Nub of the Gist -

Nub of the Gist - DJ Tice has a great column on the reasons underlying the media circus that scuppered the Pentagon's 'Terror market" last month. The market - which would have used market methods to assign a market value to different theories about future terrorist activities - was hardly a new idea.

But not only did many opponents of the "Terror Market" not have any time for new ideas - they don't like the "P" word:

:The short, unhappy life of the Pentagon's "terrorism futures market" was wonderfully instructive. It illuminated, through exaggeration, the point at which communication breaks down between two groups: those eager to unleash every power of economic markets, and those who recoil from the cold amorality of the profit motive.

I had many acquaintances who recoiled in horror at the idea - and with whom, as Tice says, communication was impossible:

• People who thought that it was "sick" to "tie human lives" to something as ""crass" as markets, and
• people who have great misplaced faith in the status quo of the current intelligence process (and in the media's willingness or ability to explain this idea, for that matter)

Tice continues:

Such "aggregation of information" is the magic all markets do. Stanford Professor George Parker speaks of a creature he calls "Mr. Market" — the collective mind of scores of millions of investors who trade in stocks and other investments. Mr. Market, Parker says, knows everything, reads everything, hears every rumor and checks them all out. And every day Mr. Market blends all that information together to estimate the value of investments

This, of course, incited a storm of misplaced moralism:

And yet, of course, it was impossible. The reason it was impossible is an extreme example of the cold, moral "realism" of market economics that causes many people to dislike capitalism — to the endless frustration of champions who focus on its good results.

But there's something the naysayers miss - and always miss - about capitalism: While its methods may be divorced from any direct moral imperative, its results are inherently moral anyway:

Adam Smith's famous "invisible hand" causes a manufacturer, say, to make quality products, not necessarily out of pride or concern for customers, but because quality products sell quicker at higher prices.

By making each person's profit depend on pleasing others, the market spins the abundant straw of avarice into the gold of the common good.

It's the same with markets. Every time an investor buys or sells an investment (causing its price to rise or fall), he or she is sharing information with others — not out of generosity, but to make money. Nonetheless, the information gets shared.

Similarly, a terrorism market would inspire people to do out of a selfish desire for gain what they should have done out of moral decency — to tell what they know.

Tice hits the main point:

And of course that's just the problem. The motives of terrorism "investors" would be simply too barbarous to be tolerated, and too repulsive to be used, even for the best of purposes. No result, however beneficial, is worth the moral debasement involved in rewarding such motives — or at least that's what the politicians quickly decided.

In a much less inflamed way, different levels of tolerance for the reality of human selfishness determines how a person responds to the whole of free market economics.

Some people find it fairly easy to accept that human beings are self-interested. They think it a marvel (almost a miracle) that markets can convert self-seeking into unintentional generosity. Such people care about results more than motives.

Tice concludes by noting that, for most people, there comes a point on almost any issue where motives become more important than results.

But here's the problem; the motives were consistently mis-reported by the media and the opinion-shaping classes. There was lavish coverage of those who were indignant - "we're going to have fatcats profiting, profiting I tell you, over the deaths of innocent people!" - and almost no reporting (certainly no competent, detailed, economics-based reporting) on the potential strengths or value of the concept.

People - and I'm one of them - do balance motives and morals against results. But when the battle is being fought in the realm of public opinion, those who help shape public opinion do the world a gross disservice by focusing on only half the story.

Which creates more misery?

Posted by Mitch at August 19, 2003 10:46 AM