Tuesday, November 17, 2009

Duct-Taping the Economy

Politics and economics seem to be inexplicably interconnected. And yet, they often seem to have polar opposite vectors. It seems that our system is stuck in a negative feed-back system that will keep us locked in unhealthy economic decisions. Politicians are necessarily short-sighted in the sense that they look to re-election every few years. This means that they must implement policies that will have noticeable positive benefits in the short-term. Good economic policies tend to have detrimental effects in the short-term or at least appear to hurt specific groups of people. Minimum wage, for example, seems like a good idea because it helps low-wage workers earn more money. It seems like the just and right thing to do because you are helping people who are not well off. Politicians who support minimum wage will point to that as a positive economic decision they've made, contributing to their re-election worthiness.

What is left by the way-side are the unintended consequences of minimum wage. A surplus of workers applying for the higher-priced jobs, depriving certain workers of jobs they would gladly have taken at a lower wage, etc. I need not lecture on this as I'm sure you've all been thoroughly indoctrinated in your 100 level Econ class.

Similarly with the economy, the President is expected to contribute to a healthy economy. And he only gets four years to do this. Eight if he does well the first four. Twelve if he is a crippled war-time president who "saves" the nation from a great depression. The problem is that, as Roberts points out, growth in the economy takes time. And there's very little one man can do (even the President) to help it. The economy is a massive entity, involving the decisions and actions of millions of individuals and government intervention tends to have negative effects.

But to please the ignorant masses the President must show that he is actively seeking to "fix" the economy and "make it" grow. If he doesn't, or if the economy falters under his auspices, his opponents will leap on the fact like a pack of ravenous English school-children upon their crumpets and tea. And so we get Presidents who tinker with, and "adjust" and "stimulate" and "repair" the economy destroying investors' certainty and creating see-saw cycles in the economy.

How is this ever going to change? The only way I can see is by mass-education of the populace. Unfortunately, most adults tend to be set in their ways and thinking. People don't like thought re-education once their world-view has set. Therefore we must start with the Youth.....

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