The Conservative Case Against Innovation

Courtesy of Economist’s View, this Tom Tomorrow piece on what happens when you let exotic new instruments grow rapidly: unexpected consequences.

While Tom Tomorrow is a Leftist, here he is making a conservative case: what happens when we create a new institution and rapidly expand it? What are the social consequences.

Of course, we “do not know” until a disaster occurs. Then we know to well.

There was a conservative case to be made against the rapid expansion of mortage-backed securities. Likewise, there is a conservative case to be made against things such as homosexual marriage laws. These are new things we do not know the consequences of.

On one side are libertarians, who say, “You can only stop these contracts through violence, and the first rule of civilized society is never to initiate violence.”

On the other side are conservatives, who say, “The state exists to protect against against the chaos of nature. We are at war with uncertainty, becauese bad choices can lead lost lives of innocent people who were caught up in your innovations.”

19 thoughts on “The Conservative Case Against Innovation”

  1. “While Tom Tomorrow is a Leftist, here he is making a conservative case:”

    Then again, can’t leftism and conservatism intersect on various issues? From my examination, they are not inherent rivals, and as a matter of fact they they can be one-in-the-same if leftism is the status quo of certain constituencies.

  2. I think the MBS has been around since 1930. I don’t think they were the problem. They were a valuable tool in resolving the S&L crisis. The rapid expansion that rocked the boat was of exotic subprime, which was created to address a class of buyers who could not qualify for a mortgage otherwise.

    As for gay marriage, I would say the the lesson from the mortgage meltdown is the opposite. Exotic subprime skated around the ordinary rules and created unintended consequences – the mortgage meltdown and the credit crisis. When couples want to marry, the traditional marriage contract is probably the best means. We already know it works and its rules.

  3. sonofsamphm1c ,

    As for gay marriage, I would say the the lesson from the mortgage meltdown is the opposite. Exotic subprime skated around the ordinary rules and created unintended consequences – the mortgage meltdown and the credit crisis. When couples want to marry, the traditional marriage contract is probably the best means. We already know it works and its rules.

    I’m not sure what you mean by this.

    If by ‘the traditional marriage contract’ you mean that marriage between a man and a woman, you capture the conservative argument.

    If you do not mean this, I will try to follow your argument:

    Traditionally mortgages have been created between those with cash and those with good credit ratings.

    A quantitative shift was created, allowing those who do not fulfill this criterea to gain mortgages.

    Disaster ensued.

    Likewise, traditionally marriage have been crated between a man and a woman.

    A qualitative shift was created, allowing those who do not fulfill this criterea to gain marriage.

    Therefore, the conservative lesson is that the qualitative shift should be encouraged.

    Which one of these chains do you endorse?

    Jeffrey,

    Then again, can’t leftism and conservatism intersect on various issues? From my examination, they are not inherent rivals, and as a matter of fact they they can be one-in-the-same if leftism is the status quo of certain constituencies.

  4. In the example civil unions, etc. are more similar to exotic subprime than to MBS. MBS have an extensive record of stability and success. What expanded rapidly was exotic subprime, and it had extensive negative unintended consequences. It was a means of skating around the rules to allow a category of people access to homeownership. Civil unions, etc. are a means of allowing a category of people access to some of the benefits of marriage. HUD had to force Fannie and Freddie to buy exotic subprime. Fannie and Freddie did not want much of it in their MBS. They violated their standards.

    MBS are traditional – since 1937 they have allowed for a very high percentage of home ownership in America. Marriage is the better means for allowing couples to enter into their contracts. That avoids unintended consequences as the institution is well tested and well understood. It allows for a far less complicated society. One system for all people – far easier and less risky.

  5. If I am understanding you, both homosexual civil unions and homosexual marriages are exotic instruments, with civil unions being more exotic?

  6. A bifurcated consciousness is common. The left is for conservatism in one ecosystem (the environment) but against conservatism in another ecosystem (the social ecosystem). They are against intelligent design and pro-evolution in one system (biology) but favor intelligent design and oppose evolution in another (society). If contradiction mattered than these contradictions would create real cognitive dissonance whiplash. Nassim Nicholas Taleb made an interesting remark: many people accept that their dog evolved but very few accept that their car evolved.

  7. If one considers marriage as a method of reducing risk-taking, then gay marriage would completely different from exotic sub-primes, which were intended to facilitate risk taking.

