Flawed Worldview

Conservative columnist David Brooks writes today in the NYT about the economic mess we're in, Alan Greenspan's recent and startling confession of his own flawed worldview, and government regulation:

If you start thinking about our faulty perceptions, the first thing you realize is that markets are not perfectly efficient, people are not always good guardians of their own self-interest and there might be limited circumstances when government could usefully slant the decision-making architecture....But the second thing you realize is that government officials are probably going to be even worse perceivers of reality than private business types. Their information feedback mechanism is more limited, and, being deeply politicized, they’re even more likely to filter inconvenient facts.

This meltdown is not just a financial event, but also a cultural one. It’s a big, whopping reminder that the human mind is continually trying to perceive things that aren’t true, and not perceiving them takes enormous effort.

In other words, we are guided more by our worldviews and ideologies rather than the empirical information coming to us. Which is why Greenspan's failure of worldview is costing us so much. And which is also all the more reason to not have as our government regulator someone who doesn't believe the government should be regulating!

Greenspan typified the anti-regulation mindset of the last several decades, under both Republican and Democratic administration (he was reappointed by Bill Clinton, don't forget). And now, the whole worldview and mindset (a paradigm shift?) is changing, and regulation of banks, markets, etc. is the order of the day.

We're going back to what we used to call a 'mixed economy', in order to avoid the distortions and excesses of the 'free and unfettered market'. If you thought we learned that lesson back in the 30's, then think again.

I actually think of the 'mixed economy' as a conservative thing (stabilizing, cautious, etc.), but if you insist on viewing it as 'liberal', then now we're all liberals again.

The only exception to that would be that shrinking number of free-market libertarians who think the government should not intervene in the current mess and should not regulate anything but let everything free to take its course, come what may. They (like Ron Paul) have a theoretical case to make, of course, but it's not one that most people are going to accept.