"Banks are special"

Everyone interested in finance is now talking about the recent announcement by JP Morgan that it somehow managed to lose $2 billion in the past six weeks. In a recent opinion article, Paul Krugman asserts that this is precisely why we need more government regulation:

Just to be clear, businessmen are human — although the lords of finance have a tendency to forget that — and they make money-losing mistakes all the time. That in itself is no reason for the government to get involved. But banks are special, because the risks they take are borne, in large part, by taxpayers and the economy as a whole. And what JPMorgan has just demonstrated is that even supposedly smart bankers must be sharply limited in the kinds of risk they’re allowed to take on. [emphasis added]

So do you now understand? Banks are special.

The beef I have with Krugman is not that I think businessmen are superior to government; far from it. No, the beef I have is that I believe, as a hopeful believer in the classical liberal tradition, that our ultimate political goal should be to create a society which is less dependent on people with power, not more dependent. Krugman either thinks there is nothing wrong with a system in which we are forced to pay for the mistakes of cocky financiers, or else he simply thinks such a system is inevitable. I refuse to accept either premise.

As libertarians constantly remind us, if big businesses will at some point inevitably screw us all over, then isn't the same true of big government?

How do we liberate ourselves from a power structure which forces the many to pay for the mistakes of a few? It seems to me we need to reexamine the purpose of law. Almost everyone in contemporary political discourse assumes that one of the major purposes of law is to prevent bad things from happening. So confident are we in our ability to control the world around us, using the incredible technological and political tools developed in the modern era, that we feel certain that someone ought to be able to steer this monstrous ship away from those icebergs. (You'd think we'd actually learn something from the Titanic.)

We need a more chastened approach to law. The purpose of the law is to administer justice. This concept is still not lost on most people. We understand that if we have been wronged, the person who has done the wrong ought to compensate us. It is not possible to change a person's motives, but we can punish bad behavior.

Sometimes, however, the question is not so much whether a person has committed any wrong, but rather who should be responsible for what happened. A man who risks his own money in a business venture has not done any wrong to anyone, and probably has good intentions. However, if the venture goes bad, then justice does not provide him any claim on anyone else's money to reimburse him. He may ask others to be merciful, of course. But is stealing from someone else in order to help this man really an act of mercy? That, in effect, is what the government does whenever it bails out failed businesses. And how much more insulting is this practice, since the businessmen being shown "mercy" hardly deserve our pity!

For this reason, the best way to constrain government is to demand from it only justice, not mercy. The purpose of government is not to "steer the boat," as it were. Its sole purpose is to arbitrate between individuals who will sometimes fall into irreconcilable conflict. Its purpose is to decide the boundaries of responsibility so that individuals aren't forced to pay for the consequences of actions to which they had no prior connection, and then to enforce those boundaries. This is clearly not a trivial task, but it is a fundamentally different task than the one demanded by a majority of the American public today. It has nothing to do with control, but only with justice.

Doubtless someone will say that mercy triumphs over justice. A fine Christian sentiment that is, but mercy can only be shown by someone with power. The vision proposed by America's founders is one in which the government is not an institution of power, but of service to the people. God can have mercy on us because he has some rightful claim on us. If we admit that the government can have mercy on us, we give government a place which only properly belongs to God! Nothing belongs to the government other than what we have given it, or what has been taken from us. What an act of mercy for government to steal from the many in order to give to the few!

Like Krugman, I believe that if government is to insure the banks against all possible failures, it ought to demand that these banks act within the bounds of reason, so that they don't harm the public. But the question is whether the government has the authority to insure the banks in this way. The question is whether anyone has the right to claim a position in society that is "too big to fail," or too important not to be supported by the public. Such a position is what used to be called privilege, before the term came to be abused in modern discourse. The American dream, in my view, was to have a society in which the notion of privilege in this sense was all but totally destroyed.

It is not possible to prevent mistakes. It is not possible to prevent evil. Regulations will only slow down the conscientious. Those who have respect for what is right and prudent will either work around such regulations or ignore them. When people speak of the need to "regulate," they have already assumed that there is such a thing as privilege. And that is a tragedy.

Rather than regulations, we simply need law. "A government of laws, and not of men," as Madison said. In the short run, laws do not prevent evil men from doing evil things, but they do give the common man the power to stand up and be compensated for the wrong done to him. One hopes that in the long run, this has the tendency to prevent evil, since at least people will seek to avoid bad consequences. But what is there to prevent a man from doing as he pleases, when he knows that he has a place of privilege in society, and someone will always pick up after his mistakes?

