

In No One We Trust - draq
http://opinionator.blogs.nytimes.com/2013/12/21/in-no-one-we-trust/

======
Perceval
> If any of them thought about the social implications of their activities,
> whether it was predatory lending, abusive credit card practices, or market
> manipulation, they might have taken comfort that, in accordance with Adam
> Smith’s dictum, their swelling bank accounts implied that they must be
> boosting social welfare.

Stiglitz is doing violence to Adam Smith here, an author I suspect he has not
re-read in a long time.

This quote from Stiglitz would more appropriately reference J.M. Keynes rather
than Adam Smith. To wit, Keynes wrote in the _General Theory_ :

> It is better that a man should tyrannize over his bank balance than over his
> fellow citizens.

Smith, on the other hand, was very clear in advising the government against
the conspiracies of businessmen and against viewing rising profits as a sign
of national wealth:

> "His employers constitute the third order, that of those who live by profit.
> it is the stock that is imployed for the sake of profit, which puts into
> motion the greater part of the useful labor of every society. The plans and
> projects of the employers of stock regulate and direct all the most
> important operations of labor, and profit is the end proposed by all those
> plans and projects. But the rate of profit does not, like rent and wages,
> rise with the prosperity, and fall with the declension, of the society. On
> the contrary, it is naturally low in rich, and high in poor countries, and
> it is always highest in the countries which are going fastest to ruin...

> "Their superiority over the country gentleman is, not so much in their
> knowledge of the public interest, as in their having a better knowledge of
> their own interest than he has of his. It is by this superior knowledge of
> their own interest that they have frequently imposed upon his generosity,
> and persuaded him to give up both his own interest and that of the public,
> from a very simple but honest conviction, that their interest, and not his,
> was the interest of the public. The interest of the dealers, however, in any
> particular branch of trade or manufactures, is always in some respects
> different from, and even opposite to, that of the public. To widen the
> market and to narrow the competition, is always in the interest of the
> dealers...

> "The proposal of any new law or regulation of commerce which comes from this
> order, ought always to be listened to with great precaution, and ought never
> to be adopted till after having been long and carefully examined, not only
> with the most scrupulous, but with the most suspicious attention. It comes
> from an order or men, whose interest is never exactly the same with that of
> the public, who have generally an interest to deceive and even to oppress
> the public, and who accordingly have, upon many occasions, both deceived and
> oppressed it."

 _Adam Smith, The Wealth of Nations, Chap. XI, Part III, "Rent of Land:
Conclusion"._

------
bsirkia
"I suspect there is only one way to really get trust back. We need to pass
strong regulations, embodying norms of good behavior, and appoint bold
regulators to enforce them."

Isn't this the exact opposite of trust-building behavior? Trust defined as "a
firm belief in the reliability, truth, ability, or strength of someone or
something." So the author is arguing for more trust in our regulators and
laws, because we can't trust the people we are regulating.

I don't think that you way to build trust with a person or group by creating
stiff rules and penalties for cheating, you do that after they've proven they
can't be trusted. I think a more convincing conclusion for the article would
be something along of the lines of: we've learned our lesson that banks can't
be trusted, so we need to impose heavier regulation.

~~~
skybrian
I think the idea is something like "locks keep honest people honest."

If you make clear rules and get people to follow them, and people see that
everyone else is following the rules, that makes following the rules normal
and rule-breaking an unusual transgression, even without a panopticon.

It's tricky to pull off, but how else would you do it?

~~~
ams6110
The main thing we need to do is get back to real, darwinian consequences for
stupid behavior. Banks would NOT have made all those "toxic" loans, nor would
they have been able to bundle them into derivative products (because nobody
would have bought them), if they had been exposed to the real risks they were
taking on.

~~~
pbreit
Are you certain about that? Because I sure am not.

------
thecoffman
It seems a more appropriate title for this would be "In Government We Trust."

Apparently large powerful entities aren't to be trusted, except for when
they're called "government."

~~~
ams6110
Neatly ignored is the large role the government had in pressuring banks to
make all those bad loans.

~~~
pbreit
Yeah, the banks sure were pushing back on all that pressure!

------
massysett
> Similarly, teachers must be given incentive pay to induce them to exert
> themselves . . . Do we really believe that giving them $50 more, or even
> $500 more, as incentive pay will induce them to work harder?

No, I don't believe that at all. The idea is that you give teachers incentive
pay to reward high performers and to attract individuals who are better
teachers, and to give the high performers a reason to stay in teaching rather
than to defect to another field. Similarly, the idea is that you give the CEO
incentive pay to incent him to be a CEO, to attract good CEOs, and to keep
your good CEO rather than lose him to another company.

Maybe these ideas are flawed, but certainly the notion is not that by giving
the CEO incentive pay he will toil for 7 days a week at 14 hours rather than
just 6 days at 12 hours.

------
gremlinsinc
What we need is politicians who commit to giving the popular vote of their
constituents decide major issues. -- A trial in Liquid Democracy if you will.

We also need term limits in congress, no more career politicians, or at least
no consecutive terms--take 1 term off between terms. -- Personally I think
President should be a 6 year term, sometimes 4 is too little, sometimes 8 is
too much. A single 6 year term may make more sense. Senators would be the same
a single 6 year term, and that's IT go get a REAL job, - Senators/Congressmen
are essentially living on Welfare, we give them posh health plans, good wages,
good benefits, and their voters pay all their bills via fund-raising. You
should be only allowed one term in each national government position.

~~~
spc476
I've discussed this idea with my girlfriend (a former Federal worker) and she
opposes this idea, because an inrush of freshmen Congresscritters who have no
idea what is what would be beholden to the rank and file of Federal workers
who aren't elected and thus, know the system more than those elected do.

In other words, the institutional knowledge shifts from elected
Congresscritters to unelected bureaucrats.

~~~
gremlinsinc
Nah, I'm convinced that if we were to stop elections, and go to a 100% random
lottery that selects 200 random citizens w/out any idea of their credentials,
we would have a healthier political system than the one we have now.

