Wednesday, November 18, 2009

"Hi, Everything is Great"

The president actually has two great powers over the economy. One of their greatest influences is that of perception. The president has the ability to persuade the people that the economy (or most things in general) is good or bad. This power doesn't always work however if the president goes out to the public and tells everyone that everything is fine then some people will say, "Oh then it can't be that bad." Consumer confidence cannot prevent a recession but it can help reduce its acuteness. The president has a big influence on consumer confidence. There are obviously exceptions but in general I feel this holds true. Convincing people that the economy is good is obviously harder than convincing them it is bad (perhaps because of the skepticism of people). If the president were to go on the air right now and say, "Oh God, we are so F@?%ed! I would consider it a great success if only half the country survives the night!" People would panic and it would have substantial impact on the economy. Which brings me to the next power the president has over the economy. While the president has limited powers in making the economy better he has substantial power in making it worse. The president can author and sign treaties reducing trade, create international conflict, select incompetent individuals for various offices and etc. In the end it is always easier to break something than fix it. The president can easily break the economy. The mechanisms which we generally associate with the powers of the government to fix the economy are just like the little boy educated in the public school system. It fails to take into account the opportunity cost of those funds and the behavioral changes which those policy will cause. However, since the general public does not realize this and the presidents main influence is in perception he must use these tools to show that the economy is good, or at least the government is trying to make things better.

:) <<- the six billion dollar smily face sticker. Now the economy is better.

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