Our Fate Is in Their Hands?

Last month, Representative John Shimkus spoke out against regulating carbon dioxide emissions on the grounds that carbon dioxide is plant food. “So if we decrease the use of carbon dioxide, are we not taking away plant food from the atmosphere?” Shimkus is on the House Subcommittee on Energy and Environment, which means he has a vote on these issues.

In the wake of a financial and economic crisis of at least generational magnitude, our government will be rewriting the rules of the financial industry. And “our government” includes not just the pedigreed scholars in the executive branch (Larry Summers, Christina Romer, Austan Goolsbee, etc.), but Congressional representatives like John Shimkus – “like” in the sense that they were selected for their jobs, and for their committee seats, in exactly the same way that Shimkus ended up discussing the crucial role of fossil fuels in sustaining plant life on this planet. And when it comes to legislation, Summers, Romer, and Goolsbee have exactly zero votes between them; Shimkus has one.

Planet Money had an interesting interview a while back with John Campbell, one of those people on the House Financial Services Committee. Campbell reminded me of a college student who’s about to take a really hard math class, and knows he isn’t a math whiz, but is fairly confident that if he studies hard he can probably figure out enough to do a decent job.

I’m not sure even in my own mind – if I were king – I’m not sure what I would do at this point and I don’t think I’m alone in that viewpoint. This stuff is not easy; there are a number of different alternatives, a number of different thoughts on how to do it. . . .

One of the debates . . . is if it’s too big to fail, can it be regulated enough that it won’t fail. Maybe. I’m not sure. . . .

To me, it’s an intellectual exercise, too, which I find very fascinating, and it’s a problem-solving exercise, which I’ve always liked to do . . . I was in business. I was essentially a startup and turnaround guy. I went into businesses that were in trouble and tried to figure out how to turn them around. And so right now we now have an economy in trouble, and this is a little bit the same sort of thing on a much bigger scale. [Laughter.]

The first time I heard that interview, I was terrified.

Now I don’t mean to be hard on Campbell. Few people sound as smart on a microphone as they do with the benefit of reflection and the backspace key (the writer’s best friend), and to some extent he’s just saying he has an open mind, which is a good thing. I didn’t find Campbell particularly insightful, or particularly dumb. He just seemed like a normal, well-meaning, earnest guy.

But on reflection, maybe that’s the way it should be. When it comes to our representatives, the point of our particular kind of democratic system isn’t to select for expertise, or intelligence, or ability to understand policy issues. If it were, we should all be profoundly depressed, because it has obviously failed. The point is to ensure accountability, which  means that the people making decisions have to answer to someone.

What alternative is there for redesigning our financial system? Imagine you instead entrusted the job to some committee of professional economists from Harvard, MIT, and all those other fancy places. How would you decide who would be on the committee? And do you really want a bunch of economists? Some people would want to include people from Wall Street; others would want to include people from other disciplines, like psychology and political science and history; others would want to include people from Main Street. Any group you managed to convene would be assaulted with charges of bias. And anyone who didn’t like the outcome would claim he wasn’t bound by its ultimate decisions.

Expert commissions have to have their work approved by Congress before it becomes law, because Congress, for all its imperfections, is the tool we’ve got for ensuring accountability and thereby creating political legitimacy. Which brings us back to John Campbell.

First, Congressmen do have staffers, many of whom are very knowledgeable about their areas of expertise, particularly when you get to the committee chairmen. They are getting all sorts of intellectually reputable input – from the executive department, from hearings, from think tanks, from the newspapers, and maybe even from the Internet. They are also getting input from their constituents, who presumably are representing their own legitimate interests. (Let’s pretend we don’t have problems of false consciousness for a moment so I can avoid a huge tangent.) At the same time, however, they are also getting input from lobbyists and major campaign contributors. Ideally, we want them to make decisions that are in the best interests of their constituents and the country as a whole (probably in that order).

Ultimately, I think this means two things. First, the policy discourse – even when it deals with something complex like systemic financial regulation – has to be conducted in terms that a non-specialist Congressman can understand. Second, the process by which Congressmen gather information and make decisions has to be as transparent as possible. A policy debate conducted in the open, where the public understands the issues at stake and understands who is voting for which position and why, should be one where it is harder to reward major donors and special interests.

For the opposite, we need look no further than the Commodity Futures Modernization Act of 2000 – passed, unread by anyone except the lobbyists who drafted it, in the dying moments of the Clinton administration. And that bill was even sponsored by Phil Gramm, a onetime economics professor.

This is how I learned to live with John Campbell. This isn’t particularly insightful to anyone who’s thought about representative democracy, and I’m sure some of our readers will find it painfully naive. But I like to think that maybe there are people on the House Financial Services Committee who are secretly not so sure about the difference between preferred and common stock, and maybe they will read Financial Services for Beginners, and maybe that will help them understand what’s at stake so they can make an informed decision rather than just voting the way the lobbyists want them to vote.


Originally published at the Baseline Scenario and reproduced here with the author’s permission.

4 Responses to "Our Fate Is in Their Hands?"

  1. Guest   April 20, 2009 at 3:37 pm

    “Imagine you instead entrusted the job to some committee of professional economists from Harvard, MIT, and all those other fancy places. How would you decide who would be on the committee? And do you really want a bunch of economists? Some people would want to include people from Wall Street; others would want to include people from other disciplines, like psychology and political science and history; others would want to include people from Main Street.”China has been working on its performance as a centralized planner for some time now. It’s conclusion: Policies of gradualism designed by political-economic historians.Certainly China has made policy mistakes. It’s failures to properly forecast supply and demand has led to bouts of inflation for example. But in an era where centralized planning is needed, they seem to be quite proactively on the mark. Global trade and their dollar reserve growth are slowing and they know that their rural migrant labor needs to have a (much) higher income – so the Chinese government is focusing on developing its domestic demand without confusion or delay. China appears to be changing in the directions that distributed control would ultimately lead – but getting there faster and with less pain.The main problem with China’s centralized planning is the ultimate ends it seems to be working toward though. For example, they are discussing the possibility of yuanization with Argentina right now. A similar discussion does not appear to be occurring with the fiscally disciplined Chile… China recently got into a spat with the IMF over who gets to make loans to the African Congo… China’s current domestic stimulus package is partly fiscal. The other part consists of instructions to its state banks to make lots of loans to its citizens to finance their consumption…Therefore the people you want designing gradualist centralized policies would not only be political-economic historians, they would also be able to resist the temptation to use that knowledge to channel flows of wealth towards themselves. People like that, people like Rudi Dornbusch, are very hard to come by.