Two weeks into Occupy Wall Street protests, movement is at a crossroads

@TheLeapist,

TheLeapist wrote:

But someone who has been given that much power and responsibility is expected to overcome these "natural traits."

I ask you to look at the analogy of a husband and a wife. It is natural for a man to pursue a woman he finds attractive, but when you enter the bond of marriage you agree to overcome this natural desire towards anyone but your spouse. So if the man ends up betraying his wife he should not and can not be forgiven merely on the grounds that he was just acting under human nature.

Of course it's natural to want to take big risks for the chance of huge gain, but these are urges that someone with so much influence over the lives of millions of people needs to suppress. Your inability to grasp this concept that cyclo keeps trying to show you is very confusing.

George is a very smart guy, and I believe that he does in fact understand the concept. However, based on our past conversations, I think that he would say that laws and regulations designed to keep humans from behaving according to their 'natural desires' cause more harm than they prevent in the long run.

Now, you and I both know that a great argument can be made against that case; but it's easy to understand how an anti-regulation, anti-high taxes Republican is forced to make such an argument, as it's the only way they can justify their preferred policy positions in the face of the massive malfeasance we've seen from the financial sector lately.

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SIDE NOTE: How to you quote someone's post with that box around it?

By using the [ quote ] [ /quote ] tags, with no spaces.

Cycloptichorn

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@Thomas,

I think we generally agree. However, I believe the problem and the solution involve both updated regulation of financial markets and better restraints on public debt, (both direct as with bonds & borrowing and implied as with guaranteed loand anf future obligations). I also believe the Canadian example illustrates this very well. It is merely interesting that some here are very intyerested in the excesses of financial markets, while denying the dangers posed by profligate government spending and guarantees.

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@Cycloptichorn,

Cycloptichorn wrote:

On the contrary; on page 13, you posted a long post explaining how a series of bad decisions by otherwise well-meaning executives for these companies are what led to the crisis, all while attacking those of us who posited that actual decisions by informed people are what led to this crisis. Not mistakes; risks they consciously took, not caring about the consequences of failure if things went south.

Risk taking alone is not wrong. Whether or not they know the consequences is very much material. You claim they knew the consequences and I do not agree. That is as far as we can get on that, I think.

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In that same post, you wrote 'it's not wrong to bet and lose.' I think this displays a terrible way to look at the situation.

I think that has been misunderstood. My point is that it's not inherently wrong to take a risk and to fail. If your failure harms others it would be unethical to do so knowingly because it would be negligent.

But their industry is predicated on the notion of taking risks and it's not inherently wrong to do so. So the question becomes a more nuanced on of how much risk was appropriate but you make it sound like the very act of them taking on risk is immoral at times and I don't agree with that.

There's nothing inherently wrong with betting and losing. It's an inexorable part of life.

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These executives didn't just bet big, they bet tremendous - all of our biggest banks were over-leveraged in mortgages and derivatives to the point where they had exceeded the value of our entire GDP as a nation, let alone the cash they had on hand!

See this is a good example, even though I agree with you that they bet big there's no such thing as a bank that does not leverage more than the cash they have on hand. It is not possible to be a traditional bank otherwise. You sound like you think that is what they should do, and to me that sounds like someone who hasn't thought through just what a bank is.

A bank loans money, by it's very nature it must leverage cash it does not have. By it's very nature some level of default will cause its insolvency. That is why it's the role of the government to regulate and insure against systemic risk. There's no such thing as a bank that does not take risks, banking is betting.

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They gambled with the lives and livelihoods of millions who had trusted them to manage their money properly.

There you go again, not realizing that it's always going to be a gamble. The problem was that they gambled badly, not that they gambled.

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Then, the gov't bailed them out, and the executives in question didn't lose anything at all.

This is a false absolutism, but I will agree with you in that they didn't lose nearly enough. But that's hardly their fault, it's the government's fault. The guys getting a free pass in all of this and that you will vote for anyway regardless of whether they bother to fix it.

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Your fundamental understanding of the dynamics of what went on are flawed; the idea that executives for these companies couldn't look at their own balance sheets and realize that they were taking tremendous, tremendous risks is a joke.

I never claimed they didn't know they were taking risks, but that is not the same as saying they knew they were taking the risks that would bust them and did it anyway.

