Sunday, May 10, 2009

Ayn Rand - Atlas Shrugged

OK. I'm watching C-Span and they're interviewing a guy from the Ayn Rand Institute and he's arguing (my interpretation) about how the government intervention into the current economic crisis is a huge problem and that free market is instead the solution to the current economic crisis. Since I think too much free market activity combined with leverage is the root of the problem, I obviously disagree. (Some will argue that what produced the crisis is not sufficient to meet their defintion of a free market - all I can say there is that on the continuum of free to controlled economies, I think we've seen the result of swinging too far toward the free end of the spectrum).

Now, I liked Ayn Rand's book "Atlas Shrugged", and even though I read it aobut 20 years ago I think I still recall the free market principles it's built upon - that we all own our own productivity and the government is a parasite that takes what it doesn't deserve.

Here are some observations where I have problems though:
- in the book the most entrepreneurs are all honorable, noble, highly productive, smart. I don't think that applies to those in business who caused the economic problems of today. The bad actors were overstimulated by greed and were rewarded for excess risk taking. End result: If things go right they cash in big on their bets with huge bonuses. If things go wrong the entire economic system suffers. While self-interest tends to produce desirable results and positive spill-over effects in an economy, we've seen that over-leveraged self interest works the opposite way and produces negative spill-over effects. In Ayn Rand's books the heroes by definition would never place the bad bets that bring down not only their companies, but negatively impact the lives of thousands. What does it say about or free market that this appears to have happened with regularity?

- government actors in the book are portrayed as inept and only seeking ways to leach off of the productivity of others. The book sees very little role for government - a very Darwinian outlook of let the strong survive and let the weak die. I'm on board with that idea to point, but I do think there is a role for the government to protect the citizens from predatory activities like we've seen - if for no other reason than no other entity can.

With economic interdependence, our interests grow increasingly interconnected, and it does appear that the actions of a few bad players in the free market today can produce very bad outcomes for the many. To me it seems a form of highly leveraged economic terrorism at work when bad bets placed by corporations, banks or hedge funds can create domino effects that can topple economies. In warfare I've heard analysts use the term "asymmetric" warfare - where a small # of actors can create a large impact.

I see that there is a place for government to step in and prevent the kind of predatory activity we've seen recently. I clearly think the government is the only institution that is able to step in and stabilize the economy currently. Since the free market created the current collapse, I obviously do not trust it to prevent or self-correct the problem that it created. In fact, I think Ayn Rand would despise many of the actions of free market risk takers in creating this mess.

I think there's the danger uniformly interpreting pro-business as free market as the "good guys", and interpreting government as "bad guys." It sees to me business has the potential to create a system where it becomes a parasite (just like the government has the same potential). I think knee-jerk pro-business stances need to be tempered. There's something to be learned here, and an honest evaluation I feel will only make the resulting business climate more sound and stable going forward.


John Drake said...

I saw the same interview.

Your memory of Atlas Shrugged seems a bit off. Some of what you say is in the ball park, but I believe you are missing some of the underlying principles. May I suggest you read it again.

Button Fuzz said...

Thanks John, but I have to decline ... Took forever to read the first time. It was an impulse post based on my immediate reaction (disagreement) to the speaker on C-span from the institute.