September 26, 2008

Game Theory: Playing Craps with Your Life, or: Some Poor Schnook with a Blog versus...Krugman!

I've written extensively about the origins, motivations and goals of the ruling class. Among other essays, you can consult these three in particular for the general argument:

The Elites Who Rule Us

It's Called the Ruling Class Because It Rules

Psst -- While You Were Gibbering, the Ruling Class Rigged the Game and Won Everything

And about the economic "crisis" in particular:

The Vampire, Struck by Sunlight

Last evening, I came across yet another way in which the ruling class, or certain key elements in the ruling class, achieve their ends. I read the following quite by accident, just following one link to another, to another, and so on. I haven't seen this idea highlighted anywhere, and no one of any prominence has discussed it at all to my knowledge.

The following excerpts are from a short Bloomberg article. The key is in the last two paragraphs, which I have highlighted:
More than 150 prominent U.S. economists, including three Nobel Prize winners, urged Congress to hold off on passing a $700 billion financial market rescue plan until it can be studied more closely.

In a letter yesterday to congressional leaders, 166 academic economists said they oppose Treasury Secretary Henry Paulson's plan because it's a "subsidy'' for business, it's ambiguous and it may have adverse market consequences in the long term. They also expressed alarm at the haste of lawmakers and the Bush administration to pass legislation.

"It doesn't seem to me that a lot decisions that we're going to have to live with for a long time have to be made by Friday,'' said Robert Lucas, a University of Chicago economist and 1995 Nobel Prize winner who signed the letter. ``The situation may get urgent, but it's not urgent right now. Right now it's a financial sector problem.''

The economists who signed the letter represent various disciplines, including macroeconomics, microeconomics, behavioral and information economics, and game theory. They also span the political spectrum, from liberal to conservative to libertarian.


Erik Brynjolfsson, of the Massachusetts Institute of Technology's Sloan School, said his main objection "is the breathtaking amount of unchecked discretion it gives to the Secretary of the Treasury. It is unprecedented in a modern democracy.''

Advocates for a rescue plan this week point to a seizing up of credit markets, reflected in elevated inter-bank lending rates, as reason for action. Some economists are unconvinced.

"I suspect that part of what we're seeing in the freezing up of lending markets is strategic behavior on the part of big financial players who stand to benefit from the bailout,'' said David K. Levine, an economist at Washington University in St. Louis, who studies liquidity constraints and game theory.
Of course, I have no way of knowing directly whether and to what extent this is true or not, neither does Levine, and neither do you. But in terms of the logic of the situation, I find the idea that this is occurring completely believable. In fact, I would go further: I think it must be true, because of the way in which the ruling class operates. And remember that much of our knowledge is not direct in that sense: we reason by inference on the basis of facts that are known to us. If we are careful and conscientious in our method, such knowledge is as fully valid as knowledge based on direct observation.

Many people have correctly noted that what is occurring with the economic "crisis" is identical in crucial ways to the leadup to the invasion of Iraq, in particular with regard to the purposeful creation of an atmosphere of crisis and possible catastrophic consequences if action is not taken. And there is a critical related point: to make certain that the action that is finally taken is what the ruling class has decided it wants, the evidence and the facts will be endlessly distorted, misrepresented, and not infrequently lied about altogether. This is the way the ruling class operates, so as to convince a sufficient number of Americans that what is being done is in their own "interests," that it is best "for America," that it is the obvious course of action to be followed.

What all that means, in fact, is that the already decided upon course of action is what the ruling class wants. The ruling class wants what it wants because their preferred course of action will strengthen their own existing power, and increase their power and wealth still more. But if too many Americans don't go along, there might be some resistance. That could mean trouble, at least along the margins. The ruling class prefers not to be inconvenienced in this manner. So, to return to the Bloomberg article, in the current "crisis," key elements of the ruling class are playing craps with your life -- and they've loaded the dice.

When you wade through all the various analyses of the economic "crisis," almost every writer finally circles back to the alleged "seizing up of credit markets." This is the problem that purportedly threatens massive economic destruction, and that will bring an end to The World as We Know It. Paul Krugman is widely admired by many liberals and progressives. I have noted before, in connection with foreign policy, how almost every liberal and progressive blogger has been entirely coopted by the Establishment. From a longer discussion:
As the inconceivable dangers of wider war, including possible nuclear exchanges, loom over us all, petty partisanship and party loyalty as the primary concern are morally distasteful at a minimum, and occasionally abhorrent in their worst manifestations, intellectually irresponsible, and immensely dangerous. Such an approach does nothing to decrease the continuing calamities that confront us, but only worsens them.