If they really did think that, they'd just have scaled back the risks a bit. And that is obvious to anyone who understand the behavior economics of what they are dealing with. They thought the system was more stable than it was. They thought their risks were smaller than they were.

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Regarding the protests and what outcomes they may have, we shall have to wait and see. But I think you are also heavily misguided when you write this:

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It's idiotic. Attack the politicians, they are the ones who can change things and don't. They are the ones who let the scapegoating of bankers hide that the problem is systemic. So instead of blaming the system small minds get to fixate on human villains.

What kind of small mind does it take, to not see that the system is shaped and controlled by the villains in question?

The ones that fixate on their human villains instead of taking a more reasonable approach to fixing the system. These will go to Wall Street instead of Washington, these will want to "attack" and "prosecute" the "villains" instead of leverage political capital to put pressure on their representatives to fix a system.

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Without making the rich fear for the future, no change will happen, period. You completely misunderstand where the real locus of power in this country lies.

I think things like "make the rich fear for their future" is a perfect example of a mindless slogan that doesn't fix anything. And you will vote for the politicians who refuse to do what you think should be done about these "villains" anyway.

Between trying to spook rich people and telling politicians that you will withhold support for them I think there's a better course of action. But the left in America will vote for them either way so why should they have to stick their necks out and actually have the audacity to change anything?

This message should have been directed at Obama, not "the rich". That is largely my point about this movement. You and I both agree on a bunch of things that should be done. I think the left should actually vote Republican to show the Democrats they aren't bluffing and that they can't just play lip service to these ideals. You'd rather try spooking the rich into this happening.

I think that the fundamental difference is that I see a systemic "evil" and you see a human evil (you don't get scare quotes, you actually believe it), you are trying to pursue yours and I am trying to pursue mine. To fix the systemic problem I think that you must pressure the ones with the power to do so to actually have the temerity to do so. To fix your problem you need a lance and a side-kick named Sancho.

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@Robert Gentel,

Robert Gentel wrote:

To me that is disregarding intent

This comes up a few times a week in my job. I have the joy Rolling Eyes

of explaining to colleagues that what they intended doesn't matter when it comes to legal interpretation - what matters is what they did or didn't do. My example is specific to wording, but the outcome is found to be more important than the intent in many real-life situations.

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@Robert Gentel,

Robert Gentel wrote:

It wasn't your Utilitarianism that made me say that, but that you hold it to be unethical to cause harm even if it is not something that can be avoided (such as in your car scenario).

Perhaps I described my example badly, then. If I run you over by accident and the court convicts me of negligent killing, the accident was something I could have avoided from the perspective of an objective third party. From my subjective perspective, you showed up in front of my car out of nowhere. But it's the objective observer's perspective that counts.

The analogy to banks is that they, too, may have subjectively been caught by surprise. Nevertheless, from the perspective of an independent observer, they could have prevented the problem by doing business more defensively, indeed have prevented problems in the past that way, and therefore are morally accountable for having proceeded recklessly of late.

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@georgeob1,

georgeob1 wrote:

I don't agree with Thomas' implied proposition that Canada's financial system is permanently rigged in favor of prudence,

how about "currently rigged"?

There were economists who identified the coming difficulties, others argued against them. We were lucky that the Canadian government decided to go with David Dodge.

http://www.cbc.ca/news/background/dodge/

David Dodge in January 2008

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The record U.S. current-account deficit? The global economy risks an "outright recession" if something isn't done, he says.

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@ehBeth,

ehBeth wrote:

This comes up a few times a week in my job. I have the joy of explaining to colleagues that what they intended doesn't matter when it comes to legal interpretation - what matters is what they did or didn't do. My example is specific to wording, but the outcome is found to be more important than the intent in many real-life situations.

Make sense, you got to deal with the facts available to you in a legal setting.

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@TheLeapist,

TheLeapist wrote:

But someone who has been given that much power and responsibility is expected to overcome these "natural traits."

Expected by whom? Not me. Human history is filled with the follies of otherwise wise and effective leaders. Why did Napoleon choose to invade Russia in late June with an army largely comprised of Polish soldiers? Why did Kruschev imagine that he could permanently restore Russian agricultural productivity by extensive planting in the central arid plains of Eurasia, when milennia of agricultural experience indicated the thin topsoil would quickly be exhausted of nutrients after a year or so, and the ample statistics clearly indicated it was their foolish collective system that destroyed productivity in the rich areas of Ukraine? Why did George Bush the elder chose to drive Saddam out of Kuwait whan it was obvious that Kuwait was indeed historically a part of what the British called Iraq and that it was in our interest to continue Saddam in his fight with the Iranians. Why did the second Bush president renew the war?

