so amusing.
Sean
Has Chile been the subject of US trade sanctions for near 50 years?
“You might like to refer to Chile as an example of libertarian ideology at the point of a gun but what about the Soviet Union? Cuba? How about Maoist China? Were these not implemented at the point of a gun?” – SeanG
I’m not sure what your point is meant to be? – that they are all examples of ideology run amok? OK.
Michael – I am merely pointing out leftist ideology has often been implemented after a violent overthrow governments across the world.
sdfc – What inward investment will go into Cuba if the land can be expropriated at will? The blockade does not stop me from visiting Cuba; or for Cuba not to trade with it’s partners across the Caribbean. What stops investment is the risk of expropriation of private property; taxation rates; the lack of living standards – which have less to do with America and more to do with the dictator of Cuba.
“Michael @ 152: I can only assume you are referring to Chile. This brickbat of anti-capitalists of associating Friedman with Pinochet is nonsense.
Whatever you criticisms of free markets/libertarian/classic liberal ideas they are ideas based on voluntary action. To try to say that someone who believes action should be voluntary as much as it possibly can would somehow condone violence is just a shallow read of the facts.” – Ben.
Not just Chile.
Voluntary action? That’s just one of the paradoxes of the neo-liberal dream. While based on a theory of voluntary action the measures are generally so unpopular they they have to be imposed, earlier at gun point ala Chile, or later via threats of fiscal pain through the IMF.
Which leads to the 2nd paradox of self-interest. When applied to developing countries, the majority would serve their self-interest through developmentalist policies of redistribution, social safety nets and price controls. Certainly not through the kind of policy suite proposed by Uncle Milt – hence the unavoidable step of imposing them by force or threat.
This is miles off topic but Sean, let me spell it out. The observation I made was, comparing two economies to whom(?) the local behemoth has a very different attitude is hardly an apples for apples comparison. I don’t think there can be much doubt that the US approach to Cuba promoted a siege mentality among Fidel and his mates. Who knows what Cuba’s economic development might have been with a more conciliatory approach from the US. It’s funny a free marketeer should think trade sanctions benign.
sdfc – Cuba has had trade relations with their neighbours and with fellow Communist countries including the Soviet Union and China. Could trade in the US improve their economic standing? Would the Cubans have allowed unfettered access to their citizens? Would the US have reciprocated? I am happy for there to be free trade in Cuba – but happier with property rights because this latter aspect undermines the regime by ensuring a code of law that respects individuals and does not put them under the thumb of a totalitarian regime.
You agree that Cuba isrun by a totalitarian regime?
And Now for Something Completely Different, i.e. more research and reality based reporting on Fannie Mae and Freddie Mac:
Subprime lending and the housing bubble: Tail wags dog?
Major Coleman IV a, Michael LaCour-Little b, Kerry D. Vandell c,*
Journal of Housing Economics 17 (2008) 272–290
A b s t r a c t
The cause of the ‘‘housing bubble” associated with the sharp rise and then drop in home prices over the period 1998–2008 has been the focus of significant policy and research attention. The dramatic increase in subprime lending during this period has been broadly blamed for these market dynamics. In this paper we empirically investigate the validity of this hypothesis vs. several other alternative explanations. A model of house price dynamics over the period 1998–2006 is specified and estimated using a cross-sectional time-series data base across 20 metropolitan areas over the period 1998–2006. Results suggest that prior to early 2004, economic fundamentals provide the primary explanation for house price dynamics. Subprime credit activity does not seem to have had much impact on subsequent house price returns at any time during the observation period, although there is strong evidence of a price-boosting effect by investor loans. However, we do find strong evidence that a credit regime shift took place in late 2003, as the GSE’s were displaced in the market by private issuers of new mortgage products. Market fundamentals became insignificant in affecting house price returns, and the price-momentum conditions characteristic of a ‘‘bubble” were created. Thus, rather than causing the run-up in house prices, the subprime market may well have been a joint product, along with house price increases, (i.e., the ‘‘tail”) of the changing institutional, political, and regulatory environment characteristic of the period after late 2003 (the ‘‘dog”).
