Author: Richard Melson

Education and “Then and Now” Thinking

Ben Shalom Bernanke was Chairman of the Board of Governors of the Federal Reserve System from February 1, 2006, to January 31, 2014.

In many interviews in financial and economic periodicals, he blurts out the fact that his guide in the years surrounding the Great Recession of 2008, in his decisions by the advice of Walter Bagehot of the Economist of London whose main book is called Lombard Street [Project Gutenberg ebook] from 1873:

Lombard Street is known for its analysis of the Bank of England’s response to the Overend-Gurney crisis. Bagehot’s advice (sometimes referred to as “Bagehot’s dictum”) for the lender of last resort during a credit crunch may be summarized by  as follows:

  • Lend freely.
  • At a high rate of interest.
  • On good banking securities.

(Nonetheless, other economists emphasize that many of these ideas were spelled out earlier by Henry Thornton’s book The Paper Credit of Great Britain [archived PDF].)

Bagehot’s dictum has been summarized by as follows: “To avert panic, central banks should lend early and freely (i.e., without limit), to solvent firms, against good collateral, and at ‘high rates’.”

In Bagehot’s own words (Lombard Street [Project Gutenberg ebook], Chapter 7, paragraphs 57–58), lending by the central bank in order to stop a banking panic should follow two rules:

First. That these loans should only be made at a very high rate of interest. This will operate as a heavy fine on unreasonable timidity, and will prevent the greatest number of applications by persons who do not require it. The rate should be raised early in the panic, so that the fine may be paid early; that no one may borrow out of idle precaution without paying well for it; that the Banking reserve may be protected as far as possible.

Secondly. That at this rate these advances should be made on all good banking securities, and as largely as the public ask for them. The reason is plain. The object is to stay alarm, and nothing therefore should be done to cause alarm. But the way to cause alarm is to refuse some one who has good security to offer… No advances indeed need be made by which the Bank will ultimately lose. The amount of bad business in commercial countries is an infinitesimally small fraction of the whole business… The great majority, the majority to be protected, are the ‘sound’ people, the people who have good security to offer. If it is known that the Bank of England is freely advancing on what in ordinary times is reckoned a good security—on what is then commonly pledged and easily convertible—the alarm of the solvent merchants and bankers will be stayed. But if securities, really good and usually convertible, are refused by the Bank, the alarm will not abate, the other loans made will fail in obtaining their end, and the panic will become worse and worse.

We have to ask ourselves: how is it possible that advice from 1873 (i.e., Bagehot’s Lombard Street [Project Gutenberg ebook] crisis-management for that time) can be applicable in 2008?

Does this confirm the off-handed comment in This Time is Different by Ken Rogoff of Harvard that there must be true-but-opaque deep rhythms in history including financial history? Otherwise advice would be useless due to the passage of time and useful patterns would not be discernible.

In fact, Lawrence Summers at Treasury “deluged” Mexico and Latin America with loans to avert an earlier banking crisis following Bagehot’s advice. The logic is that investors must sense that Mexico, etc. will be bailed out at all costs. The idea is to avert a “downward spiral of confidence” by means of visible massive interventions.

Education should always ponder these “then and now” puzzles as part of a beneficial “argument without end.”

Education and the Movies: The Issue of Political Irrationality

The Prime of Miss Jean Brodie is a movie masterpiece that is enormously educational not for the particular details of the story but for the phenomenon of politics as an outlet for personal problems: The Prime of Miss Jean Brodie is a 1969 British drama film, based on the novel of the same name by Muriel Spark. Directed by Ronald Neame, it stars Maggie Smith in the title role as an unrestrained teacher at a girls’ school in 1930s Edinburgh.

Maggie Smith (whom you know from Downton Abbey as the aggressive matriarch) plays a romantically naive schoolteacher at a girl’s school in Scotland, 1930s. She has a “big time” crush on a handsome gym teacher whom she discovers in bed with one of the young girls—“Sandy” and has a kind of nervous breakdown or better, “image of the whole correctness of the world” breakdown.

