The United States Republican Party has finally capitulated to the need for more stringent government controls on free market activity in the American investment and commercial banking industry. They now acknowledge this as the ONLY solution to the global financial crisis engendered by the industry’s subprime mortgage lending practices.

But we know that this is only the most recent in an accelerating series of financial crises that began with the stock market crash of 1929 and the ensuing Great Depression, was braked temporarily by Roosevelt’s New Deal, and picked up steam with the post-war Reagan era’s Savings and Loan debacle of the late 1980s. Since then we have seen such debacles proliferate increasingly with each passing decade: the junk bond scam, the Mexican peso crisis, the IMF crisis, the IT bubble, Enron, and WorldCom are only a few examples.

The now-most prominent spokesman of the “permanent Republican majority,” Henry Paulson, has been quoted as advising Bush II that these debacles are part of normal market adjustment cycles that are to be expected “every 6, 8, 10 years” (Newsweek CLII, 13 (29 September 2008), page 29). I suggest that when these “normal market adjustments” accelerate to one such debacle per year, we should regard ourselves as having officially returned to Hobbes’ state of nature.

Many commentators have noticed the remarkable failures of memory that seem to prevent each new generation of financiers from learning the lessons of past crises that would enable them to avoid future ones, and that motivate each new generation of free-market enthusiasts in the U.S. Republican Party to roll back regulatory legislation previously achieved. Bush II’s attempt to disembowel Social Security pensions for retirees is only one of the most shameful.

My online, open-access book Rationality and the Structure of the Self, Volume I: The Humean Conception (formally accepted for publication by Cambridge University Press) explains why these failures of memory are structurally endemic to the utility-maximization model of rationality so beloved by neo-classical economists. You can read the analysis here: http://adrianpiper.com/rss/docs/7.PiperRSSVol1HC.Ch4.DecisTheorUtility.pdf
See particularly Sections 2.3 and 3.

And my online, open-access book Rationality and the Structure of the Self, Volume II: A Kantian Conception (formally accepted for publication by Cambridge University Press) demonstrates what every intelligent person already knows: that utility-maximization MUST meet the cross-temporal consistency requirements of ordinary logic – and therefore, by implication, the constraints of nimble and judicious government regulation – in order to be rational. You can read the analysis here: http://adrianpiper.com/rss/docs/9.PiperRSSVol2KC.Ch3.ConcGenPref.pdf

Comments welcome. Because of philosophy’s longstanding historical influence on political events and ideologies of all stripes (for example, of Rousseau on the French Revolution, Locke on the American Revolution, Marx on Communism, Nietzsche on the Second World War, Rawls' Difference Principle on Reaganomics), I think we need to conduct this discussion at a more thorough, sustained and systematic, non-ideological level if we are finally to break out of these “normal market adjustment cycles.”