TheLeapist wrote:

I ask you to look at the analogy of a husband and a wife. It is natural for a man to pursue a woman he finds attractive, but when you enter the bond of marriage you agree to overcome this natural desire towards anyone but your spouse. So if the man ends up betraying his wife he should not and can not be forgiven merely on the grounds that he was just acting under human nature.

I believe you are expressing an unrealistic standard. I also believe that forgiveness is an essential component of many successful marriages.

TheLeapist wrote:

Of course it's natural to want to take big risks for the chance of huge gain, but these are urges that someone with so much influence over the lives of millions of people needs to suppress. Your inability to grasp this concept that cyclo keeps trying to show you is very confusing.

I am equally amazed at your suggestion that those with power and position exhibit any higher levels of prudence and wisdom than to faceless individuals in the management of their own lives. The observable fact of history is that most of the time they don't. The essential idea of democracy is to promptly and peacefully remove those who fall victim to their folly from positions of power.

TheLeapist wrote:

SIDE NOTE: How to you quote someone's post with that box around it?

1. Use the Quote feature on the tool bar above reply.

2. Write "[quote]" before and "[/quote] " after any text you wish to enclose in a box - but don't use italics..

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@Robert Gentel,

Robert Gentel wrote:

To fix the systemic problem I think that you must pressure the ones with the power to do so to actually have the temerity to do so.

Agreed - though I call it gumption.

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@ehBeth,

No argument there. We did ignore indicators of coming dangers in many areas; current accounts deficits; excessive public debt; runaway government real estate loan guarantees; bad side effects from well-intended subsidies to unqualified (financially) borrowers and the consequence of a fast-moving market in mortgage based securities; and hidden liabilities in underfunded pension and social welfare guarantees. Indeed we have only partly addressed these problems. Europe faces a roughly similar and perhaps more urgent situation, though the details are somewhat different.

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@Thomas,

That's different from how I read it, for sure. You did not seem to indicate preventability. If that is the case we don't differ that much on the ethics but again on the predictability of this crisis unfolding the way it did.

The analogy there in the car example is signage and regulation yet again. If it's a kid running out into the road in a residential neighborhood where you are going 50 it's negligent, if it's a kid who jumps in front of your car on the free way it isn't.

And I am of the opinion that this was a case where society on the whole started thinking that driving faster was a good idea, and there's not enough weight being given to the notion that the recklessness of this all is something whose blinding obviousness is benefitting a lot from hindsight. The society took down the signage and as a whole raised the speed limits (they did not take more risks in a vacuum, the overall society took more risks that encouraged them to bet on top of).

I asked you once and I'll ask you again. If you think that they should have known, then why is it that your favorite economical minds had no idea as well? I think that this was a generalized failure to predict it, and find it funny that suddenly this was all supposedly obvious (but not obvious enough for anyone to be making noise about it before the crisis, of course, just obvious in retrospect that these particular "villains" should have). The ones who were right about it were the voices crying in the wilderness, it was just not the consensus in society as a whole. So the notion that this was too risky is only "obvious" now that it was shown to be in effect. But evaluating risk without the result as input is simply not as clear-cut as you are making it out to be.

A few years ago the world believed that macro-economics was fundamentally not as risky as the world believes today. Risk is understood differently now than it was a few years ago. The old models of economic thought were assumed to be more stable than they were. The degree to which different parts of the puzzle were over-leveraged was not apparent till too late. All of that is very obvious now that it's unwinding, but in the build-up to it it can be very easy to not see the forest for the trees.

And despite the odd person here or there who says they knew all along (and even the occasional one who has a pretty good case for it) I think it's fair to say that everyone failed to see this coming. No part of the puzzle acted with the fiscal defensiveness that, in retrospect, it is now obvious that they should have.

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to put OWS into context

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Social and political instability has gone global. This year alone, masses of people have poured into the real and virtual streets: the Arab Spring; riots in London; Israel’s middle-class protests against high housing prices and an inflationary squeeze on living standards; protesting Chilean students; the destruction in Germany of the expensive cars of “fat cats”; India’s movement against corruption; mounting unhappiness with corruption and inequality in China; and now the Occupy Wall Street movement in New York and across the United States.

