I think this is an interesting speech, and I as someone firmly to the left of libertarianism don't find much at all to disagree with in what Harford says here. I wouldn't call Harford a libertarian at all, in fact there is a lot here that he claims is necessary to make the financial markets safer, that go against classical ideas of "Free market", to the point that I'm a little baffled that you are even considering it (hats off if you do though). Your fifth paragraph implies to me, that you are in kind of on board with what Tim is saying, as it is in fact the same as what he is saying, to various extents.
So, the rough breakdown in what he's saying is: 1) Systems are too complex and two villains are main ones in this: a) decoupling/derivatives b) obscuring branch offs for tax reasons - he is actually heavily implying a c) too, which would be lack of transparency. 2) Systems *will* fail, and to not plan for failure is crazy. And one of his main points is not only to have contingency plans, but also for regulators to approve of said plans before further transactions are cleared. Some of his methods are, I agree with you, interesting, but *all* of his methods include to some extent regulators - and this is why Harford is no follower of the libertarian school of thought. He believes in various entities regulating each other, and providing full transparency in doing so, including regulating organs of the state. This has been indicated in his writing too. I for one think that his idea of more shareholders in banking and his notion of a restructuring balance in banks and their ownership are the most interesting. Basically banks are regulated regardless of who owns them, which makes the ability to separate one piece of a whole body and save that, is much more attainable if another part goes belly up.
I'm actually fairly sure Harford is rather a-political, as his pieces on pragmatism in politics indicate. (he is always careful to make examples from all over the political spectra)
But some of the strongest personal criticism from Harford actually comes in the questions-and-answers section of the speech. He there gives a fairly strong kick at Greenspan, a rather libertarian (even Randyan) economist who was vehemently for deregulation all through his time in the Federal Reserve.
I feel I want to tell you, that there was a woman called Brooksley E. Born (member of the same working group, but a lot less known than Greenspan and his boys), who actually advocated *exactly* the same caution as Tim Harford does in this speech. In fact, and I'm not sure all the articles spell this out, but she even advocated for some of the methods that Harford tries to push here. She was the only woman in a group of men, and she was told by Greenspan to shut the fuck up, not in those words, but clear enough. She fought an uphill battle, about ten years before the crisis in 2008. In the end she had to leave the group. She gained a brief surge of media interest just after the crisis of 2008, where some articles were written about her being right the whole time, and a few interviews were made with her (in which she showed a graceful lack of schadenfreude).
I have to admit that I get slightly irritated at the rock star status of Harford and the lauding of his ideas, when this middle aged lady was said to shut up, and basically was saying much of the same thing. But since I like Harford, I'll let it pass.
Here are articles on Brooksley E Born: Long Washington Post article (http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101403343.html?wpisrc=newsletter&sid=ST2008101403344&s_pos=) and equally long New York Times article (http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html?_r=3&em&oref=slogin&oref=slogin)
no subject
I wouldn't call Harford a libertarian at all, in fact there is a lot here that he claims is necessary to make the financial markets safer, that go against classical ideas of "Free market", to the point that I'm a little
baffled that you are even considering it (hats off if you do though). Your fifth paragraph implies to me, that you are in kind of on board with what Tim is saying, as it is in fact the same as what he is saying, to various extents.
So, the rough breakdown in what he's saying is:
1) Systems are too complex and two villains are main ones in this: a) decoupling/derivatives b) obscuring branch offs for tax reasons - he is actually heavily implying a c) too, which would be lack of transparency.
2) Systems *will* fail, and to not plan for failure is crazy. And one of his main points is not only to have contingency plans, but also for regulators to approve of said plans before further transactions are cleared.
Some of his methods are, I agree with you, interesting, but *all* of his methods include to some extent regulators - and this is why Harford is no follower of the libertarian school of thought. He believes in various
entities regulating each other, and providing full transparency in doing so, including regulating organs of the state. This has been indicated in his writing too.
I for one think that his idea of more shareholders in banking and his notion of a restructuring balance in banks and their ownership are the most interesting. Basically banks are regulated regardless of who owns them, which makes the ability to separate one piece of a whole body and save that, is much more attainable if another part goes belly up.
I'm actually fairly sure Harford is rather a-political, as his pieces on pragmatism in politics indicate. (he is always careful to make examples from all over the political spectra)
But some of the strongest personal criticism from Harford actually comes in the questions-and-answers section of the speech. He there gives a fairly strong kick at Greenspan, a rather libertarian (even Randyan) economist who was vehemently for deregulation all through his time in the Federal Reserve.
I feel I want to tell you, that there was a woman called Brooksley E. Born (member of the same working group, but a lot less known than Greenspan and his boys), who actually advocated *exactly* the same caution as Tim Harford does in this speech. In fact, and I'm not sure all the articles spell this out, but she even advocated for some of the methods that Harford tries to push here.
She was the only woman in a group of men, and she was told by Greenspan to shut the fuck up, not in those words, but clear enough. She fought an uphill battle, about ten years before the crisis in 2008. In the end she had to leave the group.
She gained a brief surge of media interest just after the crisis of 2008, where some articles were written about her being right the whole time, and a few interviews were made with her (in which she showed a graceful lack of schadenfreude).
I have to admit that I get slightly irritated at the rock star status of Harford and the lauding of his ideas, when this middle aged lady was said to shut up, and basically was saying much of the same thing. But since I like Harford, I'll let it pass.
Here are articles on Brooksley E Born: Long Washington Post article (http://www.washingtonpost.com/wp-dyn/content/article/2008/10/14/AR2008101403343.html?wpisrc=newsletter&sid=ST2008101403344&s_pos=) and equally long New York Times article (http://www.nytimes.com/2008/10/09/business/economy/09greenspan.html?_r=3&em&oref=slogin&oref=slogin)
Anyway, thanks for an interesting topic!