Mallet Meets Puddle

Friday, May 21, 2010

Note: The following debate summary was written with the aid of the notes I took during the event I describe. Any inaccuracies in the positions taken by the speakers or of the events they discussed are my own.

Yesterday evening, I attended the Ford Hall Forum debate, "Lessons from the Financial Crisis: More Government or Less?" between Yaron Brook of the Ayn Rand Institute and Peter Kadzis, editor of the Boston Phoenix. This event was smaller than other Ford Hall Forum events I have attended in the past, and took place in a moot court room at Suffolk University Law School. Attendance was good, but the size of the venue limited the audience to a little over one hundred people.

Kadzis opened the debate with his argument, which almost instantly revealed his dominant approach to ideas to be pragmatism. Rambling at first, Kadzis discussed the necessity of "regulations," by which he vaguely meant not just the laws and rules of central planning that were under debate, but also customs, legitimate laws, and even rules set by parents for their children.

Kadzis argued that he government had been deregulating from the early 1980s all the way through the presidency of George W. Bush, whom he said was pro-business. Subsequently, he painted an impressionistic picture of an economy collapsing for want of regulation. The case of Bernie Madoff, the "re-swindling" of the European Union by Goldman Sachs, and the "9/12" collapse of Lehman Brothers (My notes say in 1982.) all showed that Wall Street has become almost as "powerful" as a nation-state -- an intolerable situation that he claimed must be countered by more government regulation. He emphasized his point by saying that 9/12 was far more significant than 9/11.

Brook began staking his position by noting that he agrees with Kadzis that we face an era that could be marked by a deep, worldwide depression and the rise of dictatorships. However, he disagreed about the cause, which is that our government has been increasingly regulating the economy for decades, including during the period Kadzis claimed saw a rollback of state regulation of the economy. This regulation, Brook would argue, precipitated the crisis.

Acknowledging the role of FDR, but skipping to the post-9/11 credit expansion by the Federal Reserve for the sake of brevity, Brook noted the role of the Fed and other government agencies in incentivizing improvident borrowing by individuals and financial institutions alike throughout the economy. Taking the housing bubble as an example, he further noted the role of other government policies in fostering malinvestment.

The above problems were compounded by other regulations. The "too big to fail" doctrine, in place since the 1980s, encouraged complacency among the major players. The three major credit rating agencies, creatures of the regulatory state to begin with, gave absurdly high bond ratings under political pressure. (My notes may be bad here: This point may have come only during rebuttals.) Furthermore, from Bush's passage of Sarbanes-Oxley to Eliot Spitzer's legal assault on Wall Street (which "destroyed its business model"), our economy, already deranged by regulation, ended up being regulated even more tightly as time went on.

In addition to showing how central planning harms the economy, Brook noted failures by the government to perform its legitimate function: Among all the events discussed to that point, the one thing the government should have done -- stop the swindling Madoff -- it didn't do, overwhelmed as it was by its fruitless attempts to micromanage the economy.

Brook ended by (1) countering Kadzis's loose definition of "regulation," drawing a sharp distinction between central planning and the proper scope of government; (2) summarizing how regulation at every level of the economy has led to this crisis; and (3) noting that regulations have, paradoxically, led to whatever political power Wall Street might have by incentivizing it to try to influence the central planners. Brook ended with a call for a systematic rolling-back of government regulation of the economy.

I will only highlight the rebuttals and the question-and-answer period.

The title of this post comes from Kadzis's frequently claiming to agree with one point or another Brook made, only to hedge that with some variant of the theory-practice dichotomy (e.g., regulation is good for Wall Street, but less so the farther one gets towards the periphery of the economy; or the economy is too "complex" not to be regulated; or (his pole star) events like the BP oil rig blowout in the Gulf show that you can't allow a completely free market). Kadzis did make one very good point about contemporary moral standards having fallen greatly. Nevertheless, Brook capitalized on this, too, by noting the government's role -- via all-encompassing regulations -- in encouraging the "dumbing-down" of American society and a lackadaisical approach to many of the things government now purports to look after.

Because Kadzis's lack of principles left him on the defensive and made him too disorganized to counterattack, Brook was able to take advantage of his own rebuttal time to further flesh out certain points from his original argument. For example, he pointed out how central planning puts the fate of the economy into too few hands, and that past events have shown the dire consequences of panic on the part of these master regulators. Most notably, Brook was able to tie our public's sheep-like trust in regulators to altruism: Many trust regulators because they aren't "in it for themselves" and we have been taught to regard self-interest with suspicion even as we act on such a basis every day. (e.g., We don't go to the mall in order to "stimulate the economy.")

The Q&A was pretty good, with two questions standing out particularly as indicators of how the debate went.

The first of these was an earnest Russian man directing his question to the pro-regulatory Kadzis: He asked what role government regulation played in the greatest ecological disaster in history, the Chernobyl reactor accident. This brought the house down, but Kadzis managed to miss or evade the point anyway when he countered that Russia was a "rogue state."

The second such question came from an angry leftist who asked Kadzis how the editor of the Phoenix could lack fire in such a debate. Kadzis, true to pragmatist form, said that this was a highly theoretical debate, and that nothing would come of it anyway. After Kadzis's reply, Brook memorably answered, "I fully intend to make a difference."