2008 Elsevier Inc. All rights reserved.
Chacona here: As the article seems to be protected, I can provide only parts – but they are well worth reading. Of course, I have to omit the Figure 6, which is a great pity, but hopefully the verbal explanation by the authors convey the results as effectively.
Back to Major Coleman IV a, Michael LaCour-Little b, Kerry D. Vandell:
“6.2. Model 2: GSE-to-private ABS regime shift
As shown Fig. 6, Freddie Mac and Fannie Mae exhibited two different regimes of behavior during our observation period.18 Before 2004, they were active issuers and purchasers of conventional conforming mortgages and MBS securities (regime I), typically responsible for over 50% of net new lending each quarter. However, at this time and until 2006, their activity level dropped considerably (regime II), to close to zero by 2006Q4. At the same time, the net increment to mortgage debt outstanding reached record highs in the period 2004 through the first two quarters of 2006, with evidence of at least partial replacement of the GSE’s during this period by private label issuers. From 2002Q4 to 2005Q1, the private ABS issuers’ share of market activity rose from less than 10% to over 50%. However, after early 2007, as house prices stagnated, defaults increased, and problems of illiquidity in the private ABS market set in, regime III was initiated—the GSE’s became the only game in town as new private ABS issues disappeared and total net new mortgage origination volume plummeted.
The reasons for the GSE’s absence from the market during this period are many and complex. First is the fact that they were experiencing considerable political problems in Washington. Accounting irregularities resulted in pressure that ultimately led to the resignation of their senior officers, Leland Brendsel of Freddie Mac in June 2003 and Franklin Raines of Fannie Mae in December 2004. As a result of the revision in their books, both were required to provide a substantial capital infusion and maintain higher capital levels. Ongoing accusations of lack of safety and soundness, caused by alleged lack of proper hedging mechanisms and their being “too big,” resulted—in their weakened political state—in pledges to reduce the growth of their retained portfolios.19 In addition, their maximum lending limit for single-family loans became highly constraining, especially in expensive high-growth states such as California, in the face of continuing increases in house prices nationwide, resulting in their being able to purchase increasingly fewer loans.20 An additional constraint was a requirement by OFHEO in November, 2004, to increase their participation in affordable housing initiatives, including the purchase of subprime and other MBS products as well as investments in Section 42 LIHTC multifamily developments.21 Increases in demand for private-label subprime pools at this time would be expected to further exacerbate “bubble” conditions through demand effects.
However, the explanation for GSE withdrawal from a dominant mortgage origination position in early 2004 is more complex than simply political and regulatory pressures. The GSE’s actually loosened their underwriting standards to a degree during this period, through the reduction of documentation requirements and other means, and attempted to compete aggressively with the private-label ABS issuers, but were unsuccessful because credit spreads became so tight.22 Recently, Fed Chairman Ben Bernanke and former Chairman Alan Greenspan have cited the rapid spread of weakened underwriting standards among the mortgage originators supporting the private ABS issuance market starting in 2005 (see Greenspan, 2008). Indirectly, our data suggests this started as early as late 2003. Evidence, too, grew of fraud on the part of certain mortgage brokers, lenders, appraisers, and borrowers in the way of falsified applications and other documentation.23
The significant withdrawal of the GSEs from the conventional conforming market is shown in Fig. 6 to have led to a significant substitution effect, in which the private-issue ABS and RMBS market supplanted that of the conventional conforming RMBS market for new originations during this period.24 This is a little-recognized fact: The residential mortgage sector experienced a double shock during our observation period. Overall lending volume to the sector increased to record levels, peaking at a net quarterly additions of around $301 billion by 2006 Q2, while at the same time the percent of net additions to outstanding mortgage balances represented by private ABS issuers rose from an average of 13% of the market in the period 1998–2003 to an average of 47% in 2004 and 2005.25 At the same time, the GSE share dropped from an average of 54% of the market in the 1998–2003 period to under 7% in 2004–2005.26 A natural question of concern is the extent to which such a regime change had on the housing market, and specifically house prices…
—-
19 Their retained loan portfolio was a source of ongoing policy controversy and was proposed to be capped in the Administration’s FY2004 budget. In May 2006, Fannie Mae agreed to an OFHEO requirement that it restrict growth of its portfolio to the level of December 31, 2005 (OFHEO, 2006). In July 2006, Freddie Mac agreed not to increase its retained portfolio beyond its level of June 30, 2006 (Syron, 2006). Retained portfolio restrictions for the GSE’s were enacted into law in 2008.
