About a week ago, I heard a radio commentator whose beat is the stock market exclaim, “The market is broken!” What struck me about this is that nearly all such market commentators, whether on NPR or Fox, are free marketeers who at most pay lip service to what one might call ‘regulation lite’. So I found myself wondering in what possible sense could the present crisis be construed to mean that the free market is broken? On the contrary, isn’t this a classic example of a (substantially) free market working… freely? Notably, the mess around credit default swaps and other new derivatives has happened in precisely the least regulated areas of the market. I’m no economist myself, but I have to wonder what it means when something that operates as it’s supposed to is nonetheless taken to be broken, not by its critics but by its adherents. For one thing, it suggests that a good many people who argue for free markets actually don’t understand the concept (taking the promise of good outcomes on faith, an economic religion) or engage in self-deception, preferring to look only at the upside. I suspect that either position–the faith or the self-deception–is enabled by belonging to the safer zones of the middle class and becomes harder to sustain the closer you get to the economic margins.
Speaking of credit default swaps, it occurs to me that the slew of such financial instruments being invented over the last decade constitutes a new technology of money, and that what the banks that promulgated them have been doing is beta-testing them on us. Forced, de facto beta-testing is nothing new (think Microsoft Vista), but I wonder if one consequence of the computer era is that we have internalized the idea that such beta-testing of new technologies without consent of the testees is socially acceptable. If Microsoft can do it to its user base, AIG can do it to, in effect, everyone. Bioengineering is another obvious example of a field in which citizens have been beta-tested (through their food) without prior consent. To put it another way, free market capitalism normalizes large-scale beta-testing as as an opt-out rather than an opt-in system–but without any easy way to opt out.
We’ve had several hundred years of beta-testing free market capitalism. I hereby volunteer as a beta-tester for a true American social democracy.
Lily, et. al.:
I was just casting about on the web by way of Google using a search phrase of “Beta testing financial instruments” and came upon this site. My interest of course stems from the recent economic crises America is facing.
I specifically list Lily because I’m most interested in the question she sets out in “I wonder how one could ethically beta test these things? If you do it with fake money, the stakes aren’t the same.”
I envision something akin to the contests set up among engineering schools where they’re given a box full of parts and a goal. Instead of money, or often a nominal compensation, there are bragging rights, (and more … read on).
The competitors really go for it in such cases. While not directly involving any appreciable amount of cash it somewhat translates into cash value in that prospective students look, at least in part, to such achievements as being indicative of dynamic and results-oriented programs that are in turn valued by potential employers.
So, why not let the leading business schools loose on something similar re: newly designed, (read highly speculative), financial instruments. Especially with state funded universities and colleges, their various state governments would be getting a return on their investment. The results of various competitons could be compared and averaged and some sort of window on a sound national policy approach to such instruments might emerge.
Thoughts?
Take care,
Troy
yes I realize that this kind of beta testing has a long and ignoble history– in effect all social and political structures constitute an ongoing beta test, worldwide. That seems to me a given. I was just contemplating the possibility of a shift in a specifically American mindset– not committed to the notion in any sense, but just putting it out there.
Definitely. The Tuskegee Experiment also came to mind, and contemporary pharma companies testing drugs on people in parts of Africa.
As far as the margins of the hegemonic system — Standpoint theory comes to mind. But is there something that articulates that without falling into essentialism? Situated Knowledges (Haraway) comes to mind, but unevenness isn’t central to that.
Yes, But. (my response to everything these days..)
The But usually goes like this: Check out history – the slaves and colonized peoples, women and children, non-whites and poor whites, were beta tested without their permission. The difference perhaps is that now we all are. If you travel around the world right about now, you’ll find people everywhere saying, america’s finally getting a taste of what it dished out to us.
Indeed when one is on the margins of the hegemonic system that’s a useful (neither necessary nor sufficient) incentive to see differently. With my old-fashioned hat on, I would also add: Knowing history helps. And especially transnational / world history. See, eg Eric Wolf, Europe and the People Without History, a classic. (now being updated by feminists everywhere!)
Yes, there’s also the whole doctrine of consumer choice and “voting with your dollars.” Well in this form of computationally buggy capitalism, there really is no opt out option. The tumult of the economy and who gets hurt is proof of the flaws of “opt out if you don’t like it” logic.
I also find it fascinating that part of this crisis is computational. They made instruments so complex that they can’t even figure out how to price them.
I wonder how one could ethically beta test these things? If you do it with fake money, the stakes aren’t the same. If you do it as a pilot in a bounded but real market, is that ethical? Would this be the highest risk highest reward investment one might hope to make?