While these protests have no unified theme, they express in different ways the serious concerns of the world’s working and middle classes about their prospects in the face of the growing concentration of power among economic, financial, and political elites. There is high unemployment and underemployment in advanced and emerging economies. There is resentment against corruption, including legalized forms like lobbying. Young people have inadequate skills and education to compete in a globalized world. And income and wealth inequality is sharply rising in advanced and fast-growing emerging-market economies.

http://www.slate.com/articles/business/moneybox/2011/10/what_occupy_wall_street_the_arab_spring_the_chilean_students_and.html

The elites have failed us....and so now the march towards revolution picks up steam.

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@georgeob1,

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I am equally amazed at your suggestion that those with power and position exhibit any higher levels of prudence and wisdom than to faceless individuals in the management of their own lives. The observable fact of history is that most of the time they don't. The essential idea of democracy is to promptly and peacefully remove those who fall victim to their folly from positions of power.

The flaw in your argument here is that most people don't end up cheating on their spouse. And those that do are rightfully removed from the marriage and the affected's life.

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@Robert Gentel,

I think the core issue here is why theoretically predictable economic crises are so often unpredicted by those involved. In almost every case of the many (and tiresomely similar) economic crises that have beset the world of modern economies over the past few centuries, there were those who forecast some of the dangers that later unfolded. Why were their voices not heeded?

That's a tough one to answer. How many false alarms are routinely ignored with no adverse impact? The fact is that many dynamic systems (viscous fluid flow; non-linear mechanical linkages and non-linear dynamic systems generally) are deterministic but utterly unpredictable, and the theoretical reasons for this are now fairly well understood. The term "chaos" is used by mathematicians to describe them.

In all such systems it is easy after the fact to deduce the causal sequence that led to specific outcomes, but impossible to reliably predict them. This is very counterintuitive, but true nonetheless.

Economics is not even deterministic in that there is no general agreement on just what are the the fundamental variables and what are the governing dynamic relations among them. We certainly have a great deal of heurestic understanding about cause and effect in many situations (just as we do for example with the wheather) , but that does not give us the ability to make reliable predictions. Even among theoretical and practical economists we find continuous disagreement and dispute about various models and the dynamics involved, and a much greater incidence of "I told you so" than real, concrete reliable predictions of the future.

Perhaps the only thing worse than the heurestic guesses about the future that govern economic decisions would be the illusion that there exists any fixed deterministic system that could both support creative economic activity and avoid occasional excesses.

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@Robert Gentel,

Robert Gentel wrote:

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They gambled with the lives and livelihoods of millions who had trusted them to manage their money properly.

There you go again, not realizing that it's always going to be a gamble. The problem was that they gambled badly, not that they gambled.

I also want to point out that most people here are ignoring that prior to knowing what was going to happen that taking too defensive a position was also to gamble (in the other direction, these are bets on the future of a marketplace, if you will). They face an existential risk at both ends of that spectrum. We now know that their bet on the future of the market was wrong, but let's not forget why we are so sure (the whole we can see the result and now have hind sight thing). Bankers would gamble better if they had the crystal ball that we now have too.

Life is a gamble, it's not unethical to gamble. Too few people understand this. They look at a free-soloing climber and say that he's foolish. Why? Because for him, it's not a matter of when he will die but if. Well that's the same as it is for us all but they pretend that only he is taking his life into his hands when it is in reality a matter of degree and not whether or not to do so.

People here talk as if a life without gambling is one they lead or is one that is even possible, it isn't. So the problem is never whether or not someone took a risk (inaction is a risk, it is all a risk) but that they took an inordinate one. Not taking risks is itself an action that is not without risk. We should not vilify the mere act of risk-taking.

And when things fail we shouldn't be trying to throw the baby out with the bathwater and burning down the house. Lets be smart about this for crying out loud, lets identify the key causes and champion for their change, instead of theater. I wish to this movement was a megaphone at Obama. To the effect that if he does not start pushing for regulation meaningfully he's out (and if he pushes for it and others obstruct the so on and so forth). Because you are just not going to scare the rich into getting Obama to do it. That's silly. You have elected representatives whose job it is to regulate and insure (with public money) the system. Why is the pressure on those to whom this system works the best instead of on those to whom the power to change the system is granted? Why aren't people occupying the front lawns of their elected representatives. So we've determined that the rules of the sport are benefiting a player in a particular position more than we want. What makes more sense? To appeal to the commissioner to change the rule or try to scare those players into taking it easier in the game?