I don't know how to successfully reform the power structure we have mistakenly built in this great civilization of ours. All I know is what kind of direction we ought to move in. It seems to me that so-called "liberals" like Krugman have abandoned the classical liberal vision of a world without privilege. My only guess is that they have all but abandoned thinking about the long run in favor of using their technocratic abilities to help as many people as they can in the short run. We shall see what is the fruit of their bias.

Knowledge and Power

For those who want to save their life will lose it, and those who lose their life for my sake will find it. (Matthew 16:25)

On a day like today, who can help but think of the horrible things done in the name of religious zeal?

Such thoughts cause us to start drawing lines between the forces of good and the forces of evil. For some, it is between secularism and religion. For others, it is between the West and the Islamic world. I would like to believe that most of us refuse to buy into such divisions. The terrorists who destroyed the World Trade Center ten years ago were evil people doing evil things. But evil unfortunately cuts across all lines. In order to fight it, you must look at yourself as well as your enemies.

Part of the great challenge of our time is to determine what we mean by truth. It might seem strange that such an abstract epistemological question could have anything to do with war and peace. Yet it is precisely when people compete for power that we need to call upon truth--whatever that may be--to know how to take a stand.

This is the central question for religious people today. What do we mean by claiming that our beliefs are true? What are we willing to do for those beliefs?

Are we willing to die for them?

Are we willing to kill for them?

The question is not for religious people only (or do we need to recount the horrible atrocities done in the name of secular ideologies?) for it is a basic human question. It is not simply a question of whether we're going to be nice to other people or not. To think that "decent people" can't do horrible things is exceedingly naive. If we are unclear on questions of principle, we are susceptible to the same horrible evil impulses that drive planes into buildings.

The basic choice all humans have to make is whether knowledge is a matter of control, or whether it is a matter of humility. That is the starting point for everything else.

One may desire knowledge because he thinks that having knowledge can make the world right. Understanding means knowing how things work, and knowing how things work means you can steer them in the right direction. Knowledge is power, and power can be used for good or for evil. Our enemies want to use knowledge for evil, but we wish it for good. This is the inevitable dualism arising from the notion that truth is power.

On the other hand, one may instead desire knowledge for love's sake, with the profound awareness that deeper knowledge is cause for deeper humility. The more we know, the more we realize how little we know. Understanding may help us solve certain problems, but it won't help us "change the world," at least not in the way we expect. Knowledge is not power, but some people might use knowledge to gain power--and this might be disastrous, no matter who it is seeking power.

The Christian seeks to make all of his conscious decisions based on deeply held convictions derived from faith. These convictions are not a private affair only, but they must influence the Christian's public life, as well. His beliefs must therefore be on display, and he can and should share them with others. Does it not follow, then, that a Christian should ultimately be a zealot, seeking to shape the whole world according to the principles which he believes are given by God himself?

Not at all, for his principles do not fall into the first category, but rather the second category of knowledge. Christian beliefs are not ultimately proved by their ability to give us control over the world. Quite the opposite, really: they tell us that with greater knowledge comes greater humility. As offensive as it may be to modern man, Christianity insists that true knowledge must be humbly accepted as a gift, rather than proved by our reason.

It is for this very reason that Christians ought not to have anything to do with "world-changing." We are not called to sacrifice the world, but rather ourselves (Rom. 12:1). Our beliefs can and do provide a very powerful critique of the modern world, but we must never mistake this for a mandate to rebuild the world according to our principles. The Tower of Babel, after all, was meant to reach heaven.

No wonder modern man is repulsed by religion! He has no other conception of knowledge than that which is synonymous with control. If man is to be controlled, he would at least like to have proof that the principles controlling him have withstood the test of rationality. If it is control we desire, then the only hope for civilization is the scientific method (although even that will fail us, since the desire itself is vain). Nothing could be more heinous than faith posing as a substitute, insisting on some unquestionable authority to guide human affairs.

I say these things not because I have any answer to why evil people fly planes into buildings. I say these things because in the future we may find that our own flawed principles have wrecked the world as we now know it, despite our best intentions. I have heard vague rumblings of Christians everywhere trying to determine how best to transform the culture. There is no question that our beliefs offer a thorough diagnosis of the modern world. What, then, is the cure?

Whatever may be the cure, we will not find it, and may rather create something horribly opposed to it, if we start with the wrong understanding of truth. The fundamental truth of Christianity is that God died for us, and this is not what we wanted him to do for us. I fear we would have preferred that he "changed the world."

God, forgive our ignorance.

Individualism and force

I think I can summarize Hayek's individualism as follows.

