Arnold Kling  

Steven Chu vs. Bernie Madoff

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A commenter on this post wrote,


I don't find it very credible that Steven Chu spends his whole life studying physics (and extremely successful at it) so one day he could reward some political cronies of his boss. Comparing Chu to Madoff, really?

Really.

I think a reasonable case can be made that Madoff never set out to become a villain. He started out as a successful money manager. He was a philanthropist. He just fell into the habit of providing returns to customers using Ponzi methods.

I don't think that Steven Chu set out to become a villain. But think about it. Who lost more money that belonged to other people? Whose actions do more to undermine the ethical fabric of this country?

The fact that Chu is not being prosecuted under any criminal statutes is a point in his favor.

Or perhaps not.


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COMMENTS (12 to date)
Stuart B writes:

Comment deleted for being ad hominem.

rpl writes:
Whose actions do more to undermine the ethical fabric of this country?
I don't know, Arnold. You tell me. On the one hand you've got a guy who was duly appointed to office, spent money lawfully appropriated on the project it was appropriated for. On the other hand you've got a guy who lied to a bunch of people to get them to give him a bunch of money, which he used to enrich himself. (Note: this is what it means to "fall into the habit of providing returns to customers using Ponzi methods." Don't try to sugar coat it.) No matter how bad you thought the loan program was, I don't see how you can suggest with a straight face that Chu's actions are in any way "criminal," let alone worse than Madoff's.

I get that you think the loan program was stupid and ineffective. I think so too, but that was the law we got. I won't even argue that the fact that a law was passed perforce makes the law legitimate because I think there is such a thing, even in a democracy as a law that is so odious that citizens have a moral duty not to comply with it. However, the bar for making that determination, for declaring a law illegitimate and the officials who execute it "criminal" has to be higher than just, "I think it's stupid and a waste of money." What you are describing is exactly the opposite of the "rule of law" that we aspire to in this country.

Say Chu was arrogant. Call him a fool, even, but to argue that he's a "criminal" on par with the likes of Madoff is simply absurd.

Sonic Charmer writes:

Madoff committed fraud in a way that Chu did not. Madoff implicitly promised high returns via legitimate investments, as a businessman. Chu just claims to be - basically - a Smart Person, who, by dint of being Smart, has the intrinsic right to direct much of our economy's resources however he sees fit, make decisions about which products and what energy we'll all use or not-use, and so on. Using his Smartness.

No particular malinvestment or amount of lost money can overturn or invalidate this claim of his. Indeed, a lot of people - perhaps a majority - still agree with him about Smart people having that intrinsic right, Solyndra or no Solyndra, to fling billions of dollars in 'loans' (I think loans is a misnomer here) at such things. In any event his implicit claim to power/capital oversight was a *philosophical* claim, not a contractual one, thus there's nothing for Chu to have legally or morally 'violated' in the first place, in being so financially irresponsible.

After all, I'm pretty sure he's still Smart.

Johnson85 writes:

I think Chu is probably less culpable for his actions. He's been surrounded by people telling him he's brilliant and he had a lot of people (who also told themselves they were brilliant) supporting his decisions. It was probably pretty easy to take that morally ambiguous step of convincing himself that the backers of the projects he chose just happened to be financial supporters of the president and that even if the projects were likely to ultimately fail, they were worth supporting.

That said, Madoff is in some ways more respectable than Chu. He made his decision with the knowledge that he would have to face the consequences. Horrid as his choice was, at least he was willing to be judged for his actions and I assume was never planning on pretending that what he did wasn't reprehensible. I bet Chu would still bristle at being compared to Madoff, as if what he did was not roughly comparable in terms of overall destructiveness, just because he was able to spread the pain to more people and avoid breaking the letter of the law.

Jack writes:

I think we need a new concept: hopeful cronyism, or something like that. I believe Chu sincerely thought his decisions would lead to successful projects and the betterment of the US. I do not believe he became Sec Energy to hand out money to political or ideological allies. But is the rent-seeking any different? Are the direct costs to taxpayers, and indirect costs to economic efficiency and productivity (giving firms the right signals) any different? I don't think so.