Over drinks with friends after the debate, I expressed some disappointment that the pro-capitalist share of the audience made it seem a little like Brook was preaching to the choir, but that impression is incorrect on two counts. First, I understand that the debate will eventually air on Ford Hall Forum Television. Second, it certainly did me good to see Brook's confidence and clarity, and I am sure I am not alone there.

-- CAV


: Corrected a typo.


C. August said...

Thanks for the write-up, and you described it well.

There is one spot where I think you got it wrong. You said one "angry leftist" was disappointed that Kadzis wasn't more forceful, but I think it was a pro-free market person who was trying to tease a response out of the man who had tried all evening to not actually say anything.

I just spoke to another friend who attended the debate, and he agrees with my assessment. He said "I think he was genuinely surprised at what a punching bag Kadzis was" and was trying to goad him into standing up for himself.

Gus Van Horn said...


After the way he stormed off, I'm not sure I agree, but I can see that. Thanks for bringing up that alternative explanation.

In either case, the impression of Kadzis as a debater is clear, and it is exactly as you describe.


JJZeise said...

Thanks for posting this. I haven't had the pleasure of seeing Brook speak for years. Being strapped for time, this type of synopsis may be better than a video. I hope you'll consider doing this again the next time you attend a debate.

Stephen Bourque said...

Good summary, GVH.

I think Kadzis would have fared pretty well if his opponent were say, an ordinary businessman or Republican--the type that is conventionally (and quite mistakenly) thought to be a defender of free markets. All Kadzis would have had to do in that case were to say, "Well, surely we need some regulation, right?" And his opponent would have buckled and hastened to agree, begging not to be taken as an extremist.

Against the principled opposition of Yaron Brook, however, Kadzis had absolutely no answer because . . . well, because there is no answer. Dr. Brook's complete drubbing of Kadzis was due not to his better grasp of the material--though that was obvious--but to his explicit identification that morality and justice are on the side of freedom.

Gus Van Horn said...


Thanks. Being a blogger, that's always an option because it's free material. However, I MUST at least take rudimentary notes, because my memory always needs jogging for something like this. Sometimes, circumstances prevent my taking notes, and no notes, no summary.


Thanks. Your point about Kadzis likely faring better against a conservative is spot-on and was even illustrated by the moderator -- who I believe self-identified as a Republican -- spontaneously conceding that very point at least once.


Richard said...

A couple things:

Thanks for posting this summary. It's interesting to see your appraisal of the debate. Whenever a statist tries to insist the last few decades have been full of deregulation it makes me lagh. One of the only examples they can even offer is the Glass-Steagall Act.

Secondly there's one small typo in the second to last paragraph, which should say "Pragmatist".

And lastly along the same lines, ARCTV just posted Yaron Brooks new debate over the question: Is Christianity Compatible with Capitalism? I haven't viewed that debate yet but it looks like Dr. Brook has been very busy.

Gus Van Horn said...


Thanks for catching the typo.

Whats even funnier that hearing a statist saying we've deregulated is hearing one tell that to Yaron Brook.


Snedcat said...

Yo, Gus, sounds like you could as easily have titled this post "Paddle Meets Puddle."

Or "Mallet Meets Muddle."

Richard said...

When I read your post here a few days ago I was shocked by this bit:
"He emphasized his point by saying that 9/12 was far more significant than 9/11."

Apparently this view is not as uncommon as I had though however. Today while searching for news on Lehman Bros. I found this cartoon that attempts to make the same disgusting point.

I find it grotesque that some would try to equate the violent firey death of thousands of people with an economic collapse brought about by bad government.

Gus Van Horn said...


Or "Paddle Pounds Puddle." Might as well get alliteration in with that first one...


I think you're being unitentionally charitable when you say say, "equate the violent firey death of thousands of people with an economic collapse brought about by bad government."

After all, this ilk are really, though falsely, blaming capitalism (although the actual cause is bad government).

Thus, in their minds, capitalism is worse than terrorism. That is beyond obscene.


madmax said...

The case of Bernie Madoff, the "re-swindling" of the European Union by Goldman Sachs, and the "9/12" collapse of Lehman Brothers (My notes say in 1982.) all showed that Wall Street has become almost as "powerful" as a nation-state -- an intolerable situation that he claimed must be countered by more government regulation.

I have seen this particular argument from Leftists alot recently. "Wallstreet is too big", "Wallstreet is too powerful", "Wallstreet is more powerful than nation states", etc, etc.. These are all more examples of the failure to differentiate between economic and political power. Which means the failure to differentiate between the power of human reason and the power of a gun.

Gus Van Horn said...

You are, of course, correct.

I was glad to see Brook touch on this distinction at least twice. First, he drew a distinction between regulations and legitimate law. Second, he tied whatever actual political power WS possesses to regulation.

Stephen said...

>Whenever a statist tries to insist the last few decades have been full of deregulation it makes me lagh.

The Pragmatists who regulate the economy are inconsistent so it may well be that other Pragmatists can isolate some deregulations from the general trend. Even a stock that increases in price usually does so in a zigzag way. Pragmatists must be confronted with the contexts they evade.

Gus Van Horn said...

Indeed, but I see this as much more likely to the benefit of non-pragmatists in the audience, based on examples like this one.

Or, to put it humorously: He's ignored principles and context all along, but he'll see that he's evading this time.

Pragmatists do have free will, but their own method makes them as close to hopeless as I can imagine.