Sunday, October 16, 2011

New requirements for Politicians

To be elected a US Senator you must be:
  • at least 30 years of age
  • a US citizen for at least 9 years
  • a resident of the state one is elected to represent
If only there were one more requirement:
  • A Ph.D in economics
Unfortunately, most politicians have a background in law. Due to this and the fact that it's in their job description most seem to believe that they should make laws. Politicians always have a plan to do something. As humans and Americans we entertain the idea that we control our own destinies. It is part of American ideology that anyone can make it simply through hard work and determination. I will refrain from discussing whether this is true or not (though Malcolm Gladwell has a lot to say to the contrary in his book Outliers). However, it does lead us to believe we can exert control over things like the market.

You can't go half an hour watching the news without hearing about jobs. Every politician and their mother has a plan to "create jobs." I can't help but cringe when I hear this claim. As far as I can tell it's utterly impossible to "create jobs." Even when a politician "creates jobs" it's an illusion. I suppose I could create a job right now. I could hire someone to make my bed. I could hire someone to take my notes. There are many things I could hire someone to do that I have no need for. Someone looking at only the "seen" might say, "Well that's great! The person you hire now has a job and money to spend." However, now I don't have that money. If I happen to be a government I either get that money by a) going in to debt, bad idea b) "creating" the money, worse idea or c) taxing the people for whom I am supposed to be creating jobs for. Option C is obviously flawed because you can't get something for nothing. TINSTAAFL.

Employers hire new employees when the marginal benefits of a new hire outweigh the marginal costs. Government should lower the marginal costs of hiring employees and of doing business. Do not confuse this with covering the costs of hiring employees through stimulus. That's just a complicated version of Option C. Government should simplify the tax code and reduce regulations. Overall, politicians should take their hands off the wheel and realize that they're trying to steer a train.

Growth, like jobs, can't be "created" it must be allowed. There are many government run industries which, if privatized, would allow for competition, growth, and of course, new jobs. How about private roads, private airports, private schools. Private businesses, due to competition and properly aligned incentives, always do it better than cumbersome bureaucracy. (Seeing as how government does such a poor job of managing the economy we might consider even privatizing that.)

The point of all this is that we can't "engineer" economy. Attempts to steer the market always lead to unintended consequences. Perhaps this is why we rarely see economists elected as politicians. I doubt they even try to run. And when they do, what platform do they stand on? "Don't worry folks, everything will work itself out. I know it. We just need to stay calm and wait out the storm. Do nothing." That doesn't quite have the ring of, "If I'm elected, I'm going to create jobs." As if creating jobs is simply a matter of fruition. It's akin to promising everyone a shiny new car and a puppy.

Instead of debates, I'd like to see politicians compete in the "quiet game," and "who can sit on their hands the longest?"

I'm not saying the role of government is to do nothing, I'm just saying it should stick to what it's good at: protecting property rights, ensuring the rules of the game, protecting our borders from war. On second thought, I can't say it's been particularly good at those things either. Can anyone say eminent domain?

No comments:

Post a Comment