The teacher sees newsreels of Mussolini in Italy and begins to think of him as a “romantic savior and ‘world-cleaner’ who will clean up the illegitimate situation at her girls’s school in Edinburgh and salvage her dignity and place and prestige and sense of how the world should be. On the one hand Miss Brodie talks about the girls of the school as ‘la crème de la crème’ but how does that comport with ‘Sandy’ and the male gym teacher sharing their beds with each other? The ‘cognitive dissonance’ (incompatibility) in Miss Brodie’s mind is causing her to break down and flee into fantasy land (i.e., Mussolini will restore the romantic world to the way it’s supposed to be). She goes deeper and deeper into this nutty vision of salvation and romantic re-balancing and at the end of the movie, ‘Sandy’ senses that she’s coming unglued and is borderline bonkers. Thus the title ‘the prime of’ can be thought of as ironical or sardonic since the teacher Miss Brodie is flipping out and ‘maps’ her romantic frustrations” onto Mussolini. This is what makes politics so dangerous (i.e., it serves as a “Rorschach test” for people’s inner irrationalities and yearnings and they “see” what they need to see).

Harold Lasswell (died in 1978) spent his life exploring politics and people’s private lives, order, sense of things, grievances, in such books as Psychopathology and Politics.  If you watch the movie The Prime of Miss Jean Brodie you will see how people use politics as a “screen” on which they project their emotions, grievances, hurts, humiliations, hysteria, anger.

Harold Dwight Lasswell (February 13, 1902 – December 18, 1978) was a leading American political scientist and communications theorist. He was a Ph.D. student at the University of Chicago, and he was a professor of law at Yale University. He served as president of the American Political Science Association (APSA), of the American Society of International Law and of the World Academy of Art and Science (WAAS).

He has been described as a “one-man university” whose “competence in, and contributions to, anthropology, communications, economics, law, philosophy, psychology, psychiatry and sociology are enough to make him a political scientist in the model of classical Greece.”

Table of Contents for Lasswell’s Psychopathology and Politics Book

Introduction
Preface
I. Life-Histories and Political Science
II. The Psychopathological Approach
III. A New Technique of Thinking
IV. The Criteria of Political Types
V. Theories of Personality Development
VI. Political Agitators
VII. Political Agitators—Continued
VIII. Political Administrators
IX. Political Convictions
X. The Politics of Prevention
XI. The Prolonged Interview and Its Objectification
XII. The Personality System and Its Substitutive Reactions
XIII. The State as a Manifold of Events
Afterthoughts—Thirty Years Later
Appendix A. Select Bibliography
Appendix B. Question List on Political Practices
Index

(2016 reprint of 1930 edition. Full facsimile of the original edition.)

First published in 1930, this classic study of personality types remains vital for the understanding of contemporary public figures. Lasswell’s pioneering application of the concepts of clinical psychology to the understanding of power brokers in politics, business, and even the church offers insights into the careers of leaders as diverse as Adolf Hitler and, arguably to more recent figures such as Richard Nixon, Donald Trump and the Clintons.

Movies should be your off-campus alternate university. You should ask yourself does this movie and Lasswell’s notions of psychopathology in politics help me understand authoritarian leaders today and such bizarre phenomena as half-dead prisoners in Stalin’s gulags bursting into tears in March 1953 when they learned of his death. Why sob over the death of the man who’s murdering you and tormenting you and your family?

How to See the Rise of Speculative Finance via Novels: Trollope

Anthony Trollope (died in 1882), the great British novelist, gives us a glimpse of the world of speculative finance in the nineteenth century where to some extent the stock market becomes a kind of “betting parlor” where abstract bets can be made on previous bets in a kind of “infinite regress.”

The example here concerns coffee, guano, and something called “Kauri gum” which is the title of a chapter in The Prime Minister, Trollope’s novel, which introduces us to the “betting parlor” tendency, which is not unique to the prelude to our own Great Recession of 2008.