There is a false kind of individualism which tells us that we can be free of all force. Taken literally, of course, this is just silly. We will never be free of the force of gravity, or any of the natural forces acting on our bodies at all times. Yet we are tempted to think that what is true of natural forces is not true of cultural forces. We think that individuals can be completely independent of everything except his own will.

This is simply mistaken. In any society, the individual will be subject to pressures from all around him: obviously from people he knows, less obviously yet no less truly from people he doesn't know, and still more indirectly from the institutions which shape his culture. There is no escape from these forces, any more than we can escape the laws of nature.

The only question from a political point of view is, shall the individual be subject to personal or impersonal forces? Shall the individual be coerced into abiding by the will of one or several other individuals, or shall he be free to choose his own path through the set of cultural forces which press against him? By distributing power equally among all individuals, we do not free him from all societal forces, but only from the will of arbitrary rulers.

In traditional terms, we might say man is either subject to the will of other men or subject to the will of God alone. Hayek doesn't see it that way, but it is still helpful to convey the crucial point: the forces to which man must be subject are either personal and arbitrary or impersonal and abstract. These are the only choices.

Americans are largely plagued by false individualism. Our politicians on the Left and on the Right promise us that they will free us from the forces which necessitate difficult choices on our part. The more we buy into this, the more we simply trade impersonal abstract forces for personal ones. Sometimes it's natural to favor personal over impersonal force; impersonal forces are more difficult to understand. But when force is allowed to come from select individuals, then we are all subject to their personal agenda. If these select individuals were divine, this wouldn't be a problem. Since they are not, we will usually suffer for it in the end.

Of evolution and the created order

This op-ed I just read by Robert Wright reminded me that while I seek to have a faith in God that is compatible with modern science, there are certain compromises that leave me empty.
At first I had hopes that this article would bring something exciting to the table. What drew me in was this line:

Oddly, an underestimation of natural selection’s creative power clouds the vision not just of the intensely religious but also of the militantly atheistic.

But then I realized that all this "creative power" amounts to for Wright is that of Spinoza's clock-maker:

The first step toward this more modern theology is for them to bite the bullet and accept that God did his work remotely — that his role in the creative process ended when he unleashed the algorithm of natural selection...

Unfortunately, this theology is not at all new. It's just Deism, straight out of the Enlightenment. This might be an appealing religion for some people, but it's not Christianity--it's not a story about a God who comes into the world to redeem it and make all things new.

In the end, though, the punchline of the article was just another statement of hopeful modernism:

A more evolved religion could do what religion has often done in the past: use an awe-inspiring story to foster social cohesion — except this time on a global scale.

Something inside me trembles when I hear the words "social cohesion." Doesn't anybody read Brave New World and get freaked out? Human beings do not become what they're supposed to be simply by living "cohesively" with one another.

I just think a part of being human is seeking for something that doesn't make sense, that is so Other that it can only be called holy, or perhaps awesome, terrifying, bizarre, absurd, or mystical.

People will beat themselves, starve themselves, pray day and night to find it; they'll use drugs, or experiment sexually; they'll go to concerts to be blown away by music of all kinds, or they'll create art ranging from absurdly beautiful to absurdly depressing; they'll go to church to get an emotional high from music and preaching; they'll read any book they can get their hands on, searching for deeper ideas; sometimes they'll just sit alone in their room contemplating.

All of these hope desperately to find that there's something beyond the curtain of reality. I just can't stand any system of thought that makes this aspect of humanity out to be an unfortunate byproduct of our evolution. Harmony is good, but all great music has dissonance. To paraphrase Einstein, God does not play the same four chords with the universe.

Wright's article ends with this:

William James said that religious belief is “the belief that there is an unseen order, and that our supreme good lies in harmoniously adjusting ourselves thereto.”

I just don't agree. I am compelled by my religious faith to believe not merely in unseen order, but in unseen fury, the kind that can so easily be caricatured into this quaint little image of a God distributing people into heaven and hell.

The kind of fury I'm talking about is evident in that utter speechlessness that you experience on the edge of reason, when you finally realize that what you really want in life is far too big for you to handle. It's evident in Jesus of Nazareth, who in his wrath died on a cross for his people.

A lot of people don't seem to experience this, and so much the worse for them. They will probably be swept up in the tide of whatever system that comes around to ensure them harmony with the "unseen order" that today's intellectuals want to imagine for them.

As for me, I don't think Jesus asks us to simply harmonize with some invisible order. I think he asks us rather to tremble at the fury of the kingdom of heaven, a fury so incomprehensible that violence does not fully describe its power.

Maybe after all what I want is not so much a vision of God that harmonizes with science, so much as a vision of Him that renders all opinions on the matter irrelevant.