  8. Michael,

    If one considers marriage as a method of reducing risk-taking, then gay marriage would completely different from exotic sub-primes, which were intended to facilitate risk taking.

    The exact same argument was used to spreading sub-prime loans: mortgages make people more conservative. The reason BUsh was so proud of the increase in home ownership was that he thought he was engaged in widespread right-wing social engineering.

    The problem with exotic instruments like sub-primes or homosexual marriage, from a conservative perspective is that they bite back in unexpected ways.

    The problem with regulating against such exotic instruments, from the libertarian perspective, is that such laws ‘bite back’ immediately for an unknown benefit sometime in the ambiguous future.

    josephfouche,

    Excellent point.

    Perhaps it is safer for us than the libertarians and conservatives are spread out between two parties — neither has any real chance of seizing power, so we’re left with random experimentation in some domains only, which makes the swings between the two easier to tolerate.

  9. “The exact same argument was used to spreading sub-prime loans: mortgages make people more conservative. The reason BUsh was so proud of the increase in home ownership was that he thought he was engaged in widespread right-wing social engineering.”

    Huh? I was under the impression that the exotic sub-primes were intended to facilitate risk-taking by spreading the risk around. Compared with that, gay marriage would have the effect of reducing risk-taking by encouraging gay people to stick with one partner and punishing them for failure to do so.

  10. Michael,

    Thanks for your comment.

    Huh? I was under the impression that the exotic sub-primes were intended to facilitate risk-taking by spreading the risk around. Compared with that, gay marriage would have the effect of reducing risk-taking by encouraging gay people to stick with one partner and punishing them for failure to do so.

    Two different conceptions of risk are at risk (so to speak) of being confused.

    The common perception of risk is risky behavior: infidelity, drug use, transience, etc. Mortgages and marriage appear to decrease these.

    The statistical definition of risk is variance in outcomes. A mortgage-holder suddenly finds himself in possession of an expensive-to-maintain property that increases at a long-term rate of government bonds, with short-term swings similar to the stock market, that can be used as a source of secured credit. Increased risk from marriages is most straight-forward: a catastrophic injury or claim against either partner in a marriage is likely to bankrupt both.

    Both mortgages (by Bush, et al) and gay marriage (by Andrew Sullivan, et al) are pushed as a sort of ring-wing social engineering: tie down people with greater statistical risk, and their risky behaviors decrease.

    It seems to be backwards to be advocating such exotic applications of those instruments in an effort to decrease one sort of risk at a known expense of another sort of risk, not even counting the unknown consequences of what happens when such exotic instruments explode, but perhaps that’s just the conservative in me!

  11. That’s fair. As you might have noticed, though, statistical risk increase is by no means unheard-of in straight marriages:) Considering that
    a) the risk increases in straight marriage are well documented,
    b) at least one source of risk increase (unplanned pregnancy) is inherently impossible in gay marriages,
    c) society has a vested interest in reducing the numbers of people engaged in the risky behavior that marriage discourages and
    d) there are a number of homosexuals who are demonstrably willing to get married,
    I’d say it’s worth trying.

  12. Michael,

    That’s fair. As you might have noticed, though, statistical risk increase is by no means unheard-of in straight marriage

    Indeed. In the same way (to reply to your three points) the risk increases in prime mortgages are well documented, at least one source of risk increase (diverting mortgage wealth to the stock market) is inherently improbably in subprime mortgages, society has a vested interest in reducing the number of people engaged in risky behavior that subprime mortgages discourages, and there are a number of folks when credit risks that are demonstrably willing to take-out subprime mortgages.

    We don’t know if it’s worth trying because we don’t know what the catastrophic downside is. We know that after it has blown up.

    Or, to put it better, whether exotic instruments are worth trying depends on whether you approach the problem from a conservative (the war against nature is always close to experiencing grave reversals), libertarian (the state is one of the first creatures in nature), or some other perspective.

  13. “In the same way (to reply to your three points) the risk increases in prime mortgages are well documented, at least one source of risk increase (diverting mortgage wealth to the stock market) is inherently improbably in subprime mortgages”

    I agree on the 2nd and 3rd points, but not on the first point, copied above.

    1) Diverting mortgage wealth to the stock market is combining two forms of risk taking into one, increasing statistical risk dramatically. Unless there’s a well-documented risk in all homosexual behavior that doesn’t apply to heterosexual behavior, the two aren’t comparable.

