I have yet to see Matt Ridley’s new book The Rational Optimist, which is related to stuff I’ve said about human evolution. But George Monbiot seems to consider it damning that Ridley was chairman of the bank Northern Rock when it failed. Bailout of Northern Rock was an example of government intervention — which The Rational Optimist is against, Monbiot says. Hey, why not attack Ridley for drinking government-supplied water from the tap in his kitchen? What a hypocrite!
If Matt Ridley had written a book saying the government should not be supplying everyone with water then attacking him for drinking that water would be fair. If he writes a book that says the free market has all the answers and government intervention is always a bad thing, I think it’s pretty reasonable to point out when Ridley put his ideas into practice the result was catastrophic and he needed a government bailout. Ridley is the hypocrite, not Monbiot. This is obvious to any reasonable person.
“When Ridley put his ideas into practice”–his running a bank wasn’t “putting his ideas into practice.” Running a bank is more complicated than that. Other people and other people’s ideas were involved, I’m sure.
Monbiot’s assertion is fair — if one is going to take a public stand defending a principle, it is reasonable to ask whether they live by that principle. Ad Hominem arguments are not always fallacious.
A fallacious Ad Hominem attack might have been saying Ridley was an Eton-educated son of a nobleman who owed his chairmanship to crony-capitalism and connections rather than the merit of his experience in business and banking, and that his ideas on finance and economics are divorced from reality because he was raised in a gilded cage and breathes only the rarified air of the ivory tower. It might be a fallacious Ad Hominem attack — or it might be a valid Ad Hominem attack.
Ridley is a proponent of the free market and a critic of government subsidy, but when his personal interests were at stake as chairman of a company floundering due to his leadership, he sought a government bailout for himself, the friends he ran the company (into the ground) with, and the shareholders. Why shouldn’t the market have determined the fate of Northern Rock? It would have cost Ridley a fortune to put his principles into practise. If that wasn’t exactly the type of stand he was looking to take, he shouldn’t have taken the chairmanship to begin with. He’s a hypocrite. Would he have advocated bailing out any of the other thousands of companies that go bankrupt every year? The one’s he has no vested interest in? The ones that don’t have connections to government leaders through family connections?
Northern Rock was massively leveraged and so felt the credit crunch far earlier than others. Basically, they took a huge gamble on something they didn’t understand. A bigger, stupider gamble than all of the other big, stupid gambles made at the time (made by deluded bankers instead of deluded science writers).
I think Ridley is the worst of the type of decision-maker Taleb is warning us against — the arrogant fool-King in experts clothing spun from his own rhetoric and leaving him disctinctly naked to those more concerned with the strength of his arguments than the conviction with which he makes them.
I notice that Monbiot made specific criticisms of Ridley’s climate change position as well, and am wondering how accurate those criticisms are.
MT, you are mistaken about the nature of the bailout. Shareholders got nothing. The value of Ridley’s shares went to zero and he lost his job. In that sense the market did determine what happened to Ridley. See:
https://business.timesonline.co.uk/tol/business/law/article5515655.ece
See also his Freakonomics Q & A:
https://freakonomics.blogs.nytimes.com/2010/06/15/matt-ridley-the-rational-optimist-answers-your-questions/
My characterization was accurate — I said he “sought a bailout” and that it would have “cost him a fortune to put his principles into practise.” He did seek a bailout, and the alternative would have cost him a fortune so he scrambled to avoid it. He simply failed, and I’m calling him a hypocrite for trying.
If I said someone was behaving immorally for trying to extort money from pensioners, it wouldn’t contradict my point to observe that they failed in their attempt.
On a side-note, I love the Orwellian explanation of the situation offered by Lord Pannick in the article from the Times that Northern Rock simply had “short-term liquidity problems.” What bankrupt business couldn’t make the same claim? If these assets were so valuable, why wouldn’t anyone else buy them? The value of financial assets is contingent on the market for them. Nobody wanted them, so they had no value. If there was a higher bidder, they would have sold to that bidder and there wouldn’t have been a problem to begin with.
“[Why not attack Ridley for drinking government-supplied water from the tap in his kitchen?”
Because the UK government no longer supplies water to households in the UK, since water was privatized in the late 1980s.
Jeremy, thanks for the correction.
MT, I’m unsurprised he sought a bailout — for the sake of his depositors, at least. But how he thereby saved a fortune — as you seem to think when you write it “would have cost him a fortune” not to be bailed out — I fail to see, since he lost his whole investment and his job.
Seth, MT already explained that. Ridley did not save a fortune by betraying his principles, but he tried to. He betrayed his principles without foreknowledge that he would get nothing for it. The betrayal stands on its own, and is in no way mitigated by its ultimate futility. If, in fact, he had succeeded, would that make the betrayal more or less meritorious?
Seth seems like most of us, he tries real hard to find parts of a story that validate his own beliefs.
Imo, any commenters claiming hypocrisy on Ridley’s part for his these actions should be IP-blocked from commenting further as they have proven themselves to not be able to think clearly about even simple issues.
But it’s not just Ridley who doesn’t mention the inconvenient disjunction between theory and practice: hardly anyone does. His book has now been reviewed dozens of times, and almost all the reviewers have either been unaware of his demonstration of what happens when his philosophy is applied or too polite to mention it. The reason, as far as I can see, is that Ridley is telling people — especially rich, powerful people — what they want to hear.
Ridley’s biology books are excellent, but it is odd that hardly anyone was mentioning his problems at Northern Rock. Especially since bank failures are so much in the news these days. He was obviously in over his head.