Timothy Burke and I are having the kind of back and forth over the AIG bonuses that I'd hoped to have when we moved to registered comments. I fear that the long siege may, however, have made me intemperate, so if so, I hope he will consider this my public apology.
At any rate, Burke is one of my favorite bloggers, particularly when he writes about academia. His prose is dense, nuanced, and extraordinarily enlightening about the institutional difficulties of creating a perfect university.
I hope he will forgive me for saying that I think he, along with a whole lot of other bloggers, are making a common mistake that conservatives do when they talk about academia.
Burke, like most of the academics I know personally, is aware of the deep problems in academia. (That's not a slam on academia; most institutions have deep problems, and the older the institutions are, the deeper the problems often run). Conservatives critiquing academia do have a point: the culture is nearly monolothic on a lot of issues, and that can't help but chill discourse. Where they are wrong is with the cartoon diagnosis of both the problem and the solution.
Conservatives tend to paint academia as a conspiracy of the smug. What Burke illustrates so well is that academia's problems are both smaller and larger than this: when it fails, it often does so in the ways that all organizations fail to make themselves socially optimal for either their members, or the society to which they belong. Groupthink, self-perpetuating institutional world-views, self-dealing by insiders, and so on, are not problems of academia; they are problems of humanity. And many of the disagreements are on values questions that don't actually have an answer, like whether a college education is properly vocational or aspirational, or whether George Washington or George Eliot were more important human beings to learn about.
I think what Burke's posts show so well is simply that constructing truth, and passing it on, is hard. When academia fails, it doesn't fail because lefties have gleefully seized the precious mind-control machine; it fails because the task is difficult, failure is often hard to detect until too late, and institutions are never perfect. One can argue that the institutional structure of academia makes it particularly difficult to change when it is failing its constituents, but that's not a cause for anger; it's just a fact of institutions. Yet conservatives have too often made this a battle against villains instead of a discussion of institutional reform. They are far too willing to hurl accusations of active malice, or at least, excessive greed for power over young minds. (To be sure, liberals have often been willing to hurl those sorts of accusations right back). And those who make blithe assumptions that it would all be perfectly easy if only they, the good guys, were in charge, can be profoundly irritating, not to mention wrong-headed.
So I'm distressed to see Tim Burke, of all people, making these kinds of statements about AIG:
Considering that the 11-year veteran executive VP says that he's not at all accountable for AIGFP's losses because he wasn't involved at all in the CDS trading and knew nothing about it, maybe the 26-year old MBA might do a fair enough job.
Really? Really, maybe a 26-year-old MBA might do an okay job of liquidating the financial products division of the world's largest insurance company? I was a 28 year old MBA from (she noted modestly) one of the top finance programs in the country, and let me assure you that there is not the faintest whiff of a possibility that I or any of my classmates could have done an adequate job. We would have cost the taxpayer billions.
Among the necessary assets we would have lacked: 1) adequate skill to maintain the company's portfolio trading strategy in a really screwed up market until they could be wound down 2) contacts in other firms who could buy either our securities, or our line of business 3) experience in executing trades so that they make, rather than lose, money 4) knowledge about current market conditions 5) experience with complicated transactions.
This kind of hyperbolic speculation about an industry which he, respectfully, knows nothing about, is the exact opposite of how thoughtfully he approaches the institutional problems of his own industry.
What I find really worrying is that neither he, nor most of the other normally thoughtful commenters making these kinds of statements, appear to give any credence at all to the possibility that this just might be really, really hard--that it simply might not be a matter of throwing a lot of well-meaning guys in there to replace the jerks currently running the place, and by applying the cleansing forces of American middle class values and good old fashioned common sense, make everything all right again.
Would Burke take seriously critics who suggested that his course might be just as well be taught by a freshly minted BA--who would, no doubt, be glad to do it for his salary even without tenure. Or folks who repeated that it just can't be that hard to do historical research, and pointed to their nice neighbor who's working at the village historical society for free?
As I see it, the problems of academia and the problems of financial system reform are very closely related in one important way: the people who understand them best are often those with the most to lose from change. This makes reform difficult and frustrating for those outside who see the real problems inherent in both systems. The true and valid answer that people like Tim Burke offer to critics is that while academia has problems, there is often no clear and easy fix, and that for all the issues, the system as a whole is really valuable. That answer can be self-serving without being untrue.
And I think the same is probably true for finance--indeed, for almost everything. I tend to assume, as a first principle, that most things are probably a lot harder to do than they seem to those who are offering advice from the metaphorical back seat. For all its issues, the financial system is still providing most of us housing loans, insurance, and so forth. It has given us more than it has cost us. We would obviously like to make it cost even less--but it is unlikely that this is such a simple matter as flogging the scoundrels thrice around the public square.