Occupying an Endless Frat Party

I can understand the frustrations of (some of) the Occupy Wall Street protesters*: the economy is terrible, jobs are hard to find, especially for young people, and many graduates are saddled with large student loans that they see no way of repaying. They see the government propping up large banks (via TARP) and wonder why the government isn't doing more to help them.

That said, I have trouble with both the logic of the protesters and the tactics the protesters employ. Starting with the latter, it troubles me that these spaces are co-opted for the exclusive use of these people for extended periods. Public spaces should be available to everyone, and, for example, issuing a four-month permit for one organization to camp out at Freedom Plaza in Washington, DC denies the public at large from using that space. Having made their point, it's time to move on.

The protesters and their defenders in the media like to say that "This is what democracy looks like." But as Anne Applebaum says in an op-ed for the Washington Post,

[A]ctually, this isn’t what democracy looks like. This is what freedom of speech looks like. Democracy looks a lot more boring. Democracy requires institutions, elections, political parties, rules, laws, a judiciary and many unglamorous, time-consuming activities, none of which are nearly as much fun as camping out in front of St. Paul’s Cathedral or chanting slogans on the Rue Saint-Martin in Paris.

Worse is the misdirected anger. Several weeks ago, part of the DC anti-war mob tried to rush the Smithsonian's Air and Space Museum, and were fortunately rebuffed by the guards. It's boneheaded behavior like that that leads to having guards at museums, searching everyone's belongings and creating lines to get into buildings. Next time you wait to get into a museum, thank a protester. Last weekend, two dozen people were arrested in a Citi branch in New York, loudly demanding things from bank tellers. Bank tellers? These are hardly the fat-cat bankers with huge bonuses; these are working-class people just trying to earn a living.**

Then there's the logic of the protests. Never mind the people making rediculous demands: free tuition, a guaranteed wage of $20/hour, prosecuting bankers for losing money. Let's look at the demands of the people with some remaining connection to reality. Angry at TARP? It sure looked sleazy, propping up banks that made billions of highly-leveraged bad bets on the housing bubble.*** I'm not bright enough or informed enough to know whether it's true, as both the Bush and Obama White House and Treasury told us, that TARP was necessary to keep the entire financial system from melting down. Bank failures would surely have led to liquidity problems for the "little people" (perhaps the FDIC would eventually make good on its insurance guarantees, but how long would you like to be out of your entire bank balance?) and runs on other banks. Rich people have other options for banking and investments; you and I depend on the banking system. But let's say that TARP was a bad idea. It's done, the banks have largely repaid the government, and life has moved on. I understand the anger at large salaries and bonuses being paid to executives of banks that took taxpayer loans, and wish that shareholders would be more assertive in limiting executive pay, but it strikes me that regulating pay - especially in one sector of the economy but not others - isn't a good solution.^ The anger at "greed" seems entirely misplaced. Are we not all greedy? Desire is part of the human condition. In a capitalist society, markets impose discipline on greed, howevery imperfectly. Would it be better for government bureaucrats and politicians make those decisions? Neither China nor Russia, to pick two examples, have created a workers' paradise through more centralized decisions about resource allocation.

Student loan debt is huge, and I feel sorry for people who bought into the concept that returns on education were large and that the returns to an expensive education were enough larger than the returns to a moderately-priced education to make the extra debt worthwhile. The protesters would do well to consider why education costs so much, and why those costs have vastly outpaced inflation in the past few decades. I'll point to three reasons: the availability of government-backed student loans, which encouraged debt and let universities increase tuition without an immediate effect on enrollment rates; an academic tradition that rewards research over teaching, so that many academics have a light teaching load, increasing university costs as well as leading to large introductory classes and increasing reliance on graduate assistants; and horrible bloat in university administration, including deans of this and that, catering to self-indulgent students and their helicoptor parents. The protesters should be agitating for education reform. Occupying a park near New York's financial district doesn't seem to be the best way to go about this. How about occupying the Department of Education?

That leads us to the big problem, the lack of jobs and what to do about it. It's a mistake to think that the government creates jobs. I know this is a tough argument to sell; after all, aren't there a lot of jobs in government? Most government jobs, however, don't create anything; rather, they draw resources from elsewhere in the economy, through taxation, or draw resources from future generations, through borrowing.^^ What government can do is provide the environment necessary for the private sector to create jobs. This is an important role, and I don't mean to minimize it. Strong property rights, a stable currency, low inflation, predictable corporate and capital gains tax rates - all of these things help maintain an environment in which individuals and firms can make long-term decisions, including starting new businesses and expansion plans that involve hiring new workers. Government can deter hiring, too - for example, by imposing onerous regulations that create costs for firms. None of this is magic. The magic comes in knowing how to create a balance between a business-friendly evironment and other interests that we have (clean air, worker safety protections, societal safety net programs, and so forth). The protesters are asking the government to do more, while fundamentally misunderstanding what the government is capable of.

Maybe all of this is too much to expect of a large-ish gathering of mostly young people. Demonstrations run on slogans, not a careful understanding of facts. Protests are driven by emotion, not dispassionate analysis. However, without a sensible unifying principle, rather than the inchoate set of demands that have evolved, what are the rest of us supposed to do about it? Should I be against "greed" in the abstract? What sort of action item is that? Contrast this with the evoution of the Tea Party activists, who have a simple, yet actionable principle - less government, lower taxes - and easy ways to implement that principle - vote for people who won't support new government programs and higher taxes. Add to this the perception that the protesters are not serious people, asking not for a way to achieve goals (e.g., jobs) but instead insisting that the government - meaning the rest of us, the "53 percent" - provide handouts.^^^

All in all, while I can sympathize with their plight, I can't sympathize with either their means or their ends.

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* Newspaper articles and video show that, in addition to the genuinely aggreived, these protests have attracted anarchists, well-to-do kids looking to have fun, union-hired extras, and people with a motley assortment of other greivances. Some are part of the professional protesting class, the people you see at the G-20 meetings, decrying "globalization" and smashing windows. Some, especially those in DC, are part of the anti-war Left, co-opting the Wall Streeters to complain about...well, I'm not sure what.

** I have similar feelings toward the union-hired mobs who bang on drums and chant mindless slogans in front of buildings using non-union labor. The building owner is somewhere else, and the people affected by the noise pollution are the hard-working individuals in and around the affected locations.

*** I continue to recommend Michael Lewis's book The Big Short for a wonderful discussion of the housing bubble leading to the financial crisis. This wasn't something that could only have been predicted with hindsight; the number of people who understood how bad those collateralized mortgage obligations were *but bought them anyway* astounds me.

^ Do you *really* want even less-competent people running financial institutions?

^^ Don't get me wrong: many of those jobs are important in keeping the rest of the economy running well. Defense keeps the population safe from foreign dangers. Law enforcement maintains domestic civil order. A variety of regulations help balance interests. However, these are transactions costs. We're better off with fewer of these costs, all else equal, not more.

^^^ College students who are skipping classes in order to camp out in a park reinforces this perception. Instead of getting the education that they - or, more likely, some combination of their parents and taxpayers - are paying for, they're complaining about the cost of the education they're not getting.