Vermont View: Keep your cool, and do the math
By Oliver Goodenough | October 05,2008
I got an e-mail today from a relative of mine with a message titled "Another bailout plan." Maybe you got it too it's been flying around the Internet enough to catch a bunch of us.
Even before I opened my copy, I had heard about it over the radio. An irate listener called in to a public radio talk show and described it on the air.
Here's the plan: The e-mail reports that the cost of the AIG "bailout" totaled $425,000 for each adult U.S. citizen. It suggests, with compelling logic, that we just give that amount to each of us that ought to solve any financial problem. As well it might.
The difficulty, however, is that the math is simply wrong by a factor of a thousand times. The e-mail states: "So divide 200 million adults 18+ into $85 billion that equals $425,000.00."
Do the calculation (I must admit I needed a calculator to make sure). The division actually equals $425. While that is not a trivial sum, and one that would sure help come heating season, the logic of the new plan gets a bit less compelling with the correct figures inserted. When I pointed out the problem to the relative who sent this to me, (who, by the way, has a graduate level education) the reply came back: "Details. I never checked the math."
There is the problem in a nutshell. At the front end of it all, a bunch of supposedly smart people bought a bad story about the safety of essentially stupid mortgage investments, and put the whole financial system at risk. The profits were so good, the people at the top just didn't do the math. And the guardians of the system we call them regulators were made stupid by the willful self-delusion that markets do better without guardians. But markets wonderful as they may often be can get us all in trouble if there aren't some smart rules keeping people away from toxic, short-term decision making. The guardians didn't do the math, either.
So here we are in the mess. Luckily (sort of), there is a flawed but probably workable plan on the table to patch up the financial system so that it doesn't go down the tubes wholesale, making a really bad situation really a lot worse. But when we most need our smarts, to evaluate the proposal with some clarity and make it work better, the communal rage about the unfairness of it all makes us credulous about clearly impossible alternatives where the math is off by a factor of 1,000.
Dumb and getting dumber. We won't fix a problem caused by stupidity by being even more stupid. We need to sit on our anger hard though that is and see our way through to a decent plan to protect ourselves as a country against even worse fallout to come. Unsatisfying though the conclusions may be, we need to keep our cool and do the math.
But that isn't the end of the story. We have a chance in November to register our protests a chance that we should use not against people trying to fix the mess in good faith but against the mindset that got us here. There is a lot of math on election night. We can be angry, but we shouldn't be stupid, when we put it to work.
Oliver R. Goodenoughis a professor of law at Vermont Law School and a faculty fellow for the Berkman Center for Internet & Society, Harvard University.