    2) The risks of subprime lending of ANY kind are well documented to the point of near-universality (anyone who’s lent something only to not get it back or to get it back damaged knows this). The people who built businesses on this practice did so not as an experiment with something new (as gay marriage admittedly would be) but as a gamble on something that should have been more familiar with–Maybe they didn’t lend out enough books as kids?

    The nature of the exoticism has to be taken into consideration when judging their worthiness of risk, and I see exotic financial instruments as being a different nature from gay marriage.

  14. Michael,

    Thank you for your comment.

    1) Diverting mortgage wealth to the stock market is combining two forms of risk taking into one, increasing statistical risk dramatically. Unless there’s a well-documented risk in all homosexual behavior that doesn’t apply to heterosexual behavior, the two aren’t comparable.

    Anal sex and disease transmission. The same also applies to dry vaginal sex, but that is not normative in western countries. Additionally, any infidelity will be with the more-diseased-prone homosexual community. [1]

    2) The risks of subprime lending of ANY kind are well documented to the point of near-universality (anyone who’s lent something only to not get it back or to get it back damaged knows this). The people who built businesses on this practice did so not as an experiment with something new (as gay marriage admittedly would be) but as a gamble on something that should have been more familiar with–Maybe they didn’t lend out enough books as kids?

    Presuming you mean statistical risk, it was precisely the application of quantitative analytical methods (and the quants who ran them) to mortgages which provided cover. The argument that we knew more of the risk of subprimes than gay marriage strengthens the conservative case against gay marriage v. the conservative case of subprime mortgages.

    The nature of the exoticism has to be taken into consideration when judging their worthiness of risk, and I see exotic financial instruments as being a different nature from gay marriage.

    Considering the role of the family in western civilization, it strikes me that exotic manipulation of family structure is of graver concern than exotic manipulation of housing stock.

    Likewise, the concept of creative destruction is more readily accepted in industrial organization than social bonds.

    Could you explain?

    [1] http://www.tdaxp.com/archive/2005/07/06/homosexuals-disease-etc.html

  15. It just occurred to me that a better analogy might be useful. As it happens, I read that article on SUV marketing from one of the Detroit threads and it would seem to be a better analogy to exotic instruments.

    In packaging SUVs, two known risks (driving under adverse conditions and older truck technologies) were combined into an exotic new package by clever marketing. This created unforeseen new risks: high roll-over rates from high centers of gravity, reduced crash protection from off-road optimized frames, unskilled/indifferent/aggressive drivers, increased fuel usage and (for Detroit) a big-ass laurel wreath to sit on.

    In a similar way, exotic sports cars are also a good analogy. Designed for driving that is known to be unsafe, the buyer gambles that the combination of new technology with old risks won’t put him in a ditch (or worse) somewhere.

  16. “Anal sex and disease transmission. The same also applies to dry vaginal sex, but that is not normative in western countries. Additionally, any infidelity will be with the more-diseased-prone homosexual community.”

    By this argument, lesbian marriages should be more acceptable than straight marriages–they lack the equipment to engage in penetrative sex that males do. Disease transmission amongst straight couples is all-too-normative in many societies (witness the AIDS epidemic in Africa and the debate over the cervical cancer vaccine here). And the reduction in risky behavior by gays would also reduce the disease load of the homosexual community as a whole.

    As for the risks of any kind of tinkering with family structures, there’s the 800 lb gorilla in the debate–we already do, all the time. We have:
    high divorce rates,
    marriage across classes and nationalities,
    marriage by people with known mental illnesses and/or other forms of disfunctionality,
    marriage by workers who travel all over the place for their jobs(stress of long or frequent absences plus more opportunities for infidelity),
    marriage by workers in dangerous professions like police work (emotional and financial stress cause by the risk of coming back dead, disabled or disturbed) and
    marriage by soldiers and sailors (previous two combined).

    And this doesn’t count circumstances of risk to children of marriage. Under the circumstances, forbidding a marriage because the risks are unknown when we routinely allow other types of marriages with very high risk levels and can see societal benefit from those marriages seems pointless.

  17. Michael,

    Thank you for your comment.

    SUVs, as you mention, were also an exotic instrument. Bad long-term consequences is that in-production electric cars cannot be safely driven on American roads, because of the safety hazard posed by SUVs. Likewise, SUVs have helped enable the invasion of Georgia, and the possible breakdown of the post-8/2/90 security regime [1,2].