Sexty Parker sympathized with him to the full, — especially as that first 500 pounds, which he had received from Mr Wharton, had gone into Sexty’s coffers. At that time Lopez and Sexty were together committed to large speculations in the guano trade, and Sexty’s mind was by no means easy in the early periods of the day. As he went into town by his train he would think of his wife and family and of the terrible things that might happen to them. But yet, up to this period, money had always been forthcoming from Lopez when absolutely wanted, and Sexty was quite alive to the fact that he was living with a freedom of expenditure in his own household that he had never known before, and that without apparent damage. Whenever, therefore, at some critical moment, a much-needed sum of money was produced Sexty would become lighthearted, triumphant, and very sympathetic. ‘Well; — I never heard such a story,’ he had said when Lopez was insisting on his wrongs. ‘That’s what the Dukes and Duchesses call honour among thieves! Well, Ferdy, my boy, if you stand that you’ll stand anything.’ In these latter days Sexty had become very intimate with his partner.

It was evident on that day to Sexty Parker that his partner was a man of great resources. Though things sometimes looked very bad, yet money always ‘turned up’. Some of their buyings and sellings had answered pretty well. Some had been great failures. No great stroke had been made as yet, but then the great stroke was always being expected. Sexty’s fears were greatly exaggerated by the feeling that the coffee and guano were not always real coffee and guano. His partner, indeed, was of the opinion that in such a trade as this they were following there was no need at all of real coffee or real guano, and explained his theory with considerable eloquence. ‘If I buy a ton of coffee and keep it six weeks, why do I buy it and keep it, and why does the seller sell it instead of keeping it? The seller sells it because he thinks he can do best by parting with it now at a certain price. I buy it because I think I can make money by keeping it. It is just the same as though we were back to our opinions. He backs the fall. I back the rise. You needn’t have coffee and you needn’t have guano to do this. Indeed the possession of the coffee or guano is only a very clumsy addition to the trouble of your profession. I make it my study to watch the markets; — but I needn’t buy everything I see in order to make money by my labour and intelligence.’ Sexty Parker before his lunch always thought that his partner was wrong, but after that ceremony he almost daily became a convert to the great doctrine. Coffee and guano still had to be bought because the world was dull and would not learn the tricks of trade as taught by Ferdinand Lopez, — also possibly because somebody might want such articles, — but our enterprising hero looked for a time in which no such dull burden should be imposed on him.

On this day, when the Duke’s 500 pounds was turned into the business, Sexty yielded in a large matter which his partner had been pressing upon him for the last week. They bought a cargo of Kauri gum, coming from New Zealand. Lopez had reasons for thinking that Kauri gum must have a great rise. There was an immense demand for amber, and Kauri gum might be used as a substitute, and in six months’ time would be double its present value. This unfortunately was a real cargo. He could not find an individual so enterprising as to venture to deal in a cargo of Kauri gum after his fashion. But the next best thing was done. The real cargo was bought, and his name and Sexty’s name were on the bills given for the goods. On that day he returned home in high spirits for he did believe in his own intelligence and good fortune.

(Trollope, The Prime Minister, Chapter 43, “Kauri Gum”)

One could “marry” this mini-essay to the previous one about Dreiser’s novel to get a fuller picture of the story of our technology-and-finance strand of the present world.

There is a potentially unhealthy “dephysicalization” of finance whereby you don’t need to think about actual “coffee and guano and Kauri gum” at all but only on the “betting structure” (i.e., horse races without horses, so to speak).

Is History the Story of Technology? Dreiser’s Novel

Due to the welter of inventions and gadgets around us, we have come to understand the entire past our “path to the present” as the story of technical milestones. This is a very narrow-gauge view of the world, but it is part of our “epochal waters” that buoy us up (i.e., our minds immediately go there without our knowing quite why). Consider the opening paragraph of Dreiser’s (died in 1945) novel, The Financier. The past is explained as a setting for technical change by itself:

The Philadelphia into which Frank Algernon Cowperwood was born was a city of two hundred and fifty thousand and more. It was set with handsome parks, notable buildings, and crowded with historic memories. Many of the things that we and he knew later were not then in existence the telegraph, telephone, express company, ocean steamer, city delivery of mails. There were no postage stamps or registered letters. The street car had not arrived. In its place were hosts of omnibuses, and for longer travel the slowly developing railroad system still largely connected by canals.

