Politicians and Thunderstorms

Arnold Kling sounds almost cynical:

The main science of political economy is the science of obtaining and retaining power. As far as expertise goes, the pollster, the fundraiser, and the media expert are all fundamental to the operation. The public policy expert is for decoration. If you want to be an economic policy adviser when you grow up, then my advice is to learn to rationalize the methods used by leading politicians to obtain power.

Well, that might be good for the spleen, but there’s another way of looking at it. I am referring to Bentley’s "Process of Government" theory. Bentley’s theory sees politics as "a never-ending, small-bore struggle for advantage among constantly shifting coalitions of interest groups". Seen in that light, politicians are best seen as power brokers who attempt to navigate through the small-bore struggles while maintaining popularity. This is a more sympathetic view of politicians that neither raises false hopes nor paint the process in the darkest colors. That’s just the way it is and, however unsatisfying, the way it has to be. There’s no more point in being outraged about political behavior than there is being outraged by a thunderstorm.

Common Sense Economics

Here is a neat summary of the problem with Austrian economics:

The average person lacks the patience to read Human Action and Man, Economy, and State. How then can he acquire the rudiments of Austrian cycle theory and grasp why the theory is true? To set the question aside, on the grounds that it is unnecessary for the man in the street to bother with such matters, is a counsel of despair. If the public does not understand the economics of depression, there is little hope that we can avoid disastrous government policies. Unless the free market receives sufficient popular support, our economic future is bleak.

As I have often written, economics need be nothing more than the rigorous application of common sense. It’s the rigor part that people find difficult. You have to read a lot of difficult text to understand the proof of Austrian theory, but the everyday application of common sense shouldn’t be alien to most people. Consider this simplified explanation of the core idea of Austrian business cycle theory:

The basics of Austrian cycle theory fall readily into place once one considers a fundamental point: the economy can grow only by producing more goods. An expansion of the money supply does not suffice. Efforts to get something for nothing, by the government’s deficit spending or by an expansion of the money supply, cannot produce lasting prosperity.

The speed with which an economy grows depends on the extent to which people prefer present goods to future goods. Other things being equal, people always prefer satisfaction in the present; but the extent to which this preference prevails is crucial for economic development. In order to obtain more consumer goods than are immediately available, people must postpone satisfaction by saving, enabling a greater production of capital goods to occur.

You don’t have to understand the complexities of capital structures to grasp the essence and to be able to deduce from there.

Unwise Spending Forever

This article on transportation spending illustrates the fundamental problem with government spending: spending is based on political considerations and not on anything that might resemble good sense. Unless something very unusual happens, government spending is usually unwise.

Consider the "cap and trade" bill lurching through Congress. As the WSJ point out, it does almost nothing to reduce carbon emissions while showering vast amounts of money on favored constituencies. Regardless of your view of "global waming" and our ability to change it, it’s clear that nothing effective is being done other than to create future campaign contributions and generate a lot of "feel good" PR.

The blogosphere is full of people debating policy. What’s clear is that whatever policy is chosen, our government has almost no ability to carry it out in a sensible way. To me, that’s the bigger issue.

Bite Sized Culture

Tyler Cowen has a new book which I won’t read – not because it isn’t good, but as he explains, technology is driving us to consume information in smaller and more selective chunks. There are good reviews here, here, and here.

There are implications to this that I haven’t thought through. In a world dominated by short spurts of information (blogs, YouTube, Twitter), there is certainly some risk of losing the bigger picture and the fuller explanation. On the other hand, there are countless interconnections and intersections of information that might otherwise go unnoticed.

I’m developing some sympathy for the contemporaries of Gutenberg. This changes everything – but how?

Who Decides?

There sure is a lot of blogging underway regarding healthcare.

Don Boudreaux makes some good points and then makes a key point:

Does anyone seriously suppose that decisions by government bureaucrats over who will get, and who will be denied, some expensive lifesaving procedure would be better than having such decisions made according to each patient’s willingness and ability to pay?

In either case, some people will be denied care. I’d prefer that the impersonal forces of the market direct such decisions than to have them made by bureaucrats. Each of us, at the end of the day, has more control over the size of our bank accounts than we have over politically influenced bureaucrats.

If you think such decisions about who does and does not get care, and who lives and dies, are far-fetched, you might want to read this. There is a lot of emphasis on reducing the cost of healthcare. The most straightforward ways are to deny treatment or defer treatment (in hopes that you either get better on your own or die). We should all hope that when the politicians are done with “healthcare reform”, we still have the option of spending our own money for treatments that would otherwise be denied.

Emerging Realism

Thanks to Powerline for a nice overview of realism a it applies to international relations. However, I fear that this notion of political science has a common flaw: the assignment of inappropriate attributes to collective groups. I don’t believe that nations have interests or even that nations can have interests. Instead, those individuals in power have interests. Now it might be true that anyone in power in a given nation might share the some of the same interests. It is certainly tempting to view those shared interests as national interests. But that kind of thinking can lead to flawed analysis. These flaws can be avoided by remembering that only individuals can have goals. When groups of people have a common goal, the goal is usually a fragile compromise among individuals. A more accurate portrayal of systems comes from always viewing composite goals, interests, and actions as the result of individual components from which an order has emerged.

Buy Global

Simple economic concepts elude many people. I confess, some concepts have zipped over my head until I saw the right example expressed in the right way. To that end, I direct you to a very clever explanation of why globalization is good and the “buy local” movement is not so good.

The Power Of Bad Ideas

Why are bad ideas and bad policies so persistent? If you’ve ever wondered about this, you will be interested in Bryan Caplan’s Idea Trap. He makes a compelling argument for why there is popular support for bad ideas. While I agree with his logic, I think it is only a partial explanation. People may support bad ideas, but someone has to promote bad ideas – then people can rally behind them. And why would people promote bad ideas? My guess is there is some personal short term relative advantage. That, combined with the human power of self delusion, is enough to abandon reason.

Your Tax Dollars At Work

This is hilarious and sad at the same time. In a fit of bipartisanship, Congress has seen fit to take your tax dollars and spend it on subsidizing the production of rum and racetracks. I guess there are worse kinds of stimulus – I guess we’re lucky that they didn’t fund whorehouses and opium dens. It’s hard not to think of Congress as a band of pirates – and incompetent pirates at that. Shiver me timbers.

Great Depression II

Some people worry that we are headed for another Great Depression. The parallels between then and now are striking: insane blunders by first a Republican and then a Democratic administration pushed the country into a nightmare. I’ve just finished reading the best short analysis of the Depression and it’s, well, depressing.

The moral of the story comes at the end:

Nothing would be more foolish than to single out the men who led us in those baleful years and condemn them for all the evil that befell us. The ultimate roots of the Great Depression were growing in the hearts and minds of the American people. It is true, they abhorred the painful symptoms of the great dilemma. But the large majority favored and voted for the very policies that made the disaster inevitable: inflation and credit expansion, protective tariffs, labor laws that raised wages and farm laws that raised prices, ever higher taxes on the rich and distribution of their wealth. The seeds for the Great Depression were sown by scholars and teachers during the 1920s and earlier when social and economic ideologies that were hostile toward our traditional order of private property and individual enterprise conquered our colleges and universities. The professors of earlier years were as guilty as the political leaders of the 1930s.

Social and economic decline is facilitated by moral decay. Surely, the Great Depression would be inconceivable without the growth of covetousness and envy of great personal wealth and income, the mounting desire for public assistance and favors.

Sound familiar?