    By this argument, lesbian marriages should be more acceptable than straight marriages–they lack the equipment to engage in penetrative sex that males do.

    Yes. I think it’s also interesting that traditional sanctions against lesbianism have been much lower than traditional sanctions against homosexual sodomy. For instance, while male homosexuality was met with death at the Puritan colonies, lesbian was considered a subset off lewdness, with obviously ligher discipline.

    Disease transmission amongst straight couples is all-too-normative in many societies (witness the AIDS epidemic in Africa and the debate over the cervical cancer vaccine here).

    As I mentioned, hence the role of dry varginal sex and anal sex in spreading AIDS in Africa.

    And the reduction in risky behavior by gays would also reduce the disease load of the homosexual community as a whole.

    First, I don’t know why would think this. Disease spread through super-vectors, while you urge legal subsidies for those who (presumably) already tend towards monogamy (presuming homosexual marriage increases monogamy).

    As for the risks of any kind of tinkering with family structures, there’s the 800 lb gorilla in the debate–we already do, all the time. We have:…

    I’m not sure what you make of your litany here. In your previous post, you use SUVs as an example of what can happen when we multiply risks. Your argument wrt homosexual marriage, howver, is taht we are merely multiplying risks.

    Additionally, the conservative case against homosexual marriage comes down to the exotic instrument involved: you reply that a number of non-exotic instruments are already in the marketplace. So what does your litany even matter?

    Regarding your last sentence, I don’t know if you mean you can see into the future, or that you “see” only possible benefits and not actual consequences. Regardless of the formulation, the sentence comes across as meaningless.

    [1] http://www.tdaxp.com/archive/2008/08/10/8808-like-8290-and-91101.html
    [2] http://www.tdaxp.com/archive/2008/11/18/supplier-failure.html

  18. “First, I don’t know why would think this. Disease spread through super-vectors, while you urge legal subsidies for those who (presumably) already tend towards monogamy (presuming homosexual marriage increases monogamy).”

    If one assumes that marriage discourages the sorts of behavior that spreads VDs, then it’s logical that allowing marriage where it has been previously forbidden would reduce the rates of VD transmission within that community.

    As for my ‘litany’, the point wasn’t to suggest a multiplication of risk factors (it may happen in some instances, but it isn’t implicit to the concept) but to point out the sheer variety of possibilities- good and bad- inherent in straight marriage. Forbidding gay marriage because you don’t know what might come of it seems an odd choice when you already allow straight marriages with known problems. Unless you’re ready to consider banning all marriages with more than a certain amount of statistical risk, I don’t see where banning gay marriage accomplishes anything.

    Lets try another approach. Polyamorous marriages, usually in the form of polygynous (multi-wife) marriages, are traditional in many parts of the world; their risks are well documented. If the untried newness of gay marriage is that big a turn-off, then legalizing polygamy- with provisions to reduce known problems and prevent combination with other known problem factors- should be perfectly ok. Is it?

  19. Michael,

    Thanks for your comment.

    If one assumes that marriage discourages the sorts of behavior that spreads VDs, then it’s logical that allowing marriage where it has been previously forbidden would reduce the rates of VD transmission within that community.

    If super-vectors are included toward monogamy, sure.

    Likewise, if we assume mortgages increase frugality, the best thing we could do for economic stabilization is expand the sub-prime mortgage program.

    Forbidding gay marriage because you don’t know what might come of it seems an odd choic

    The original post agreed with you, saying from a libertarian perspective increasing laws now to prevent to prevent unknown-unknowns later would be strange.

    From a conservative perspective — being wary of exotic instruments — the fear of unknowns unknowns is the whole point.

    If you insist on assuming your conclusion (fearing unknown unknowns is senseless), of course you are going to convince yourself every time.

    Lets try another approach. Polyamorous marriages, usually in the form of polygynous (multi-wife) marriages, are traditional in many parts of the world; their risks are well documented. If the untried newness of gay marriage is that big a turn-off, then legalizing polygamy- with provisions to reduce known problems and prevent combination with other known problem factors- should be perfectly ok. Is it?

    I don’t know what ‘perfectly ok’ is (perhaps you are assuming full mastery of any exotic instrument you care yo use), but if you meant ‘less dangerous,’ then yes, of course.

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