Theodore Dreiser (Chapter I, opening paragraph of the novel)

The larger story is described here. Notice the Panic of 1873 as pivotal:

In Philadelphia, Frank Cowperwood, whose father is a banker, makes his first money by buying cheap soaps on the market and selling it back with profit to a grocer. Later, he gets a job in Henry Waterman & Company, and leaves it for Tighe & Company. He also marries an affluent widow, in spite of his young age. Over the years, he starts embezzling municipal funds. In 1871, the Great Chicago Fire redounds to a stock market crash, prompting him to be bankrupt and exposed. Although he attempts to browbeat his way out of being sentenced to jail by intimidating Mr. Stener, politicians from the Republican Party use their influence to use him as a scapegoat for their own corrupt practices. Meanwhile, he has an affair with Aileen Butler, a young girl, subsequent to losing faith in his wife. She vows to wait for him after his jail sentence. Her father, Mr. Butler dies; she grows apart from her family. Frank divorces his wife. Sometime after being released, he invests in stocks subsequent to the Panic of 1873, and becomes a millionaire again. He decides to move out of Philadelphia and start a new life in the West.

This is Book 1 of the “Trilogy of Desire.”

Knowledge and Self-Knowledge

The educational remedy or fulfillment or reform being proposed here does not want to “suppress the person” acquiring some knowledge at a university. Every student is also a person.

Every person has the problem outlined by Nietzsche (died 1900):

“What have we really experienced?”—or rather, “who are we, really?”

The sad truth is that we remain necessarily strangers to ourselves, we don’t understand our own substance, we must mistake ourselves; the axiom, “Each man is farthest from himself, will hold for us to all eternity. Of ourselves we are not ‘knowers’…”

(The Birth of Tragedy and The Genealogy of Morals, Doubleday Anchor Books, 1956, Francis Golffing, translator, page 149, “Preface” to The Genealogy of Morals, 1887)

The problem of self-knowledge and its relationship to academic knowledge—whether specialized or more general—should be embraced and not dodged or suppressed since every student is also a person and the person-student continuum cannot be avoided or repressed.

Scientism and Its Discontents: Movie About Hawking

Scientism is the view that science is truth and the rest is false, idiotic, or childish.

There’s a wonderful scene in the 2014 movie, The Theory of Everything (Eddie Redmayne plays Hawking) where the young Hawking is courting his wife to be at an evening party and he represents the quest for the theory of everything, hence the name of the movie.

His girlfriend expresses doubts about this and speaks a few words from the William Butler Yeats (died in 1939) poem “The Song of the Happy Shepherd” [full text]:

“Seek, then,
No learning from the starry men,
Who follow with the optic glass
The whirling ways of stars that pass —”

The poet (and Hawking’s fiancee in the film) are suspicious of the science-and-nothing-else cosmologists and astronomers “who follow with the optic glass the whirling ways of stars that pass.”

William Butler Yeats (13 June, 1865–28 January, 1939) was an Irish poet and one of the foremost figures of 20th-century literature. A pillar of the Irish literary establishment, he helped to found the Abbey Theatre, and in his later years served two terms as a Senator of the Irish Free State.

Yeats says in his works, “Education is not the filling of a pail, but rather the lighting of a fire.”

Our desire to “re-enchant” education might cause us to modify this Yeats aphorism slightly, “Education is not merely the filling of a pail, but rather the lighting of a fire.”

Education and Donne’s Line “All Coherence Gone”

John Donne (died in 1631) in his poem, “An Anatomy of the World”, captures the fragmentization of everything and the dis-enchantment of the modern,  when he says, “’Tis all in pieces, all coherence gone.”

We want to reshape education to knowingly address Donne’s “foundational complaints” expressed in the poem.

“Then, as mankind, so is the world’s whole frame
Quite out of joint, almost created lame,
For, before God had made up all the rest,
Corruption ent’red, and deprav’d the best;
It seiz’d the angels, and then first of all
The world did in her cradle take a fall,
And turn’d her brains, and took a general maim,
Wronging each joint of th’universal frame.
The noblest part, man, felt it first; and then
Both beasts and plants, curs’d in the curse of man.
So did the world from the first hour decay,
That evening was beginning of the day,
And now the springs and summers which we see,
Like sons of women after fifty be.
And new philosophy calls all in doubt,
The element of fire is quite put out,
The sun is lost, and th’earth, and no man’s wit
Can well direct him where to look for it.
And freely men confess that this world’s spent,
When in the planets and the firmament
They seek so many new; they see that this
Is crumbled out again to his atomies.
’Tis all in pieces, all coherence gone,
All just supply, and all relation;”

Past and Present Thinking

History is “forever new” and we keep asking “what’s new?” but the past is “forever suggestive” and so we inquire here as to whether the past gives us interesting echoes of the more recent.

