Inteview With An Objectivist / Feel The "No Burn"

Newsweek offers an interview with Dr. Yaron Brook, head of the Ayn Rand Institute, about the meltdown, free markets, and Alan Greenspan.

I should say that I am just pleased as punch with my 'Alan Greenspan as Smoky the Bear' metaphor from yesterday's Stiglitz critique but a cursory pass with Google debunks any illusions I had of originality.  This is from January 2001, making the identical point:

For a period of time, the U.S. Forest Service actively attempted to prevent all forest fires - a "no burn" policy. This was highly effective for a period of time, except that this no burn policy allowed a great deal of underbrush and dead wood to accumulate that normally would have been periodically cleared in natural forest fires. Eventually, a fire occurred that was uncontrollable, fueled in part by the unburned debris, burning for weeks/months and taking out a fair portion of Yellowstone National Forest. The lesson was that "no burn" didn't work - fires were a part of nature and needed to be allowed to occur in a controlled fashion. (this also has its drawbacks - i.e., the fires that nearly took out Los Alamos and the nuclear facilities - originally a planned burn).

Why all this talk of forest fires? Well, if you see the federal reserve as the forest service and the attempt to control the economy as a "no burn" policy, the question becomes - will there eventually be a fire so large that the federal reserve will not be able to stop it? And will in fact its actions now actually contribute to the severity of the fire later? Or are they engaging in a "controlled burn" policy?

Eerily prescient.  I blame the Long Term Capital Management bailout in 1998 for promoting the notion that anything and everything is too big to fail.  That said, the Lehman switcheroo in Sept 2008 was insane - at this point, the time for "Burn, baby, burn" is later.

Dr. Brook offers a similar defense of free markets:

What we need to do is really make the case to the American people—and I think it's an easy case to make—that this is not a failure of free markets, this is not a failure of capitalism, but this is a failure of the exact opposite. It's a failure of the regulatory state. It's a failure of all the government policies of the last eight years. Actually, the last 95 years.

      Why do you say the last 95 years?       
I believe that the No. 1 cause of the current crisis is Federal Reserve policy. [The Federal Reserve was created in 1913.] The Federal Reserve, by necessity, creates economic problems; no matter how good a Federal Reserve chairman is, he's going to create cycles of booms and busts.

      How did the Federal Reserve create today's mess?
The current crisis was caused by the housing bubble, and the primary cause of the housing bubble was the Federal Reserve keeping interest rates at 1 percent in 2003. They were asking people to borrow money, basically begging them. The financial problem we face today was a problem of overleverage, of too much debt—but that's exactly what Federal Reserve policy encouraged.

Since we seem to overlap on this point I yield to him my Lincoln quip from the Stiglitz critique - "these markets cannot permanently endure half regulated and half free".  Of course, since the regulatory framework and the large government role in the economy won't be going away, I prefer to remain in denial about the long term implication of that thought.

MORE:  A teeny bit of Yellowstone background.  I am not letting facts undermine a great metaphor.

Comments

[Charlie (Colorado)]

An Objectivist. Jeez.

[Ouch. Normally SpellChek and BrainCheck are not that much of a effort. TM.]

[sbw]

No, that was Objectivist A. You know, like Advisor A and Senate Candidate B. ;-)

[clarice]

Dr. Brook:"I think it's an easy case to make"

Heh--Let him persuade his academic colleagues first . If it's easy to persuade them (I predict, it isn't) then we can hope to make this case to a general public-- pampered and cosseted by decades of a great economy fueled in large part by deregulation-- which still has no idea why they had it that good.

[peter (not peteruk)]

I visited Yellowstone for the first time this past August. Still lots of beauty there. Very strange to see so many burnt tree trunks twenty years after the fact. The new growth is about twelve feet tall. Plenty of elk and buffalo roaming about. One of the wonders of the world.

[kim]

Where's MJW to figure out the alphabet mysteries?
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[Soylent Red]

I am currently re-reading "Atlas Shrugged".

The words and deeds of the enlightened public in that book are so eerily similar to what I hear modern politicians and libs say it freaks me out.

Anyway, the problem with Objectivism (like the similar Libertarianism) is that we've gone so far away from when it was a plausible reality that no one can fathom living like that any more.

People simply cannot get their heads around the notion that the government, or some other entity, has to come and bail them out and that their failures might be the sacrifice necessary for others' triumphs.

[whosonfirst]

"No matter how good a Federal Reserve Chairman is, he is going to create cycles of boom and bust".

I'm only a humble chimney sweep, but wasn't the Fed created in the first place to tame the cycle of boom and bust?

[Uncle BigBad]

When the Pilgrims first came to the New World they were surprised at the constant smell of smoke.

It turns out the Indians (yes, the Indians) constantly burned forest undergrowth to improve hunting success.

[JJ]

From Stiglitz thread yesterday:

"The fact is, investors did not act as if they expected the role of government to be minimal; they acted as if they expected the Fed to perform a miracle if times got tough..."

So, maybe this was like optimistic Yellowstone managers expecting Smokey to prevent all forest fires, no matter the bad the debris buildup? (Leaves open the possibility for all kinds of mixed metaphors! But I will not start that backfire.)

[clarice]

Uncle, you mean the Indians threw all those pollutants into the air?

[bad]

And started global warming?

[whosonfirst]

I don't think Maguire deserves you people. Time and time again you do just what you're doing here. This thread is not about Yellowstone, forest fires, or ecology.

Before you're done you'll turn it into a thread about how to make egg nog or how to knit a nice Christmas sweater.

[cathyf]

Hey, you gotta good eggnog recipe? Do tell!

