Making sense of the bailout: Are Bernanke and Paulson 'experts' or 'elites'?

How can a complex society make sense of itself?

The Senate is set to vote tonight on the $700 billion bailout plan. One of the defining features of the debate over the bill has been the sheer complexity of America's (and indeed the world's) credit economy. 'Credit default swaps,' 'short selling,' 'leverage,' 'de-leverage' -- what do these words mean? There are others too: What is a toxic asset? What are the chances a toxic asset turns into a decent asset?

These are questions that only someone who has studied America's economy, in near obsessive depth, for years and years, can answer. And when you recognize that important parts of this story -- notably, hedge funds -- are done in near secrecy, it makes you wonder if even many economists can truly understand what the $700 bailout plan means for society let alone any given individual.

In determining how to think about the bailout plan, then, the vast majority of Americans are largely dependent upon experts to tell us how to think. This leads to a significant question facing any complex society: How do I know when to trust -- or not trust -- our experts?

I suggest we look behind this question a little, and contrast an 'expert' with an 'elite.' I mean neither term in a pejorative or mutually exclusive sense. Rather, I contrast them simply for analytical benefit. What's the difference between an expert and an elite? We can define both by the motivations that drive them.

Let's say that an expert is motivated by the accumulation of knowledge: he/she collects data and analyzes it (in behalf of the public) so that knowledge is the backbone of the decision-making process.

In contrast, let's say that an elite is motivated by the accumulation of power: he/she provides information (to the public) so that the decision-making process is done in a way that will maintain his/her economic or political position.

Using these two analytical categories, we can analyze the data and make up our own mind whether to trust Mr. Bernanke and Mr. Paulson. We can read their testimonies, and ask: Does my reading of their words and actions lead me to think they are motivated by power or by knowledge?

So while the vast majority of us cannot analyze the bailout bill in a strict economic sense, we can get better at understanding the decision-makers who obstensibly can.

In this case, that means Mr. Bernanke and Mr. Paulson. Are they proposing the bill they are proposing because they have access to knowledge that leads them to think the bill is widely beneficial? Or are they proposing it because it furthers their material or political interests? We can read their words, use our categories, and find an answer that suits us. The answer can be based on what we see in front of us, even if not everything in front of us makes sense.