How did a one-time card-carrying Libertarian...

...end up voting for Barack Obama in 2008? Good question, but not an easy one to answer in a short blog posting. Mine was a long evolutionary journey that began with reading Barry Goldwater's The Conscience of a Conservative in high school and casting my first vote for Ronald Reagan in the 1976 Minnesota Republican caucus. The journey's latest chapter (it never ends) concerns the financial crisis of 2008.

On St. Patrick's Day of last year, the sale of Bear Stearns was arranged by the Fed much in the same way that the bailout of Long-Term Capital Management was supervised in 1998. On the one hand, I was offended as a free-market, libertarian True Believer. On the other, I knew just enough about the financial markets to know that they had evolved in such a way that a default on Bear's counter-party transactions would have far-reaching consequences. So my internal dialogue was a debate between the moral hazard of saving a failing firm and the overriding goal of preventing financial chaos. Okay, I figured, but just this once!

Then things got worse; much worse. Apparently, Fannie Mae, Freddie Mac, Citigroup, Bank of America, and AIG (among others) were in trouble. The failure of any one of those alone would dwarf the failure of a Bear, Stearns. So the chairman of the Federal Reserve, Ben Bernanke (one of the foremost experts on the Great Depression), and the Treasury Secretary, Henry Paulson (former CEO of Goldman, Sachs, probably the premier Wall Street firm of our time) said that the U. S. government had to bail out these firms to avoid an economic collapse. Now I've been a professional Know-it-All all my life (just ask anyone who knows me), but when these two guys tell me that action is required (and I know just enough about the financial markets to agree with them), I have to defer to their judgement (I'm sure they were relieved to hear that).

Then in September, Lehman Brothers got into trouble and the Dynamic Duo decided to let them go bankrupt. Again, I'm just a casual observer of the financial markets, but people whose judgement I respect say that that was one of the worst decisions ever made and resulted in a serious gaze into the abyss. Now if a bankruptcy like Lehman could be that dangerous, imagine a failure of a Citigroup or an AIG. It could possibly have led to chaos or another Great Depression. As people are fond of saying nowadays, you can't prove a counterfactual, but I really would rather not debate policy with a Bernanke or a Paulson. (I could hold my own with either of them in a debate over the best Chicago hot dog, but that's about as far as I'd like to take it.)

Which brings us to August, 2009, when many economists are saying that the Great Recession may be bottoming out. Time will tell. But if it has, and if it did because of the massive government intervention in the economy in 2008 and '09, then clearly the government has a legitimate role to play. The whole idea of free-markets and creative destruction may make sense in an economics classroom or in the editorial pages of The Wall Street Journal, but I live in the real world. And the real world is messier than an economics textbook would have you believe.

During the crisis of '08 I was talking on the phone to an old libertarian friend. He insisted on calling me "Comrade." My response was, "Don't call me Comrade; call me Confused." I'm okay with that. The universe is a mysterious place and most of us die without ever understanding the vast majority of it. Strict free-market capitalism is simple to understand and apply. It's very Black-and-White. But reality isn't simple; it would be great if it was. Instead it comes in infinite shades of grey. So I think you have to keep your thinking flexible. It's human nature to embrace an ideology in which everything fits nicely and neatly. It's comforting to think that you have a handle on things. But it's illusory--it just ain't that simple.

No less of a free-marketeer (and one-time Ayn Rand disciple) as Alan Greenspan testified before Congress in October of last year. He said essentially that he had found a flaw in the ideology that he had been operating under for 40 years. He also said that as the facts change, he will change with them. To me, admitting that before the rest of the world was the height of intellectual courage.