20 The limit was raised from $300,700 to $322,700 as of January 1, 2003, then in increments up to only $333,700 in 2004, $359,650 in 2005, and $417,000 in 2006, where it remained until the recent Housing and Economic Recovery Act of 2008, permitting an increase to $625,500 (Mortgage Banking Magazine, various issues).
21 We note that many of these pressures brought to bear on the GSEs can be traced back to a long-standing opposition to the further development and dominance of the GSEs by the Republican-dominated Congress and Administration, who advocated on behalf of banks and other private financial institutions as their being ably suited to take on Freddie and Fannie’s role without the “implicit government subsidy” created by their implicit Federal government guarantee on their debt (Leonnig, 2008). See Thomas (2003) for a concise statement of the Republican issues with respect to the continued dominance of the GSE’s. See also Jaffee and Quigley (2007), (Hamilton, 2008),(Stevenson, 2000), (Tierney, 2003) and (McLean, 2005), and Muolo and Padilla (2008) for less partisan discussions of the recent challenges to the dominance of the GSE’s.
22 Possible explanations for their self-imposed limits on how far they could go to maintain market share vary, but include their mandated “safety and soundness” standards, whether imposed internally or externally through OFHEO, Congress, and the Administration. This constraint, in turn, could be explained either by politics or by proper risk management safeguards imposed in earlier times by responsible policymakers and regulators.
—-
7. Conclusions and policy implications
…The most important and heretofore unrecognized impact of lending patterns on subsequent house price returns was found to originate with the regime-shift which occurred in early 2004, with the squeezing out of the GSE’s from the market, both because of political, regulatory, and economic factors. The resulting reshuffling of supply of mortgage capital in the market, resulted in both a record increase in total lending volume after 2003 and a substantial substitution of alternative private instruments for conventional conforming GSE loans. This was particularly true of the alt-A, subprime, and non-owner occupied investor products. We find that the dominance of economic fundamentals and other market characteristics in driving house price returns to be more significant in the earlier years, before the GSE pullback. After the pullback, not only were economic fundamentals less important, the measures of autocorrelation present in our model estimates suggested this period possessed the highest degree of momentum in house prices—a “bubble” characteristic.
The dominant policy conclusion that can be drawn from the findings of this paper is that the existence of subprime loan products alone may not merit primary blame for the problems currently being experienced in the housing and mortgage markets. Rather, political and regulatory actions and economic conditions—which led to a disruption in traditional flows of credit into the market and the relative absence of the GSE’s during the period 2004–2006—permitted the spread not only of new private-issue instrument designs and ABS products, but also of weaker underwriting standards to flow in great volumes into the void. These events may be deemed complicit, if not dominant in precipitating the subsequent series of adverse trends which later beset the housing and mortgage markets….”
——
Back to Chacona:
Given that we are dealing here with a very complex set of events, it is very unlikely that complete unanimity can be reached on this controversial question any time soon. However, it is quite clear to me that any oversimplified narrative that omits either the whole long history (and here Dodd´s intro is excellent antidote) or is deliberatively selective vis-a-vis the time period and/or the institutional agents chosen for a more detailed analysis, is just unacceptable, both for intellectual and moral reasons.
Michael @ 163,
There is no paradox. Any free market policy is sine qua non voluntary. If it’s implemented at the barrel of a gun then it isn’t implemented by libertarians. We prefer to convince through argument and not through coercion.
chacona,
The whole paper is available to view free here: http://today.uci.edu/pdf/subprime_lending_08.pdf
The paper states that Freddie and Fannie’s activities in subprime did not contribute to the crash. It purports that, due to Freddie scaling back it’s lending volume in 2003 a whole bunch of private investors got in there and caused the problems.
