Troubling times that try men's souls can bring even enemies together as allies.
I'm struggling to ty...p...e...but but but but....I agree with Megan McArdle.
Ick. I feel like I need to take a shower while listening to Paul Krugman columns on tape and making plans to move to Massachusetts to vote for Elizabeth Warren.
Monday, October 31, 2011
Sunday, October 30, 2011
The Next Woodstein?
Crack work of journalism from the Post here: Washington Post Exclusive: Hillary Clinton awesome, says Hillary Clinton and aides!
Monday, October 24, 2011
Glad I Can't Afford to Go to These Dinners Anyway
Thanks to Wall Street's version of Teen Beat, footage emerged of Blackrock co-founder Stephen Schwarzman's stand-up routine that had some in the financial media abuzz last week. I'll save you the time: hack jokes, horrible delivery. Anyone care to explain why exactly the media loves watching the rich and powerful read other people's jokes so much (see also WHCA Dinner)?
Thursday, October 20, 2011
Limits of Law and Social Norms
Two in one day!
Even as a gosh-durn liberul, I recognize there are limits to what the law (or government) can accomplish. Because of the difficulties of writing and enforcing laws, there will always be some gap between what the legal system accomplishes and the socially optimal policy. One area where this is relatively clear, for instance, is executive compensation.
Scholars have studied the issue for decades and have yet to devise an efficient way to properly regulate the behavior of corporate executives within their firms. Collective-action problems and agency costs are well known. Solutions are more elusive.
Given the failure of internal corporate governance mechanisms, the government could take a more draconian approach, but I'm not sure how helpful this would be. You can set an executive compensation cap, but then people will classify themselves as non-executives. You can cap non-executive pay, but then people will call themselves consultants. And so on. That's not to say we shouldn't try to stop them from doing it by restructuring our legal system. But we should also recognize that there will always be an imperfect match between what is legal and what is good/moral/fair (whatever term you want to use).
Social norms, though, can fill a gap the law can't. They narrow the difference between people's actions and what we think is socially beneficial. Occupy Wall Street may never get any legislation passed, but they will make people think about these issues. Most people want to be liked--maybe shame will overcome their otherwise innate desire for greed. Perhaps executives will one day realize it's somewhat inappropriate to extract more and more for their own benefit while completely abdicating your responsibility to shareholders, employees, and society. Or, more generally, that just because no law stops you from doing something doesn't mean you should do it.
And maybe this can apply more broadly. Most "white-collar" criminals work within the system. They get lawyers to help them push their actions to the brink of the law. They get lobbyists to help them move the brink even further. It's difficult to make it illegal for them to change the law for their benefit, but perhaps it's possible to make it socially illegitimate (and perhaps economically harmful to them) to do so.
Even as a gosh-durn liberul, I recognize there are limits to what the law (or government) can accomplish. Because of the difficulties of writing and enforcing laws, there will always be some gap between what the legal system accomplishes and the socially optimal policy. One area where this is relatively clear, for instance, is executive compensation.
Scholars have studied the issue for decades and have yet to devise an efficient way to properly regulate the behavior of corporate executives within their firms. Collective-action problems and agency costs are well known. Solutions are more elusive.
Given the failure of internal corporate governance mechanisms, the government could take a more draconian approach, but I'm not sure how helpful this would be. You can set an executive compensation cap, but then people will classify themselves as non-executives. You can cap non-executive pay, but then people will call themselves consultants. And so on. That's not to say we shouldn't try to stop them from doing it by restructuring our legal system. But we should also recognize that there will always be an imperfect match between what is legal and what is good/moral/fair (whatever term you want to use).
Social norms, though, can fill a gap the law can't. They narrow the difference between people's actions and what we think is socially beneficial. Occupy Wall Street may never get any legislation passed, but they will make people think about these issues. Most people want to be liked--maybe shame will overcome their otherwise innate desire for greed. Perhaps executives will one day realize it's somewhat inappropriate to extract more and more for their own benefit while completely abdicating your responsibility to shareholders, employees, and society. Or, more generally, that just because no law stops you from doing something doesn't mean you should do it.
And maybe this can apply more broadly. Most "white-collar" criminals work within the system. They get lawyers to help them push their actions to the brink of the law. They get lobbyists to help them move the brink even further. It's difficult to make it illegal for them to change the law for their benefit, but perhaps it's possible to make it socially illegitimate (and perhaps economically harmful to them) to do so.
Understanding Externalities
Ed. Note: Been a long time. Keep telling myself I want to blog more. We'll see if it actually happens (probably not). Had a short post to dash out, though.
As I read it, populists movements on both the right and left oppose Wall Street bailouts. They recognize that these banks benefit from an implicit government subsidy while taxpayers bear the burden when the banks fail. They stand in philosophical opposition to these sorts of policies.
Yet populist movements on the right reject arguments for greater environmental regulations in other industries. They, apparently, don't recognize-or care-that these companies benefit from the ability to externalize the environmental costs of production. They find the mere act of government intervention repugnant.
How exactly does one square these views? Tighter regulations of bailouts prevent externalities that would hurt taxpayers' pocketbooks. Tighter environmental regulations prevent externalities that would hurt citizens' health. Both companies profit because they don't internalize the cost to society of their actions. Why does the right find one so more offensive than the other?
One could posit a mere opposition to government action*, or government in general (That is, government is actively bailing out banks and actively implementing environmental regulations). But the underlying opposition to bank bailouts does not appear to be any concern about the government action, but rather the impact it has on citizens. If that's the logic, how does it not also apply to environmental regulations?
*Somewhat of a simplistic view anyway, because you could also view it as a government action to decide not to act.
As I read it, populists movements on both the right and left oppose Wall Street bailouts. They recognize that these banks benefit from an implicit government subsidy while taxpayers bear the burden when the banks fail. They stand in philosophical opposition to these sorts of policies.
Yet populist movements on the right reject arguments for greater environmental regulations in other industries. They, apparently, don't recognize-or care-that these companies benefit from the ability to externalize the environmental costs of production. They find the mere act of government intervention repugnant.
How exactly does one square these views? Tighter regulations of bailouts prevent externalities that would hurt taxpayers' pocketbooks. Tighter environmental regulations prevent externalities that would hurt citizens' health. Both companies profit because they don't internalize the cost to society of their actions. Why does the right find one so more offensive than the other?
One could posit a mere opposition to government action*, or government in general (That is, government is actively bailing out banks and actively implementing environmental regulations). But the underlying opposition to bank bailouts does not appear to be any concern about the government action, but rather the impact it has on citizens. If that's the logic, how does it not also apply to environmental regulations?
*Somewhat of a simplistic view anyway, because you could also view it as a government action to decide not to act.
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