Govt' Bailouts Disruptive, Politicized - Richard Epstein

Complete video at: http://fora.tv/2009/03/23/Uncommon_Knowledge_Richard_Epstein

Law professor Richard Epstein criticizes the Obama administration for backing what he views as an overly-politicized bailout process, rather than allowing bankruptcy law to handle the collapse of large corporations like GM. According to Epstein, there is no liquidity crisis, but a crisis of confidence in long-term transactions.

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Considered one of the most influential legal thinkers of modern times, Richard Epstein brings his libertarian views to bear on the current financial crisis -- "government incentives were perverse, so the actions of the private parties were perverse" -- and rates the performances of George Bush and Barack Obama in their responses to the crisis.

He speaks to the importance of contracts and the constitutionality of the "ex post facto" taxation on AIG executives and the Employee Free Choice Act embraced by President Obama.

Finally he speaks of his personal and professional dealings with Barack Obama when they were law school faculty mates at the University of Chicago. - The Hoover Institution

Richard A. Epstein, the James Parker Hall Distinguished Service Professor at the University of Chicago, is the Peter and Kirsten Bedford Senior Fellow at the Hoover Institution. Epstein is also, as of 2007, a visiting professor of law at NYU Law School.

Peter M. Robinson is a research fellow at the Hoover Institution, where he writes about business and politics, edits Hoover's quarterly journal, the Hoover Digest, and hosts Hoover's television program, Uncommon Knowledge.

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[smmclaug75]

@eirefrance I know of absolutely no instance in which Hayek made a general claim advancing the "rationality of human society" as something that can "lead to a better world." That's not a simplification, it's a complete fabrication. It doesn't take more than 500 words to get the core essentials right.

[smmclaug75]

@MSimky Epstein is a lot smarter than that. He does not indicate that the Dow is the best indicator for how the country is doing, but rather the general financial climate--incentives, confidence, etc.--for businesses in America. The whole lead-in to the question isn't shown here.

[ieodksnw787]

just me or racist commercial? (super guillermo)

[MSimky]

Why is the stock market the best indicator of how the country is doing? How about health, longevity, happiness, education (literacy rates, math scores), quality of infrastructure, state of the environment?

Even if all you care about is corporations, most of the capital comes from debt, not equity.

So why should we focus only on the stock market?

The stock market was booming while banks were making loans that would never be repaid. It's not a good indicator of economic health.

[Vodka2389]

No, Hayek was a rationalist, more specifically, praxeologist, and not a general equilibrium economist.

May be later in life he moved toward Popperism, but that's not the work for which he's mostly recognized.

[hannel19]

@neniuki What do you mean?

[eirefrance]

Except Hayek advocated changing the political climate based on one important a priori notion; that the rationality of human society (unsupported by the evidence but assumed by Austrian School economists) will lead us into a better world if only the govt weren't there keeping people from doing good. And, yes, I simplify. After all, there are only 500 characters to use.

[neniuki]

And just to touch on the disconnect with reality part - there's no such disconnect. Rationality, in the context of economics, just says that people act in order to satisfy their preferences. What those preferences are, or how they might change in time, is beyond the scope of economics. The eternal truth of man as an actor does not change, though.

[neniuki]

Yes, and that is true, but first of all, Hayek wasn't really an apriorist, but a general equilibrium economist, but let's put that aside for now. You were implying that the Austrians say that all economical theorems are necessarily true; this is not the case. You can, and you must, test your theory, and to do this you must see if it is logically coherent. This is the most rigorous of all tests.

[eirefrance]

It was Hayek who said 'economic theories can "never be verified or falsified by reference to facts. All that we can and must verify is the presence of our assumptions in the particular case." '