Specifically, we juxtapose the “closing of the gold window” in August 1971 (Nixon) and the British gold standard gyrations between 1925 and 1931, when England left gold (i.e., September 1931).

At the time, under Nixon, the U.S. also had an unemployment rate of 6.1% (August 1971) and an inflation rate of 5.84% (1971).

To combat these problems, President Nixon consulted Federal Reserve chairman Arthur Burns, incoming Treasury Secretary John Connally, and then Undersecretary for International Monetary Affairs and future Fed Chairman Paul Volcker.

On the afternoon of Friday, August 13, 1971, these officials along with twelve other high-ranking White House and Treasury advisors met secretly with Nixon at Camp David. There was great debate about what Nixon should do, but ultimately Nixon, relying heavily on the advice of the self-confident Connally, decided to break up Bretton Woods by announcing the following actions on August 15:

Speaking on television on Sunday, August 15, when American financial markets were closed, Nixon said the following:

“The third indispensable element in building the new prosperity is closely related to creating new jobs and halting inflation. We must protect the position of the American dollar as a pillar of monetary stability around the world.

“In the past 7 years, there has been an average of one international monetary crisis every year …

“I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.

“Now, what is this action—which is very technical—what does it mean for you?

“Let me lay to rest the bugaboo of what is called devaluation.

“If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today.

“The effect of this action, in other words, will be to stabilize the dollar.”

Britain’s own experience in the twenties is explained like this:

“In 1925, Britain had returned to the gold standard.

(editor: This Churchill decision was deeply critiqued by Keynes.)

“When Labour came to power in May 1929 this was in good time for Black Friday on Wall Street in the following October.

“After the Austrian and German crashes in May and July 1931, Britain’s financial position became critical, and on 21st September she abandoned the gold standard.

“London was still the world’s financial capital in 1931, and the British abandonment of the gold standard set off a chain of reactions throughout the world.

“Strangely enough Germany and Austria maintained the gold standard…”

(Europe of the Dictators, Elizabeth Wiskemann, Fontana/Collins, 1977, page 92-93)

Nixon’s policies gave us the demise of Bretton Woods, while the economic gyrations of 1925-1931 were part of the lead-up to World War II.

The setting is both “infinitely different” across the decades but the feeling of “flying blind” applies to both cases: U.S.A. “closing the gold window,” August 1971 and Britain’s overturning Churchill’s 1925 return to the gold standard, by 1931. One gets the sense of “concealed turmoil” and a lot of “winging it” in both cases. Policy-makers disagreed and they all saw the world of their moments “through a glass, darkly.”

Education and the Problem of Pessimism

Karl Jaspers was part of the great trio or triumvirate of German philosophers of the twentieth century, along with Martin Heidegger and Hannah Arendt.

Jaspers’s basics are (from Wikipedia):

Karl Theodor Jaspers was a German-Swiss psychiatrist and philosopher who had a strong influence on modern theology, psychiatry, and philosophy. After being trained in and practicing psychiatry, Jaspers turned to philosophical inquiry and attempted to discover an innovative philosophical system.

Born: February 23, 1883, Oldenburg, Germany
Died: February 26, 1969, Basel, Switzerland
Education: Heidelberg University
Spouse: Gertrud Mayer (m. 1910–1969)
Awards: Friedenspreis des Deutschen Buchhandels, Erasmus Prize, Goethe Prize

Our issue is not the interrelations of these three but the issue of Jaspers’s “pessimism,” given that we plan an education that completely “levels” with freshmen from day one and puts on their “plate” the whole truth without hiding or suppressing any dimensions of the life/knowledge fusion which is one of the backbone elements of this educational remedy. Jaspers argues that a unifying perspective of existence is impossible for man for the same reason that the goldfish is ultimately in the water which is in the goldfish bowl which is in the room none of which can be understood by leaving the water. Jaspers writes, “Existenz kennt keine Rundung als Bild…denn der Mensch muss in der Welt scheitern.”