[kim]

Just sweepin' the chimney, fella. Not responsible for what falls out.
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[bad]

Ok, let's talk about Newsweek. Heard they are downsizing, laying off people and generally contributing to financial trouble for families.

[Sue]

I always wanted to learn how to knit. I can crochet a little but never learned the art of knitting.

[bad]

Knitting is fun. Not as fun as cooking though.

[bad]

whosonfirst, do you make your own bows for Christmas packages? I like wrapping and making the bows. Sometimes my kitties really like the bows too.

[Soylent Red]

A true objectivist would learn how to knit. Excellently. SO as not to be a parasite on those who do their own knitting.

[bad]

I prefer sewing to knitting or crochet and I never learned to tat. I shall be a tatting parasite.

[kim]

Oh, yes, tatting. In my youth, I had ambitions of learning to tat, and even had a few volunteer teachers. Couldn't get past my first knot.
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[Soylent Red]

I need to learn how to sew (beyond darning socks and putting on buttons). Seems like that might be useful when Atlas finally shrugs.

BTW...

Who is John Galt?

[Soylent Red]

Also bad...

I miswrote. Not "Parasite". The correct nomenclature is "Looter".

[clarice]

I'd be happy to teach anyone to make foolproof artisanal bread and to knit to prepare for the economic disaster to come.

[cathyf]

Speaking of which, clarice -- can you point me to your foccacia recipe again? I want to make asparagus wrapped in fontina and prosciutto and I need something to complement it...

[Soylent Red]

That foccacia is is super duper. Better than Rearden Metal.

[clarice]

Sure, cathy:
http://www.kingarthurflour.com/shop/RecipeDisplay?RID=1214501901902>Blitz bread

[kim]

Easier on the teeth than Eonite.
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[Pofarmer]

Marginally on topic.

The dollar index is falling like a rock. Might be a good time to fill up the gas cans.

[Tom Maguire]

I'm only a humble chimney sweep, but wasn't the Fed created in the first place to tame the cycle of boom and bust?

There is that. Another Missing Metaphor would relate to people's propensity to consuming the margin of safety - e.g., folks with airbags drive faster (especially if the airbag is in the back seat exhorting you to pick it up a bit...).

One might suspect that people with an effective central bank expect milder business cycles and behave accordingly, until something surprises them.

[JM Hanes]

I can't stand any of that stuff. But I used to weave rugs in my spare time. Found a giant loom, made of hewn chestnut beams, half buried in an abandonned barn, and wonder of wonder, all the working pieces were intact. And I stayed in a Holiday Inn Express last night.

whosonfirst: Did you just miss the month long discussions of the meltdown here? You practically needed an advanced degree, or a working farm, to follow along. If you've got new stuff to offer, feel free, but when Tom opens with Smokey the Bear, Yellowstone is just going to come up. Sometimes the financial threads end up in eggnog, sometimes the eggnog threads end up in the economic morass. Que sera, sera.

[clarice]

Plus, TM adores us and our quirky ways, right jmh?

[peter (not peteruk)]

You know, I am trying to knit a tea kettle cozy to put my hot eggnog in, but I don't have a good recipe.

[Jane]

OT - Waxman is holding back on Freddie and Fannie's role in the Subprime market fiasco.

[Jane]

Oops - LUN

[Pofarmer]

until something surprises them.

Like the banks going bust and the Fed going bust trying to bail out the banks? oh, and the auto industry, oh, and the unions.......

[SunnyDay]

our quirky ways
****************

This place has character. :D

[kim]

That's a good one, an 'advanced degree or a working farm'.
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[Mary]

CathyF

This is from The Williamsburg Cookbook

Eggnog (12 cups)

6 eggs, separated
1/2 c. sugar
2 c. whipping cream
1 c. milk
1/2 c. bourbon
1/2 c. brandy
1/2 c. light rum
nutmeg, freshly grated please

beat egg yolks with the sugar until thick.
Slowly add the cream, milk, spirits.
Chill.
Whip the egg whites until soft peaks form and add to the mixture.
Chill and let ripen a few hours.
Sprinkle with nutmeg before serving.

And I just found out you can buy pasteurized eggs so the usual caveats do not apply. This is the best eggnog recipe that I have tried. There is a corn chowder recipe in that cookbook that is excellent.

[Soylent Red]

See what you caused whosonfirst?

[clarice]

I have a knitting pattern for a tea cozy around here somewhere..It's actually clever with little pockets to hold stuff to keep the heat in ..forgot all the details..

[sbw]

At least so far on this thread we have seen no tit for tat.

[cathyf]

OT - Waxman is holding back on Freddie and Fannie's role in the Subprime market fiasco.

In this case, "OT" would be standing for "On Topic".

[JM Hanes]

And even the Goddess worships at Dear Leader's altar, no?

Mary: That's laugh out loud funny! Helluva nog recipe too.....

[TCO]

You RINOs are part of the problem. Remember that crap about how this bailout stuff would nip things in the bud? Might make money for the taxpayers? All that is being created is trillions of dollars of future debt. The economy is tanking because of the realization that socialism will rule and that taxpayers will be paying off Soros, Mark Cuban and John Corzine like characters.

[TCO]

LET THEM FAIL!

Start NOW!

[bad]

LOL sbw, you should be grateful for that, speaking personally only, of course.

[Tom Maguire]

Plus, TM adores us and our quirky ways, right jmh?

He does indeed, even in the non-holiday season.

[clarice]

Thanks..where'd we be without out..just wandering around the ether without ever knowing eachother..

[kim]

So with the Mss Blag, Clinton, Obama, Rice and others, do we have a new cycle of broom and butts?
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[bad]

Thanks TM. Many of us live for your adoration-- and eggnog.

[sophy]

I do not know how to use the flyff gold ; my friend tells me how to use.