The lead researcher on this paper said “…we were really blown away when Fannie’s and Freddie’s continuing presence in the market was shown to be so important.”
So Fannie and Freddie, according to the lead researcher, have a very important role to play in the stability of the market. Incidentally and of no real import here, the research was funded partially by Freddie Mac.
Fannie and Freddie cosie political retaltionship with the state was a major contribution to the housing bubble in the states. In fact Fannie and Freddie became a powerful tool for the state to inject money into specifically targeted communities or projects.
Fannie and Freddie would seek political favours in return for targeted mortgage activity in congressional districts.
This all started when Frank Raines took over as director of Fannie. He ended up loosing his job (the fall guy) with a handsom pay cheque to boot, after taking one to many risks in the financial derivatives market. Frank thought (and so did all the other investors) that his great relatiosnhip with the state would cover any defaults on riskier investments
On a another level F & F was a useful tool for the state. Through F & F it was easy to expand the money supply to grow the welfare, warfare and corporate sections of the state. Expanding the money supply has its follies which include greater class divisons and greater dependency.
So was F & F a good idea ? In my opinion, institutions of this design will always breed moral hazard of huge proportions. I find it hard to justify the existence of such GSEs.
Ben,
The above link you posted. In table 7, subprime loans accounted for 8.3% of all mortgage Loans in 2003. In 2004 it was 20.7%. In 2005, 22.7%. In 2006, 23.5%. In 2007 it dropped to 16.2% and one quarter later 9.0%. Contrast this percentage with 2001 where it was 5.8%.
So it appears the damage done by sub prime lending occured mostly from 2004 to 2007. Three short years. Again, with ALT A loans (one category of risk less than subprime but greater than all other categories) the damage was mostly done in 2005 to 2007 (figures stop there) in terms of reaching percentages at least triple any percentage prior to 2003 (series stops at 2001).
This is quite telling, indicates that growth in risky loans mostly occurred in the years 2004 t0 2007. Three short years.
Now, what were the GSE’s doing in that time?
If you then look at Figure 6. The GSE’s had close to zero percentage change in their quarterly home mortgage flows over this period, with the private firms averaging a 50% increase in mortgage flows on a quarterly basis.
The red line of this figure (GSE’s percentage change) then soars after mid 2007.
I would bet this is the time (mid 2007 on before the damn GFC hit full force) that Fannie and Freddie were busy refinancing peoples threatened loans from the private firms, given the corresponding fall in private firms quaterly mortgage flows to minus 50%.
Three short years it would appear. Three short years of gangbuster private firms loan hawkings is all it took, on these numbers.
A period in which the new home mortgage debt soared.
Ubiquity, Ben – You guys see only what you want to see and that is the emporers new clothes. You take research, you make a link to it, then you misrepresent it, then you use the misprepresentation of facts to take an ideological position.
You could see a black crow and but still swear it was a white crow.
Look, we did not come down in the last shower. Its a black crow. Ideologues. You dont care for the facts, you care more for distortions.
Have you ever noticed how libertarianism (Neo-liberalism) involves various cults of personality – Hayek, Ayn Rand, Milton Friedman and so on. Where else have we seen this before — Hitler, Stalin, Mao?
It does seem that ideologues latch on to various theories and names with a grip that is astonishing and we get the classic sign of ideology ie the pre-eminence of mere catchphrases – like “free to choose”, “individual choice”, “individualism” “liberalisation”.
I dont really want to raise the damn Nazis again but I cannot help thinking how that regime exploited and misused the philosophical writings of Nietzsche (will to power) and the musical genius of Wagner, in its own quest fo power, and there were expressions they used as well like “Lang lebe unser ruhmvoller Führer!” (the jews are our misfortune),”Ein Volk, ein Reich, ein Führer!” (one people, one country, one leader) amongst others.
