A few days ago, I wrote a flow of conscious piece titled "Contrived Markets." The thesis of the article was that many of financial tools created in the financial services revolution that took place last decade seem to be at odds with the concept of property rights.
A reader claimed that the post was rife with contradictions.
I thought the observation odd. The gist of the article was to point out conflicts between modern financial tools and the classical concept of property rights. Many of the tools of the modern capitalist are effectively the negation of property rights of others. Notably, short selling and certain methods of pooling risk undermine property rights.
A post with contradictions as it theme will, by its very nature, have contradictions in it.
This is simply a very simple application of the reflective paradox. An article with x as its subject will include x.
The comment, in and of itself, doesn’t merit a response; However, I feel that there is an important issue that needs to be addressed.
This issue is largely about the direction of the conversation. Is the conversation an attempt to expose faults that are undermining a system, or is the conversation about creating contradictions that will undermine the system in the future?
In my post, I was trying to explore the faults in the American financial system that led to a market implosion. I believe that this is affirmative discourse.
Were I simply spouting contradictions for the purpose of obfuscation, then I would be engaged in negative discourse.
The financial collapse of 2008 shows that there was something fundamentally flawed in tools of the modern financial system. The financial tools we have are a product of discourse. Much of this discourse takes place in Universities led by a professoriat enthralled with Hegelian/Marxist methodologies.
As there was something fundamentally wrong in the financial tools, I think one can conclude that there was something fundamentally flawed with the discourse that created the tools.
The discourse that takes place in Universities is flush with clever paradoxes and constradictions. Quality discourse would have drawn out and removed the systemic faults. The discourse that took place in our universities appears to have had the opposite effect. The discourse drove systemic faults in the foundation of the financial system. These systemic faults eventually created riffs which took the whole system down.
The nature of language and logic pretty much assure that there will never be a system completely free of contradiction and paradox. Complaining about the existence of paradox is a waste of breath. In my opinion, the real question is the direction one takes discourse on paradox. Is the discourse trying to expose and reduce the effect of systemic faults, or is the discourse driving systemic faults into the foundational level?
Answering this question is difficult as it involves divining the intent of the speaker. Despite what many pundits pretend, we cannot look inside the minds of others and perceive their intent.
We can, howover, look at our own intentions.
We can also look at the direction of past discourse.
Since the 70s, the financial markets have been dominated by the notion that one can create complex mathematical models to hedge risk. These mathematical models make heavy use of derivatives and programmatic trades.
Much of the hedging depends on short sales. Short selling is a fundamental negation of property rights.
The system of derivatives have has some other negative consequences. They have created mechanisms that allowed companies to list liabilities as assets.
In my life time, these complex mathematical models have led to a series of spectacular financial failures.
I believe that we can hold up the discourse that created these financial tools as examples of failed discourse.
Unfortunately, it appears that we have not learned from the recent past.
Congress is currently seeking the creation of a Cap and Trade market based largely on the thought process that created Enron and Credit Default Swaps.
Both of these contrived systems not only failed to achieve their goals. The systems created systemic faults that harmed the financial system at large.
It is a very painful thing to watch.