Krishnan writes:

Chu is actually worse than Madoff - because Chu enjoys the protection of a system with almost unlimited power - to do harm. With people like Madoff, people have the option of appealing to law and order, there is simply no protection against do-gooders like Chu.

Yes, yes ... Chu was "following the law" and yes yes the Law can be foolish and stupid and all that - What we must realize is that "Laws" like what resulted in Solyndra (and so many others) are the result of criminal thinking disguised as "doing good" for others.

Yes, Chu is not personally liable for the fraud that he perpetrated - (legally that is) - but for an individual used to thinking rigorously about certain science matters/issues, he is grossly ignorant of the market system - willfully disregards simple signals regarding markets and products.

What is frightening (to me) is that there are many scientists/engineers who are indeed very rigorous thinkers (about problems, issues in their field) - but are so left-wing that they become blithering id^%$s when it comes to economic issues and ignore the most basic information about what will actually work. Chu should return to doing physics that he obviously knows very well.

Collin writes:

Look at the history of fracking. Conservatives love it today but it was subsidized by the DOE for decades.

What if one of the solar companies do take off and it does become economical? Solar is getting close to economical in Cali. as peak electrical pricing is quite high.

Please comment on the proposed tariffs on cheap subsidized Chinese solar panels. I am with Matt let the Chinese sell underprice solar panels to us but I unfortunately see tariffs going up becuase it will the the US energy and electrical companies will support it as well.

rpl writes:
Chu is actually worse than Madoff ...

Yes, yes ... Chu was "following the law"...


So, what you're saying is that any law that doesn't reflect your personal policy preferences is illegitimate, and the people who support it (or maybe just the ones who execute it?) are "criminals" in your eyes. Honestly, I don't really see any reason to take anything you say after that seriously.

One of the consequences of living in a society, whether large or small, primitive or modern, is that you have to compromise with the people around you. They will have policy preferences that are different from yours, and from time to time you won't get your way. Until you can learn to accept this fundamental fact of life and move beyond your political philosophy of "I don't like it, so it's not legitimate," you don't have anything useful to say on the subject of politics.

Kevin Driscoll writes:

I've never met Chu, but I have met many of his former students and they're basically all professors at prestigious research universities now. The man knows how to do science.

We need to understand his perspective: he comes from a field where a large portion of the funding comes direct from the government for projects that do not even propose to turn a profit. Some breakthroughs in fundamental science may lead to HUGE gains down the road (when Felix Bloch won the nobel prize for his work on the subject of NMR, he said something like it'll be useful for damn little.....he had no idea MRI machines would be invented). I can imagine that Chu sees no problem with spending and losing money because the pursuit is valuable in itself and because he is so familiar with not needing to make a profit. He obviously thinks that ultimately it will work out.

I think we can all agree that, eventually, moving to renewable energy sources will be the best thing. As a scientist (not an engineer, mind you) when you see a problem that interests you, you work on it. How long it takes or how much money you spend is only a factor if you're running out of time or money (or the problem becomes uninteresting). Chu seems to be running out of neither. This is just the mindset of a physicist. At least, it is my mindset when I do physics and I am projecting onto Chu. Thinking like a physicist is very different from thinking like an economist. Thinking like a politician is a whole new ballpark. These facts make me wonder if there is even a good way to have a position like 'Secretary of Energy.'

Scott Gustafson writes:
Who lost more money that belonged to other people?

Clearly that is Chu.

That doesn't say anything about intentions or background or education or anything else. It is merely a statement of fact.

Results matter. I think it would be helpful if we held him and the people that helped him do it accountable.

aaron writes:

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Kenny writes:

In fairness to Chu, all of the potential recipients of the government loans probably donated money to Democratic politicians. But then doing so, and then being rewarded with a loan, wouldn't be evidence of (exceptional) wrongdoing.

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