It should also be noted that, while many liberal-progressive writers and bloggers appear to imagine they are challenging "conventional wisdom," this mode of analysis only strengthens that "wisdom" and ensures that the governing class will never be seriously challenged. In fact, to maintain that this administration's foreign policy represents a radical break with history rather than admitting, as the record conclusively demonstrates, that it continues what went before, serves the purposes of the governing class in every way it could demand -- precisely because it completely fails to seriously question the basic underlying assumptions and framework. In this manner, many liberal-progressive bloggers and writers have been entirely coopted by the establishment elites, certainly insofar as foreign policy is concerned. The elites know it; many liberals and progressives haven't figured it out yet. I would say the joke's on them, but for the fact that the stakes involved may literally be the future of the world itself (although I have no doubt that many members of the governing class are enjoying much hearty laughter). Even if the damage is limited to our own country and those nations we criminally attack even when they are no threat to us, the scope of the present and possible future devastation is beyond contemplation.
In their admiration for Krugman, the liberal and progressive commentators and bloggers I have in mind (in many instances, the same people) forget that Krugman is very much an Establishment figure himself. He's not some poor schnook with a blog like me. He's Krugman!, with a major platform in a central pillar of the Establishment, the fabulously fantastic New York Times, champion of the destruction of Iraq and liar about the danger represented by Iran (for years now), among other notable achievements. So when it comes to a critical moment, when the goals of the ruling class appear to be in some danger of being thwarted, however temporarily, Krugman is not about to question the central tenets of "conventional wisdom."

And so we have Krugman in his latest column:
Many people on both the right and the left are outraged at the idea of using taxpayer money to bail out America’s financial system. They’re right to be outraged, but doing nothing isn’t a serious option. Right now, players throughout the system are refusing to lend and hoarding cash — and this collapse of credit reminds many economists of the run on the banks that brought on the Great Depression.

It’s true that we don’t know for sure that the parallel is a fair one. Maybe we can let Wall Street implode and Main Street would escape largely unscathed. But that’s not a chance we want to take.

So the grown-up thing is to do something to rescue the financial system
You see the reliance on the major element in the form of "this collapse of credit." But what if "this collapse of credit" is "strategic behavior on the part of big financial players who stand to benefit from the bailout"? What if that is true even in part? Doesn't and shouldn't that affect what the government response is, if any? But Krugman won't mention that. Wouldn't be prudent. Won't help the ruling class.

And if you keep your critical thinking cap on, the questions about the opening paragraphs in Krugman's column are endless (and they are not answered in the balance of the column). "Doing nothing isn't a serious option." I can argue that way: "Doing something -- Krugman's own word -- isn't serious." But, insists Krugman, doing "something" is "the grown-up thing to do."

This isn't arguing when I do it or when Krugman does it. It's name-calling and intimidation -- and it's substituting name-calling and intimidation for making your case. What exactly are the consequences of doing nothing? Who would feel those consequences, in what form, and when? How do you know those will be the consequences?

And: what will be the consequences of doing "something" -- especially when that "something" involves adding an unfathomable amount of debt to the already monumental national debt? Won't that have many dire consequences that will be felt by all Americans? How do the consequences of doing this particular "something" compare to the consequences of doing nothing? Which is likely to be worse? How do you know that?

Et cetera, et cetera, et cetera.

"But that's not a chance we want to take." Who's this "we"? Speak for yourself, bub. That "we" does not include me. But this is how consensus is manufactured. And most people, fearful of independence, terrified of being thought "peculiar" and of being ridiculed, will go along. After all, Krugman! is an "expert." He knows best. All this is in addition to the failures in Krugman's analysis I noted the other day.

Just like all those "experts" knew best about Iraq. All this goes to show, still one more dreadful time, the truth of one of my continuing themes. No matter how many examples pile up, no matter how catastrophic and bloody the consequences of "acting now" are, no matter how many times the "experts" are proved wrong, the great majority of Americans are incapable of learning one single damned thing. Just change the specifics, move to another subject, and they'll fall for it all over again.

We are a nation of idiots, incapable of holding a single original thought.

But, hey, what do I know. I'm just a poor schnook with a blog. And he's Krugman! I see further great achievements in the man's future. Perhaps, Krugman! -- The Musical! He'd better be careful, though. If it bombs, he'll just be another poor schnook with a blog.

But he can write about economics and Broadway theater. Sounds like a winner.