A Canadian's random thoughts on personal finance

Nov 15, 2011

Occupying Bay Street

You may not know this about me, but I'm an avid lacrosse fan. I have season tickets to the Toronto Rock at the Air Canada Centre on Bay Street. For those unfamiliar with the game, it's a rough, fast-paced game, a lot like hockey, except there's a net on the end of your stick you use to catch the ball, and you're running on turf, so you can turn on a dime. It's higher scoring than hockey, with a typical final score something like 12-8. In fact, the rules on scoring seem designed to make for one highlight-reel goal after another. Oh, and cross-checking is legal. It's pretty cool.

There are times, though, when the refs just seem to like to hear themselves call penalties. Play stops, and a team plays one, sometimes two, players shorthanded. Sometimes there seem to be more players in the box than on the bench (at least Rock players!) and you wish the refs would just lay off and let the players play.

But one thing I never wish for is that the game had no rules. If the rules are fair and balanced and not too onerous, and enforcement is fair and balanced and not too onerous, then you have the ideal situation where two teams of self-interested players compete with each other in a vibrant contest that benefits everyone from the players to the fans to the hot dog vendors.

Another thing I never wish for is that they'd stop keeping score. Sure, it's always disappointing to be on the losing team, but it's equally unfair to refuse to reward those who achieve excellence while playing by the rules, and it would be demeaning to the players to suggest that they can't cope with losing a game or two. Worse, it would undermine the very system that drives them to excel.

Money is also a way to keep score. This is surely not any kind of newsflash to anyone. What is less obvious is why lending money to a friend is so fraught with danger, but I think the reason is clear. When dealing with your circle of friends, you know these people intimately. You know when someone has been good to you and deserves your kindness in return. You know when a friend needs your help, and if they have been a true friend, you offer that help knowing that they would do the same for you. You don't need money for friends.

Money is for keeping score between strangers. In societies as large as ours, we must interact constantly with people we don't know. None of my friends happen to be able to provide me with Cheerios, or coffee beans, or gas for my car, on a regular basis. I get these from strangers, and we use money in an attempt to have everyone contribute their fair share to each other. When you lend money to friends, you are necessarily treating them as strangers, and that's why it feels so strange.

As a system to keep track of the value of the work people do for each other, money is imperfect—otherwise how is it that the best things in life are free?—but it works better than any other system we've tried, and we've tried a lot. Money is not a perfect measure of economic value, but it's not too shabby. However, money is a very poor measure of kindness, or of humour. It is a poor measure of justice. (Should we replace all prison sentences, court injunctions, and restraining orders with fines?)

Capitalism is a good scorekeeping system, but it's a lousy moral philosophy.

The debate over capitalism is confusing because the debaters don't recognize that they are arguing semantics. It's plain to see that a free capitalist economy has demonstrably produced more prosperity for more people than we've ever seen in history. It's also obvious that the profit motive is just greed, and greed is not the moral value upon which we want to pin our hopes for society. I think a lot of the folks arguing over the merits of capitalism might actually be surprised to find they agree with each other once the distinction is made between capitalist system and philosophy.

The true Big-C Capitalists (those who use capitalism as their primary moral compass) argue that there should be no regulation at all. That we should do away with rules and referees, and that profit should be the only motive. This is fine so long as you don't mind our economy being run by the Sean Averys of the world.

I think western society is supported on three great pillars: (1) democratic legislation, giving the people a say in the rules that govern them; (2) capitalist economy, giving the people a means to gauge the equity of their interactions; and (3) public education, giving the people access to the knowledge and skills they need to thrive. At their essence, the Occupy Wall Street protests cover all three of these areas. To the extent that the protestors are standing up against the undermining of these three pillars, I'm behind them.

However, much of the Occupy Wall Street debate seems to argue over more versus less regulation. This is just as absurd as clamoring for more versus fewer rules in lacrosse: if the rules are unfair, it doesn't matter how few there are. If the rules are unbalanced, their quantity doesn't matter: the game won't be worth playing. What matters is not how many rules there are, nor how strict they are, but how equitable they are, how fairly they are enforced, and how effective they are at making the game what we want it to be.

Preet at WhereDoesAllMyMoneyGo recently posted a video of Peter Schiff discussing economics with the Occupy Wall Street protesters. Take a look if you want to watch a debate that goes nowhere because the opposing sides don't recognize that they are not making opposing arguments.


Michael James said...

I agree with you that many of the arguments between people about the "occupy" movement are largely semantic in the sense that the two sides attach different meanings to the same words.

I also strongly agree with your point about the nature of regulation mattering. I hear so many discussions about regulations as though they were a commodity and the only question was how much to have. We need sensible regulation. It is necessary to examine details in all cases. We may all agree that businesses should not be allowed to add poison to the food they sell, but exactly how much should they pay to have government examine their products for poisons? We need to examine detils to come up with sensible answers.

Anonymous said...

Hi there. Just stumbled on your blog, on my way to financial independence. You had a great thing going. Are you going to resurrect it?

Patrick said...

@niterainbow: Thanks for the kind words. In some sense I've already said everything I have to say on this topic. I do have another rent vs. buy argument formulating in my head, and that might become an article, but with Toronto's current real estate market, those articles seem a little too easy somehow. :-)