Thursday, March 26, 2009

The self-destruct button

Hilzoy, of Obsidian Wings, gets the essential paradox in the spectacle of investment bankers who lost trillions of dollars feverishly defending their bonuses:
If I were an investment banker making millions of dollars a year, I would be trying to convince the people around me to simply take the hit for a couple of years, the better to preserve our ability to go on raking it in in the future.
This raises the obvious question: why don't they do that? Whether you look on this as a matter of mass psychology, a matter of pure supply and demand, or a simple matter of justice, it doesn't matter. Employees who put their company in what amounts to government receivership can hardly claim to have "earned" large bonuses or even high salaries. The collapse of most of the investment banks on Wall Street means that many more traders need jobs than institutions need traders, so the logic of supply and demand argues for a pay cut. And the men and women of Wall Street made their money out-thinking the market; surely they can grasp the current public mood. So why do something that goes against their education, values, and experience?

A serious challenge to any idea will naturally tend to set up a particular dynamic among those who strongly believe in that idea: a tension between the impulse to allow our ideas to evolve, and a fear that compromise with an opposition will unravel them. Several factors can increase the rigidity with which partisans of an idea hold it: the perception that those who defend an idea derive personal advantage from it, or the perception of a connection between ideas that mean compromising one idea would lead to the compromise of other cherished ideas. Consider, for example, this story. I will credit the Vatican and the Brazilian Bishops with enough intelligence and compassion not to actively want a nine-year-old child to carry twins to term. I can only explain this judgement as an expression of fear, the fear that if the church gives any ground at all relating to abortion, they will lose all authority relating to reproductive rights and morality.

Yet nothing destroys an idea as quickly as rigidity. Rigidity confesses weakness. Strong ideas can withstand challenges. Strong ideas can survive compromise. When upholding the implications of an idea leads to harmful results, we generally insist on compromise rather than accept the harm, and good ideas can survive those compromises. We can take children away from parents who abuse them without compromising the ideal of parenthood. We can arrest corrupt politicians without compromising democracy. If the Vatican we cannot accept the actions of doctors who saved the life of a victim of child rape without having the whole edifice of their teaching on reproductive ethics crumble, then perhaps they should think about the apparent fragility of the ideas they teach.If bankers cannot cut their salaries for a few years to save their institutions and the credibility of the financial system, then parhaps they, and we, should reconsider the whole structure of economic inequity in our society.

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