Saturday, April 09, 2011

This picture is amazing to me. It really makes a very strong case for the budget resolution from the House of Representatives.

I recall both President Bush and President Obama arguing that the increased spending was a temporary measure required in a time of economic crisis. This is Keynesian economics. In the time of reduced aggregate demand, the government can temporarily increase its spending to restore aggregate demand until consumer spending comes back to normal. I dont personally grok this argument. There are a lot of economists who disagree with it. Strongly. They suggest, instead, that increasing spending will simply prolong the problem, and they point to data that shows the great depression didnt actually end until after WWII, some 15 years (or so) after it started.

But in this case, it matters little. The spending measures were made into law. And we cant go back and change that.

Heres the thing, though. If you buy the Keynesian argument that the spending increases were necessary and temporary, then shouldnt we acknowledge the temporary part? You can argue that they may still be necessary. But if, as the administration proposes, the spending increases stay in place until 2021 (and beyond) on the idea that theyre still necessary that far out, doesnt that give credence to the original criticism of the spending increases? That theyve prolonged, and will continue to prolong the problem?

When I look at this chart, I can see no justification at all for continuing spending at these levels. If you believe these spending increases continue to be necessary, then how can you justify that theyve helped. If they are no longer necessary, then how can you justify keeping them?

What possible reason could we have for not returning (eventually) to the spending levels that we had prior to the crisis?

Thursday, March 10, 2011

Government vs Corporate Power

I play poker with a group of guys once a month. Mostly these guys are pretty darn "liberal". Meaning that they tend to share my distrust of corporate power, but they tend, instead to trust government as a counterbalance to that power. E.g. an increase in government power is an effective means to neutralize corporate power.

I tend not to express my opinions in this group. Mainly because I'm grossly outnumbered. Any time I have tried to express my opinion, I get 3-4 people arguing over me, and I never really get to finish my thought. It's basically pointless. I don't think they're interested in listening anyway, so I just bite my tongue. It's not that these are bad guys. In fact, I really enjoy their company. They're smart and funny and (unfortunately) much better than I am at poker. But when it comes to politics, we don't see things similarly. And there doesn't seem to be much willingness on either my part or theirs to see each other's point of view.

Tonight, I managed to accidentally start a rant session when one of the guys suggested that soda should be illegal. I responded saying that I wasn't particularly fond of telling other adults what to do. I was about to say that I was totally in favor of telling kids what to do, but, predictably, I wasn't able to finish my thought while I was being told how that was wrong. I immediately shut up, because all that could happen was that tempers would flare - most likely including my own.

This eventually turned into one of the guys ranting about how bad it was that corporations bought politicians. And on that topic I couldn't have agreed more with him. The purchase of politicians is a huge problem. But it was interesting how differently he and I would approach a solution. His response was that we should demand all campaign finance be opened up completely. And in general I don't have a problem with that. But he seemed to think that it was the root cause of the problem. And there I disagree. I tend to see this as a symptom of a different problem rather than the root problem.

I think the root cause of the problem is politicians with too much power. Corporations attempting to purchase those politicians are just a symptom of that root problem. Because, of course, if you're a corporation, you don't lobby those who don't have power. There's no point. You lobby, and bribe, and attempt to influence those who have the power to make changes in your favor. If you give politicians more power - e.g. the power to regulate campaign finance, or the power to regulate financial markets, or the power to rescue GM - what you'll end up with is *more* attempts by those with money to purchase those with the power. You'll end up stoking the problem that you're trying to solve.

I imagine my friend's response to be that we need to elect the "right" people so that they will stand up to this corporate influence. And maybe that'd work. The problem is that the people who are most likely to win an election are the ones who are the most duplicitous - the ones who can promise everything to everyone, knowing that they can't keep those promises. The winners in politics are very rarely - in fact almost never - the "right" people. Politics rewards people who are best at being two-faced. As a result relying on electing the right people seems unlikely to improve anything.

IMHO, the way to remove the negative influence of corporations purchasing politicians is to reduce the power of the politicians. Reduce their regulatory authority. Make it harder for politicians to create laws and regulations. If the politicians don't have power, corporations will not be interested in influencing them.

There are, of course, two problems with this answer. First, you have to elect politicians who's goal it would be to reduce their own power. What incentive will such politicians have? Once they're elected they will face a set of incentives that pushes them towards increasing their power. Put another way, my solution also requires electing the "right" people. Which I've already mentioned is pretty unlikely. Still my "right" people are fundamentally different than my friend's "right" people. My right people would go in with the goal of reducing government power, while my friend's "right" people would be smart and able to gather more power so that they could put the right solutions in place to curtail corporate influence. I believe the latter to be impossible, even if the former is highly unlikely.

Second, my friend would probably respond that this would allow corporations to run amok over the public with nothing to counterbalance corporate power. At this point, we would be at a standoff. If I were able to get to this point without being shouted down and outnumbered, I suspect that I could get no further. Because I think that individuals making voluntary choices with their money would act as better regulators of corporations than a government. And I suspect that this would be a very difficult - if not impossible - topic to sway my friend's opinion.

Saturday, February 05, 2011

Quick Thought

I follow several very popular people on Twitter... well popular in my world. I like economists. I was quite thrilled recently when I got to have a conversation with @asymmetricinfo. I've also previously got to chat (via Twitter) with @EconTalker, @willwilkinson, @russnelson and @tylercowen.

But I'm also a Packer fan. So getting to tweet with @jasonjwilde, @mitchnelles, @TomSilverstein, and @TomOatesWSJ was pretty thrilling, too. At the same time, I follow @AaronRodgers12, @GregJennings, @ClayMatthews52 and @NickBarnett - Packers players. It's really quite cool to be able to read what they're thinking and occasionally get to chat with them.

Prior to about 2005 or so, the ability of popular, or powerful, people to communicate with almost everyone was limited by expensive resources. Specifically, newspapers, radio & television. A couple of things came about because those resources were scarce:
  1. Someone behind the scenes had to ensure that the best, most clear possible message got out. Hence editors.
  2. It was too difficult to have a conversation. Responses and clarifications were expensive. Hence you spent a lot of time avoiding conversation with the media unless and until you were certain you knew what you were going to say.
With the advent of twitter, it's become dramatically cheaper for those same people to communicate with everyone. And moreover to engage in conversation, despite the 140 character restriction. And I suspect that no matter who you are, those conversations are enjoyable. Those conversations make both parties better off. They fulfill a basic human need to connect with other humans. But until twitter, that connection was limited for stars in the world by the technology we had available.

It will likely take a while for all of us in society to get used to how to understand tweets. If you're popular you're likely to end up crossing what was a line using previous technology. Take photogate for example. But this line is less useful given today's technology. If you want more context of what was meant, just keep reading the twitter stream. More will come. And if you don't see it, you can ask. You don't have to rely on a reporter to ask the question on your behalf. You can ask yourself. You won't always get an answer, but you can still ask. And if enough people ask, you'll probably get that answer.

My quick thought is this: twitter really changes communication between the popular and the not. We have less need for 3rd party intermediaries like TV, radio & newspapers.

But this is only a guess.