If Hegel Ran Wall Street

Philosophy is a fun way to pass the time. At least, sometimes it is. Philosophy professors can be fun. They can teach us things that we never imagined, and they can stimulate us in ways that provide longstanding benefit.

A lot of them also want to be relevant.They want to use their advanced wisdom to offer practical advice, or, at least, to show us how to analyze real life.

For being philosophers they are somewhat at a disadvantage when it comes to practical concerns. Their experience does not include dealing with or even observing the workings of, say, the financial markets.

Philosopher J. M. Bernstein does not exactly want to show Wall Street the error of its ways, but he is happy to allow Hegel to shed some light on its follies. Link here.

Hegel was a great philosopher, but he was not a great capitalist philosopher. He criticized the philosophers who had created the intellectual fundaments of the free market system.

Many people consider Hegel to be among the great minds of Western civilization. And many others assume that because he was a genius, he was also right. He might have been, but there are plenty of geniuses out there who think that Hegel was anything but right.

For most people, Hegel derives his status from the fact that they cannot understand a word of what he is saying. Others are in awe of Hegel's genius because he discovered that, at night, all cows are black.

If you would like to read a clear and intelligible account of Hegel's philosophy, placed within the context of his fellow German idealists, I recommend Josiah Royce's book: Lectures on Modern Idealism.

Among many philosophers German idealism is the gold standard for sophisticated thought. Kant and Hegel lead the band; they are philosophers' philosophers.

Before taking a look at what Hegel would do if he ran Wall Street, and before looking at his thought on its own terms, let's examine its cultural consequences.

A while back I posted about a book by Joel Mokyr that made the following point: that the British Industrial Revolution grew and developed on the basis of the philosophical and cultural influence of people like liberal political and economic philosophers like David Hume and Adam Smith. I though it an important point, and still do.

When we look at German idealism, one thing that we can note is that it produced a culture that was instrumental in fostering government policies that one can only cause an unspeakable monstrosity.

And that is true even if we do not add the pernicious influence of Hegel's most famous acolyte, Karl Marx.

Say what you will about David Hume and Adam Smith, submit their work to all of the Kantian and Hegelian critiques you like, you would have been a lot better off living in the culture that their thought helped produce than you would have been in the culture that fed off of German idealism.

If you would have wished to live as a free individual, Adam Smith would have been a much better friend than Hegel.

I mention that to allow us to keep things in perspective. Philosophers contribute to cultures; they promote values and attitudes. It is entirely fair, in my view, to judge their works, not just on their own terms, but in relation to the kinds of cultures that their works have sustained.

Even if you do look at Hegel and Heidegger on their own terms, you will note that they believe that historical figures can embody their philosophies. For Hegel, it was Napoleon. For Heidegger, it was Adolph Hitler.

Where Adam Smith might have us admire George Washington, Hegel believed that Napoleon represented an important historical moment in the great dialectic between matter and spirit.

Before examining the merit of different philosophers, ask yourself who best represents your values: George Washington or Napoleon?

You should not swear adherence to a philosophy just because it is smart, even brilliant, even the work of genius.

More than being a great philosopher, Hegel was a master mythmaker. He did not think through practical problems and draw conclusions from the evidence. He invented a grand mythic construct and jammed all of reality into it. The most famous myth was the dialectic of the master and the slave.

Where Hegel posited the inevitability of the slave's rebellion against his master, because it fulfilled the terms of his narrative, more than a few politicians and activists have incited rebellion because they believed that reality had to mimic myth.

Hegel told stories; he spun narratives; he believed that these stories drove history.

Narratives have a logic all their own. Unfortunately, the logic of fictional worlds is not the same as the logic that is at work in the marketplace.

Among other reasons, because fictions are never judged by their link to reality, or their ability to render reality; they are judged by their logical coherence and consistency.

This tell us why despotic regimes, especially those that are run by self-appointed philosopher-kings, do not care about the consequences of their policies. They care only about their ability to maintain their own power.

If you want to do a Hegelian analysis of Wall Street you need to fictionalize the players, to the point of caricature, and make them into shadows of themselves.

If you read Bernstein, you will find that it makes a good story. That, in itself, does not mean that it is true or useful.

Once you extract the relevant fiction, the syntactical maze of Hegel's philosophy becomes strangely simple, even simple-minded.

As Bernstein explains, Wall Street got into trouble because bankers were letting their lust for profit lead them to the worst extremes of human financial irresponsibility.

Given that the profit motive must lead to such excesses,  the world now needs more regulation. Bernstein explains that if Wall Street's bankers had studied their Hegel they would welcome regulation because regulation would lead it back onto the pathway to virtue.

Bankers are motivated by their unbridled lust for profit, and without regulation they will not perform any social useful functions, like allocating capital efficiently.

As I say, this is easy to understand. It comes straight from the Obama playbook. You have heard it many times before. So many times, that it is useful for us to allow Bernstein to show us how it derives from German philosophy.

But, is it real? Of course, it isn't. When you make Wall Street bankers into a perfect embodiment of Adam Smith's philosophy you ignore the fact that Adam Smith did not see people as the incarnation of his ideas.

And, it is far from being self-evident that the financial crisis was caused by under-regulation. Nor is it self-evident that the mortgage and housing markets were an exemplary instance of unfettered free markets.

One might argue, and many have, that the invisible hand of the markets was overwhelmed by the heavy hand of government in the housing and mortgage markets.

Ignoring the role of government facilitates Hegelian myth-making, but we should not ignore the role of federal agencies in the mortgage market meltdown. Whether the Federal Reserve or Fannie Mae or Freddie Mac or the Congress or the administration... the market was anything but out-of-control. It was overly regulated.

Had they been left to their own devices, bankers would have exercised prudence and caution in making mortgage loans. Once a government agency tells them that they must make loans to people who cannot afford to buy houses, or that they are allowed make loans to people who cannot make down payments or provide proof of sufficient income, you are not dealing with a free market.

Think about this: left to his own devices, your everyday banker would tend to exercise caution in making loans. Government regulators are under no such constraints. They are not dealing with the bank's money. They are following their own, or Hegel's ideas.

Thus, when they do not like the looks of the world produced by the free market, they are more than happy to suspend it or nudge it in the direction that would satisfying their ideas and theories.

When Hegel insists that bankers are driven by their venal impulses, while the government, naturally, would tend to represent the public interest, perhaps he has simply gotten it backwards.

One could even argue that the more strict the regulatory atmosphere, the more people will be pushed and prodded to cheat, to game the system, to take whatever they can get.

By my lights, people are not naturally venal monsters. Excessive attempts to twist them into a form that satisfies idealistic thought will bring out the worst in them.