3 ms·

Fighting America's 'Financial Oligarchy'

21 points by nreece 18y ago

jacoblyles 18y ago
It's a fair point. But I think he's unreasonably optimistic if he thinks the problem can be ameliorated, or that it doesn't exist in other countries. That financial companies bend financial legislation and regulation to their benefit is just a specific example of a more general phenomenon. Mancur Olson and other "public choice" economists have theorized and attempted to prove that democracy tends to produce policy which has concentrated benefits (Washington's "special interests", one of the more honest political monikers) and diffuse costs (paid from general revenue). Concentrated benefits and diffuse costs explains why the article's 'financial oligarchy' controls policy. It is worth the while of financiers to put a substantial amount of resources into effecting policy, because the benefit is large to them. But the marginal cost to an average voter of that policy is quite small in comparison. So the average voter does the rational thing and doesn't try very hard to change things, and the average politician does the rational thing and serves the special interest. But this effect also explains a host of other issues. Think about why politicians are killing the DC school voucher program, despite a recent studying showing its effectiveness and the fact that the vouchers cost one-fourth the amount of educating a kid in a public school. Teacher's unions are a concentrated interest, they benefit substantially and directly from maintaining a de facto public monopoly on education. The lower quality and higher cost of education that results from this monopoly is spread over a large population, and it is indirect and hard to notice. So, poor kids are kicked out of cheaper and more effective private schools and back into some of the worst public schools in the nation. But it also explains lots of other programs. Ethanol. Military boondoggles. Bridges to nowhere. Occasionally democracy produces policy in the public interest, but it is somewhat by chance. That's not what the incentives of the system were designed to do. So, yes, I think the economist in the article has a point. I also don't think it's going to change. And I don't think the problem is limited to finance. And I don't think it depends on which politicians are in office.
- silentOpen 18y ago
  The audio is incredibly low throughput. The text blurb doesn't contain much information. If you haven't already, you should read his piece on The Atlantic <http://www.theatlantic.com/doc/200905/imf-advice> http://www.theatlantic.com/doc/200905/imf-advice>. It goes into many of the points you raise. Significantly, he notes parallels to developing nations and discounts specific politicians or power players.
tjic 18y ago
I find it quite amusing that the folks at NPR, who live largely off of taxpayer dollars, whether the economy is doing well or poorly, have the gall to call anyone else "oligarchs". The salaries for lots of NPR folks are available in public filings (IRS 990 form for National Public Radio, FY 2005). Here are some of the hosts: * Renee Montagne: $308,374 salary + $30,640 benefits * Steve Inskeep: $301,856 salary + $35,572 benefits * Robert Siegel: $288,795 salary + $24,480 benefits * Scott Simon: $266,821 salary + $33,572 benefits * Alexander Chadwick: $235,173 salary + $29,564 benefits I don't mind high compensation for folks who take risks and create tons of value, but when you effectively can't be fired, and the majority of your funding comes from taxes, it gets under my skin. ...and then to decry OTHER folks as being compensated too highly... ?
- biohacker42 18y ago
  Doesn't a large chunk of NPR funding come from private donors?
  - gills 18y ago
    At least some of it does. They were just running their pledge drive here in Seattle, I think last week (sometimes I lose track of when I hear things on the radio, maybe someone with a lower relevance filter will help me out on this one). As for taking risks and creating value, I think the linked article speaks for itself.

21 points by nreece 18y ago

It's a fair point. But I think he's unreasonably optimistic if he thinks the problem can be ameliorated, or that it doesn't exist in other countries. That financial companies bend financial legislation and regulation to their benefit is just a specific example of a more general phenomenon. Mancur Olson and other "public choice" economists have theorized and attempted to prove that democracy tends to produce policy which has concentrated benefits (Washington's "special interests", one of the more honest political monikers) and diffuse costs (paid from general revenue). Concentrated benefits and diffuse costs explains why the article's 'financial oligarchy' controls policy. It is worth the while of financiers to put a substantial amount of resources into effecting policy, because the benefit is large to them. But the marginal cost to an average voter of that policy is quite small in comparison. So the average voter does the rational thing and doesn't try very hard to change things, and the average politician does the rational thing and serves the special interest. But this effect also explains a host of other issues. Think about why politicians are killing the DC school voucher program, despite a recent studying showing its effectiveness and the fact that the vouchers cost one-fourth the amount of educating a kid in a public school. Teacher's unions are a concentrated interest, they benefit substantially and directly from maintaining a de facto public monopoly on education. The lower quality and higher cost of education that results from this monopoly is spread over a large population, and it is indirect and hard to notice. So, poor kids are kicked out of cheaper and more effective private schools and back into some of the worst public schools in the nation. But it also explains lots of other programs. Ethanol. Military boondoggles. Bridges to nowhere. Occasionally democracy produces policy in the public interest, but it is somewhat by chance. That's not what the incentives of the system were designed to do. So, yes, I think the economist in the article has a point. I also don't think it's going to change. And I don't think the problem is limited to finance. And I don't think it depends on which politicians are in office.

silentOpen 18y ago
The audio is incredibly low throughput. The text blurb doesn't contain much information. If you haven't already, you should read his piece on The Atlantic <http://www.theatlantic.com/doc/200905/imf-advice> http://www.theatlantic.com/doc/200905/imf-advice>. It goes into many of the points you raise. Significantly, he notes parallels to developing nations and discounts specific politicians or power players.

tjic 18y ago

I find it quite amusing that the folks at NPR, who live largely off of taxpayer dollars, whether the economy is doing well or poorly, have the gall to call anyone else "oligarchs". The salaries for lots of NPR folks are available in public filings (IRS 990 form for National Public Radio, FY 2005). Here are some of the hosts: * Renee Montagne: $308,374 salary + $30,640 benefits * Steve Inskeep: $301,856 salary + $35,572 benefits * Robert Siegel: $288,795 salary + $24,480 benefits * Scott Simon: $266,821 salary + $33,572 benefits * Alexander Chadwick: $235,173 salary + $29,564 benefits I don't mind high compensation for folks who take risks and create tons of value, but when you effectively can't be fired, and the majority of your funding comes from taxes, it gets under my skin. ...and then to decry OTHER folks as being compensated too highly... ?

biohacker42 18y ago
Doesn't a large chunk of NPR funding come from private donors?
- gills 18y ago
  At least some of it does. They were just running their pledge drive here in Seattle, I think last week (sometimes I lose track of when I hear things on the radio, maybe someone with a lower relevance filter will help me out on this one). As for taking risks and creating value, I think the linked article speaks for itself.