The catchphrase to me is almost a warning sign of the existence of a dogma or ideology; that advocates of whatever or whoever is being catchphrased are, regardless of whether their views are harmless or harmful, – somehow lacking in the ability to question in any depth and are unwilling to brook dissenting views. The adoption of ideology has more in common with religion.
Re 172, 173
Quite a few moderates cite Keynes extensively…
And what he really said, allegedly overlooked and so on remain hotly contested.
Or rather faith
Bruce#174 Can you name one catchphrase drawn from Keynes?
Alice,
In the long run we are all dead.
Animal spirits.
Demand creates its own supply.
Yes, Keynes’s aphorisms have a reflective intellectual weight behind them, I admit.
I think Keynes was much more open to evidence and to persuasion than the Chicago School, and, as I said earlier (in effect), the Austrians have immunising strategems that make it impossible to refute them on their own terms.
There are socalled “fundamentalist” Keynesians, but it’s hard to pin on Keynes their occasional excesses (expressed in words) . Whereas for Hitler and Mao, these leaders would say of the deeds of their followers: “What excesses?”
Keynes retained ethics and justice as filters to promote moderation in policies. “It’ll do you good in the long run”, and “no pain, no gain” were approaches he rejected.
Many fall in love with their own ideas and with themselves: if we don’t love them as they think we should, then we have not seen their beauty and they will show us and instruct us.
I think a lot of intellectual exchanges are more than clashes of egos; they involve clashes of personality types.
Alas, cream may rise to the top, but so does scum.
Bruce
I knew you would come up with that one “in the long run we are all dead.”
Its the most obvious isnt it?
Its hardly an ideological catchphrase though. It was simply a witty comment in response to other economists who felt no need for interventions because their view was the “in the long run the economy would correct itself”. Neither is animal spirits an ideological catchphrase. It was used to explain movements of the economy in the same way that Friedman used “inflation is everywhere a monetary phenomenon.”
“Itll do you good in the long run” and “no pain no gain”?? really means nothing at all in economics but may mean something to athletes in training.
The trouble with catchphrases Bruce is that they only serve to diminish, not enhance, the true meaning of the author, and can also be used to distort the true meaning of the author.
SeanG of course I agree thay Cuba is run by a totalitarian regime. Is this good? No. Is communism good? No.
Hope that clears up my opinion of Cuba for you.
Alice can I assume now that you have changed your mind about Fannie and Freddie? Do you know concede that they did indeed take on sub prime lending? You seem to be referring to them as Government Sponsored Entities too so can I also assume that you have conceded that they are entities that are not solely motivated by profit and profit alone?
If you agree with these factors then I have made my point satisfactorily. This market is not a market completely lacking in government intervention and hence is not a free market.
As I said you can make the claim that more regulation is needed and tighter controls need to be implemented but you cannot make the claim that an unfettered market has caused the current problems (should you accept what I have said above).
Freelander @ 172: What is your point? Supporters of Hitler, Stalin and Mao also breath air and drink water as do Libertarians. Is displaying admiration for people who you think deserve admiration somehow mean that the next step is killing millions of people? If this is not what you are asserting then what is it specifically that you are asserting?
“This market is not a market completely lacking in government intervention and hence is not a free market. ”
Ben, I’ll repeat the offer I made at #20, and spell it out here. Under the offer, I’ll agree that a perfectly free market would be perfect in every way, and that any criticism of actual institutions offered here refers only to the imperfect possibilities of the real world. If you accept this offer, you agree not to make any claims about the relative merits of any one imperfect system, real or possible, as against any other.
Thank you John,
This is what I previously posted in response to your offer:
John I don’t agree with what you are saying here. Your contention is based on a false assumption. What most free market advocates claim is that the more you free an economy then the better outcomes seem to follow. This is certainly verifiable over the course of history.
Socrates makes the point that extremes are generally wrong and so compromise presumably is good.
I wonder if s/he applies this thinking to slavery, or violent crime, or hunger, or maths.
The truth is not determined by compromise. When looking at the contrast between America and Nth Korea, we should not assume that a “middle path” is preferable.