(Philosophie Vol. II, German original, Heidelberg: Springer Verlag, 1948, page 647)

This means: “Existence cannot be completed or rounded off and formed into a clear and final picture…man is forced into a kind of shipwreck in this world.”

Jaspers sees existence or life as a kind of “task” or “drama” that one stumbles through and not an object that one studies like a copper salt in the chem lab. Life is always “on the run” and stronger than the runner. Every life, no matter how seemingly prestigious, is characterized by (to use Prof. Stanley Cavell’s words) “little did I know” and you might add, “even at the end.”

Orthodox educators argue that freshmen in college are not ready to be burdened by such bleak or lugubrious views but we disagree and argue, as the great Polish educator Janusz Korczak (died in the Holocaust, 1942) sensed, students rise to the challenge the teacher places before them. If you treat them as childish they will behave childishly and if you take them seriously, they will be serious.

Thus, Jaspers’s view on human life as always a confused and confusing shipwreck will not be hidden from view but studied unflinchingly.

Education and the Question of a “Scheme of Things”

The French classic The Thibaults (Les Thibault) from 1922 has a dialog about the presence or absence of “a scheme of things” behind everything. This Roger Martin du Gard (died 1958, Nobel 1937) classic gives us an insight into the relationship between education and this “scheme of things.”

First:

The Thibaults is a multi-volume roman-fleuve (saga novel) by Roger Martin du Gard, which follows the fortunes of two brothers, Antoine and Jacques Thibault, from their upbringing in a prosperous Catholic bourgeois family to the end of the First World War.

Antione, one of the Thibault brothers, has a conversation with a priest at the very end of the novel:

“I talked just now about a Universal Order and a Scheme of Things…actually we’ve as many reasons to question the existence of a Scheme of Things as to take it for granted. From his actual viewpoint, the human animal I am observes an immense tangle of conflicting forces. But do these forces obey a universal law outside themselves, distinct from them? Or do they, rather, obey—so to speak—internal laws, each atom being a law unto itself, that compels it to work out a ‘personal destiny’? I see these forces obeying laws which do not control them from outside but join up with them, but do nothing more than in some way stimulate them…And anyhow, what a jumble it is, the course of natural phenomena! I’d just as soon believe that causes spring from each other ad infinitum, each cause being the effect of another cause, and each effect the cause of other effects.

“Why should one want to assume at all costs a Scheme of Things?

“It’s only another bait form our logic-ridden minds. Why try to find a common ‘purpose’ in the movements of atoms endlessly clashing and glancing off each other? Personally, I’ve often told myself that everything happens just as if nothing led to anything, as if nothing had a meaning.”

Antione shook his head. “that blind appeal—to what? To that problematic Scheme of Things! To a deaf and dumb abstraction, that takes no heed of us.”

(Roger Martin du Gard, The Thibaults, Bantam Modern Classic, 1968, pages 768-770)

All bodies of knowledge like religion, philosophy, science posit a scheme of things which is perhaps subtle or occluded (“The Occluded Imam” or “mystery of the Holy Trinity”) or “the mind of God” (Steven Hawking’s way of getting at this) or “the Method of Absolute Doubt” leading to final certainty (Descartes).

String theory talks this way too.

In our own educational remediation effort, we are agnostic about any Scheme of Things and do not try to link books, lectures, courses to some pre-existing schema or “final layer underlying everything” at all.

Students create an evolving overview by “circum-spective” “walking around” or meta-intelligence and there is no ultimate “Eureka moment” where “everything is illuminated” (to use the title of the contemporary novel by that name.) We also do not deny the possibility of the existence of a Scheme of Things. Education thought of this way is an exploration and quest that does not end and there does not have to be a final “knowledge map“ or “truth atlas” other than home-made student “composite sketches” which are tentative and not final or “apodictic.”