Our government made the rules, and if they didn't play by them then by all means let's toss them out of the game. But if they did, and we don't like the rules and the result let's not be ridonkulous about how to fix it. You change the rules, not berate the players (or berate them if you will, but let's not forget the whole changing the rules part).

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@TheLeapist,

TheLeapist wrote:

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I am equally amazed at your suggestion that those with power and position exhibit any higher levels of prudence and wisdom than to faceless individuals in the management of their own lives. The observable fact of history is that most of the time they don't. The essential idea of democracy is to promptly and peacefully remove those who fall victim to their folly from positions of power.
The flaw in your argument here is that most people don't end up cheating on their spouse. And those that do are rightfully removed from the marriage and the affected's life.

Ant the flaw in your argument is that your observation above is based on supposition, not fact, and very likely isn't true.

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@Robert Gentel,

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People here talk as if a life without gambling is one they lead or is one that is even possible, it isn't. So the problem is never whether or not someone took a risk (inaction is a risk, it is all a risk) but that they took an inordinate one

Right, they gambled excessively and poorly with money that did not fully belong to them....a recipe for disaster if there ever was one. The financial system became a casino where the hoodlums for a very long time got away with a huge skim off the economy that they did not earn. The financial system was supposed to be a tool for making our lives (everyone's lives) better and for insuring that we turned a possibility for a better life over to our kids.

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@Robert Gentel,

I agree entirely that it all comes down to our own government not doing their jobs as referees. You can't forget, though, that these tycoons have means of controlling the elected officials. So in theory, scaring them into giving up that game could be just as effective, if not more effective than trying to persuade government officials themselves. Of course letting the government directly know that we as people won't stand for them being puppets to the "players" could work as well.

Basically what I'm trying to say is I can see the motivation behind both sides of the argument of who is really at fault and who's door we should be breaking down. Haha.

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@georgeob1,

georgeob1 wrote:

How many false alarms are routinely ignored with no adverse impact? The fact is that many dynamic systems (viscous fluid flow; non-linear mechanical linkages and non-linear dynamic systems generally) are deterministic but utterly unpredictable, and the theoretical reasons for this are now fairly well understood. The term "chaos" is used by mathematicians to describe them.

In all such systems it is easy after the fact to deduce the causal sequence that led to specific outcomes, but impossible to reliably predict them. This is very counterintuitive, but true nonetheless.

Exactly. And counterintuitive too is that we even know why, in a general sense, these models fail in advance.

Nearly every time such a model fails, it fails due to an assumption. And an assumption is almost always a guess replacing the lack of input. The problem is nearly always about lacking input.

Of course, anyone involved knows this. And also knows it's impossible to have all the input, and that there will always be this problem.

From what I've read economists are trying to identify the input their models would need to improve and I hope that they make some breakthroughs that more accurately predict abnormal behavior in their models.

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Economics is not even deterministic in that there is no general agreement on just what are the the fundamental variables and what are the governing dynamic relations among them. We certainy have a great deal of heurestic understanding about cause and effect in many situations (just as we do for example with the wheather) , but that does not give us the ability top make reliable predictions. Even among theoretical and practical economists we find continuous disagreement and dispute about various models and the dynamics involved, and a much greater incidence of "I told you so" than real, concrete reliable predictions of the future.

Yeah, and it always makes me wonder why they aren't betting more than rhetoric on all that strength of conviction. Reminds me of all the sports betting "picks" guys who try to convince me how good they are (or even try to sell this information). I know next to nothing about sports betting (I've done it something like 3 times in my life) but can tell one thing:

If they really could predict it accurately, they wouldn't need to sell their picks (or their opinions) and they could pretty much just print limitless money. I'm wary of people who are sure of the outcome of a bet, a bet that they can make money on, and do not have anything riding on it.

Many times that is what a financial pundit is. A person whose bets are entirely rhetorical.

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@TheLeapist,

Just to help clarify my point I am going to further the sport analogy.

Which is better to stop; the referee that has allowed himself to be corrupted by a player's bribes or the player that is bribing the referee?

It's a tough call.

1 Reply

Two weeks into Occupy Wall Street protests, movement is at a crossroads

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