In the debate between voluntary interactions of free people versus political control over people & product… I think the former is generally preferable. Perhaps there is an argument for more political control and less freedom, but I don’t think you can build that argument on the basis that “compromise is good”.
As for the original post — Iceland was not a libertarian paradise. At least… not since their anarchist days of 1000 years ago.
#185 John Humphreys
Aristotle’s moderation is not about weak compromise; it is about confidently doing the best that is reasonably do-able. The synthesis is qualitatively different from each of its ingredients. It is not merely a “mixed” economy. It is a new configuration.
“The golden mean is not half-way between.” (According to Google, I just made that up!)
#184 Sure, Ben, so that means your argument at #181 runs against you. The system was more deregulated than in the past, and it failed miserably
#185 Maybe you should have been directing this criticism to the Mont Pelerin guys in 2005, and to the other free-market advocates listed here
http://trollblog.wordpress.com/2008/11/15/how-did-iceland-go-bankrupt/
all of whom claimed the opposite to you
Ben # 181 says
“Alice can I assume now that you have changed your mind about Fannie and Freddie? Do you know concede that they did indeed take on sub prime lending?”
Read your own link Ben..and carefully read again what I said to you (you seem to have cognitive intepretive impairments). Does belief in the free market ideology tell you to make lies up? I dont and I never conceded anthing like that at all.
Do you now concede Ben, which was my point, that the private sector lenders overwhelmingly caused the subprime lending crisis and hence triggered the GFC Ben as evidenced by your link (which confirms Chacona’s link, the facts of which both Chacona and I can acknowledge but not you)? There has been massive irresponsibility and greed and failure to correctly price risk and unethical gambling in these instruments (ie a massive speculative failure caused by inadequate financial regulation) originating from and caused overwhelmingly by the private sector.
I cant be any clearer. It wasnt Fannie or Freddie. It was the blithering idiots in the private firms. There were controls on Fannie and Freddie and not enough on the Merryll’s, AIGs, Gooldman Sachs etc
Ben, Im not going to argue the case further with a person who is acting like an ostriche (and a blind ostriche at that).
Dont misinterpret me or misrepresent what I say to you again. I wont speak to people who twist information to suit their own biased and extreme ideologies and want to harangue everyone else with blatant misinformation.
What I said at 181 was that you cannot blame a free market. This does not work against me for 184 at all. That markets tend to work better when they are freer is an observation, not some sort of rule.
My argument isn’t that for every bit of regulation you remove then you will get better outcomes. The observation is that the freer the better the outcome in general.
If you wish to try to hoist me on that we can very easily hoist adding of regulation up there with me.
“The observation is that the freer the better the outcome in general.”
Except that this “observation” has been drastically falsified by the experience of Iceland following large-scale deregulation, and by the GFC more generally.
Also, and getting back to the topic at hand somewhat: I am having difficulty attributing a single quote from a representative of the Mont Pelerin society claiming that they are in any way responsible for the state of Iceland.
I can understand their current reluctance, post the Krona clash, to claim such an inauspicious achievement but I also can’t see anything claiming this prior to the crash.
The links you’ve provided in the original post talk about Hayek, Friedman and Buchanan visiting in the 80s but nothing from anyone at the MPS claiming that Iceland was a model.
Does anyone have a link to such a thing?
Thanks.
Ben, maybe you didn’t read the text on the page, for example,
“[Hayek’s] visit to Iceland made a huge impact on the intellectual debate.”
and
“James M. Buchanan visited Iceland in 1982 and gave a paper on fiscal and monetary constraints. David Oddsson, then Mayor of Reykjavik, gave a dinner for him (Buchanan first from left, Hannes H. Gissurarson third from left, Thrainn Eggertsson fourth from left). In 1991, Oddsson became Prime Minister and instigated an ambitious (and successful) programme of reform, liberalisation, deregulation, privatisation, stabilisation and tax reduction.”
The MPS site also includes a link to a piece by Gissurarson (MPS VP) extolling Iceland’s reforms.
Honestly, this kind of evasion does you no credit. But, I guess it’s all that’s left for anyone trying to defend the MPS line.
