In light of the drumbeat of news that the U.S. economy continues to underachieve more than a surly teenager, a little quiz: here’s two quotes, with certain terms in bold. In one quote, the boldface words are what was actually said, in the other, they’re words that have been changed. Which one is the actual economic analysis?
[T]he structural characteristics of a given financial instrument are less representative of a general class of investments than they are unique to the individual financial institution itself. Particularly, principles of relatedness… are more likely to evolve in the course of market actions than to be derived from generalized assumptions. Here again greater and new demands are made upon the perceptual and conceptual abilities of the regulator.
Our current regulatory structure was not built to address the modern financial system with its diversity of market participants, innovation, complexity of financial instruments, global integration and interconnectedness…. Moreover, our financial services companies are becoming larger, more complex and more difficult to manage.
If you’re a C-SPAN junkie, you’ll know it’s the second one—it’s from Treasury Secretary Henry Paulson’s recent remarks introducing a proposed new federal financial regulatory regimen. But if you’re a new-music junkie, you’ll recognize the ringer. Here’s the original:
[T]he structural characteristics of a given work are less representative of a general class of characteristics than they are unique to the individual work itself. Particularly, principles of relatedness, upon which depends immediate coherence of continuity, are more likely to evolve in the course of the work than to be derived from generalized assumptions. Here again greater and new demands are made upon the perceptual and conceptual abilities of the listener.
That’s Uncle Milton—Babbitt, not Friedman—from his (in)famous 1958 article “Who Cares If You Listen?” Indeed, watching such figures as Paulson or Federal Reserve chairman Ben Bernanke try and stay on top of the current financial turmoil has been rather like watching a casual audience try and bend their ears around a particularly uncompromising bit of total serialism. They’re trying, but goshdarnit, it’s complicated.
But the point of the comparison isn’t just to analyze the economy—it is complicated, and that’s part of the problem—but also to look at how Babbitt’s article has been and continues to be misunderstood, mostly by people who can’t get past the title (which wasn’t even Babbitt’s to begin with). Babbitt’s position is as hardcore as you’d expect, but he’s explicitly realistic about where his position fits into the musical world as a whole. The article is less a manifesto in support of a particular musical vocabulary than a philosophical justification for the cultivation of a niche audience. He actually puts it in economic terms:
I am concerned with stating an attitude towards the indisputable facts of the status and condition of the composer of what we will, for the moment, designate as “serious,” “advanced,” contemporary music. This composer expends an enormous amount of time and energy—and, usually, considerable money—on the creation of a commodity which has little, no, or negative commodity value….
Nowadays, that last sentence is hardly limited to composers of “serious,” “advanced,” contemporary music. I think that Babbitt doesn’t always get credit for noticing that this was the tendency of music—all music—in the second half of the 20th century: away from universality, towards stylistic fragmentation, thousands of ministers, each preaching to their own choir. The composer no longer comes out of a unified tradition, but picks, chooses, and combines from a plethora of traditions: the composer “lives no longer in a unitary musical universe of ‘common practice,’ but in a variety of universes of diverse practice.”
Paulson’s proposed regulatory plan has been criticized for assuming that the markets can still be regulated in a comparatively unitary way. From NPR this morning:
“Remember, we have seen in the last eight months repeated instances of CEOs of large, complex financial institutions being fired because they didn’t understand their balance-sheet risk at their institution,” [economist Vince] Reinhart says.
How likely is it, he asks, that Fed staff members making far less money will be able to understand them any better? In other words, Paulson may want the Fed to anticipate potential meltdowns, but in an ever-more-complex securities market that’s not always so easy to do. And critics note that the Fed has had a spotty record detecting excessive risk-taking in the housing and stock markets.
But that complexity puts any regulatory agency in a bind. Regulation is necessary to avoid turmoil in the markets, but the markets are getting too advanced to regulate. Here’s Fed chair Ben Bernanke, also this morning, defending the Fed’s bailout of investment bank Bear Stearns in Senate testimony:
Our financial system is extremely complex and interconnected, and Bear Stearns participated extensively in a range of critical markets. With financial conditions fragile, the sudden failure of Bear Stearns likely would have led to a chaotic unwinding of positions in those markets and could have severely shaken confidence. The company’s failure could also have cast doubt on the financial positions of some of Bear Stearns’ thousands of counterparties and perhaps of companies with similar businesses. Given the current exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain. Moreover, the adverse effects would not have been confined to the financial system but would have been felt broadly in the real economy through its effects on asset values and credit availability.
I would have personally preferred not to see yet more corporate incompetence bailed out with tax dollars, but the problem is, as Benanke explains, that the economy has become such an intricate network that there’s no way for me, as an individual, to opt out of a portion of the economy that’s too Rube Goldberg for my taste. The difference between the musical world that Babbitt predicted and the economy is that, if you find a certain music too complicated and cerebral, you can listen to something else. “Why should the layman be other than bored and puzzled by what he is unable to understand, music or anything else?” Babbitt asks. “It is only the translation of this boredom and puzzlement into resentment and denunciation that seems to me indefensible. After all, the public does have its own music, its ubiquitous music: music to eat by, to read by, to dance by, and to be impressed by.” In other words: listen to what you like. And he’s not saying that composers shouldn’t write for a potentially large audience, he’s saying that composers that don’t should still have some opportunity to pursue their craft, because you never know where musical taste is going. I agree with Kyle that countercritic put it particularly well: “Post-war atonality made today’s taste for oblique tonality possible.” I don’t know what Babbitt makes of that oblique tonality—probably not much—but the evolution of such taste and variety is entirely in line with his argument.
Alas, no such choice in economic life—you may have stellar credit, and may have never come near a subprime mortgage in your life, but you’re still feeling the resultant pinch. I’d never use it myself—I love the crazy modernist noise—but here’s a line to try out on an aesthetically reactionary investment banker: how bad is the economy these days? It’s worse than atonality.