Thanks John,
I wasn’t evading. I was just needing a clarification. I’ve got it now: Hayek, Friedman and co. gave talks in Iceland in the 80s and because of that they are to blame for a country of 300,000 people taking a bath on assets pumped up by US government social programs and implied guarantees for certain risky debts?
Are these Men also to be blamed for the Ponzi schemes in Albania in the 90s or indeed any time someone decides that free will in markets somehow absolves them from any blame when it comes to making decisions?
What a nonsense. There are many people who are concerned about the resurgence of anti-market sentiment but I’m beginning to see this for what it is: a dead cat bounce.
People are a little freaked out by this (largely government concocted) crisis but when they once again realize the man selling big government is a snake oil salesmen they will come back to the ideas that have lead to all of the great increases in the quality of life for humanity.
“the ideas that have lead to all of the great increases in the quality of life for humanity”
probably overstates it a bit Ben – I believe penicillin was developed outside the market system and has been responsible for quite a bit of improvement in quality and length of life. Similarly for a lot of biomedical discoveries. Also a lot of exceptional artistic production has been outside of anything like free markets.
A place for everything and everything in its place.
Nanks 193
Minor detail. I thought that penicillin was saved by good ol’ American free enterprise. People died in Britain when Florey couldn’t make enough to provide a full course of treatment from growing it in eggs. The Yanks mass produced it using corn syrup as feed. (That’s how I remember it from a TV documentary…)
Ben S (and Schumpter) are right that the big advances in human material wellbeing came from markets or from individuals freely choosing to cooperate , but I don’t see why this implies that governments are counter-productive and that markets do everything best and that governments cannot harness and focus the power of markets. Neither does it imply that governments shouldn’t clean up the mess markets leave behind or deter them messing up in the first place.
It’s facile to compare how the imperfect real world works with an idealised alternative assumed to work perfectly. Both left and right do this. (John Q seemed to be driving at this point earlier.) Better to compare the realities of one system with the realities of another, in the light of workable repairs possible in each system.
I also think that it’s useful (and more intellectually interesting) to compare the two idealised versions, but that’s another story.
I think it was part of the war effort Bruce – therefore driven by govt, even though manufacture took place across a wide range of sites. And the discovery of better production processes took place in a US Dept of Agriculture lab. The first civilian application took place in Australia where it was produced by the Commonwealth Serum Laboratories.
Perhaps another example would be the production of medicines to target the major diseases of sub-Saharan Africa. That tends to be non-market as well, as there is little profit to be made from helping people too poor to pay.
Like you though I see a role for markets and govt though I might stress the ‘freely choosing to cooperate’ more. For example, what role did markets play in the invention and dissemination of a fundamental technology such as the lever or blade, or more involved practices such as hunting, fishing and food preservation.
195
Nanks, it looks like we at least are converging. Harnessing and focusing free enterprise for the war effort is where governments add value, beyond merely providing the public good, defence.
Bruce, Florey did a bit more than that. Amongst other things he invented the mass production techniques. Yes the septics built up production greater than the British (as you would expect given the times), but it was based on his methods.
Which is one the reasons why he is often regarded as Australia’s greatest scientist.
Got to watch those American docs, according to some I’ve seen:
The US won WW1,
The US unilaterly won in North Africa.
The US unilaterly won D-Day.
Eisenhower (or Bradley or Patton) won the Battle of the Bulge.
Heck I think they won at Stalingrad, Alamein and the Battle of Britain as well and beat the Borg just last week.
None of which is true.
Ben#181 says “Alice can I assume now that you have changed your mind about Fannie and Freddie? Do you know concede that they did indeed take on sub prime lending? ”
You didnt read my response properly Ben (or you chose not to read it properly) and no you cannot assume that at all.
Ben #181
After all my responses and JQs its clear there are no flexibilities in your stance on the superiority of markets and the need for no govt and no regulation, no matter what evidence piles up….and it has piled up. This pro market sentiment needs a discerning eye…I dont think you have yet acquired that discerning eye Ben.
Do you believe in any government intervention at all Ben?
If so, how and where and why? If not, why not?