To Lean to the Left

I’ve always been uncomfortable with a number of sentiments presented by people who claim to lean to the left. I’ve never really understood why, but a number of the statements and ideas just don’t feel right to me. I consider myself to be something of a moderate (I think all political parties are very capable of being dumb and policy should decided on a case by case basis) and a little bit libertarian (I think the best government is the smallest one that meets the needs – not wants – of the people it serves).

I finally figured out part of what it was that didn’t feel right to me. A great number of the “left”‘s argument amount to society should adapt so that specific groups of people don’t have to. These groups are usually minorities of some description. This is really interesting to me. I’ve spent a lot of time in situations where it was up to me to adapt. I moved around a lot – the local culture certainly shouldn’t be expected to adapt to me – I had to adapt to it. Camping in fairly remote areas – the wilderness wasn’t going to adapt to me – I had to make sure I didn’t screw up too bad. If somebody drops the food in the river – we’re hungry. I realize now that I was never in very much danger in the bush, but it sure felt like it at the time. When a bear is looking at you like you might have something tasty to eat across a frozen river she sure isn’t going to embrace your right to exist – even if you explain it really well. You’d better have a coping strategy or a gun.

The interesting thing about most of arguments I hear from my leftist colleagues (remember I work in the “Academy”) are that the world should adapt to a particular point of view because it is somehow the correct point of view. There are 2 things that really intrigue me about this view point. One, most of the people making these statements have never really been able to adapt to anything. They seem to have convinced themselves that they’ve always had the moral high ground. I’d bet if you travelled back to when they were 15 they’d be making essentially the same arguments. Two, it is always their own point of view that the world has to adapt to. The statements boil down to – the world would be perfect if everybody thought the way I say they should think. (the speaker not me – if everybody thought the way I say they should think the world would be perfect J).

This is what we’re seeing with the proliferation of “Studies” disciplines. Women’s Studies prof’s are all women. A Black Studies prof certainly can’t be white, the same with Native Studies. I’d like to know what happened to the idea of objectivity.

The problem boils down to the problem I have always had with the NDP politically. They are totally unwilling to accept that most of the country does not support their views. This is why they cry for proportional representation. And when you point out that this will primarily benefit the NDP and take power away from the voting public (remember you don’t get say specifically who gets to go to Ottawa - Jack Layton will) there really isn’t a response. This is just another example of those on the “left” claiming that the world should adapt to them.

I know a kid about age 6 who thinks the same way. We’ll play games, and if he doesn’t win he claims the game is unfair and that we should change the rules. It never occurs to him that practising might be a good idea, or maybe he’s doing it wrong.

I’m going to end this with a line I fed to a friend of mine who’ll be running for the NDP in the next federal election. He might even use it. The NDP – so left it’s right! I wanted to add the tag line: Fascism - it covers the whole political spectrum! But it's too long.

Budget Bladerdash

The last two weeks have been a never ending stream of government noise. Here it started with the provincial budget. I always try and watch the budget coverage – professional penance. I actually had to turn it off it was making me so mad. Let me be clear. I do not support any particular political party - I think they’re all pretty stupid. But this time the provincial Liberals win the prize for all time dumbness. First and foremost, they present what they claim is a balanced budget, but in almost the next breath they admit that the provincial debt is increasing due to the budget. This is not balanced by definition. Oh well, chalk it up to creative accounting.

The non-deficit deficit doesn’t really bother me that much. What really pisses me off is the rhetoric about self-sufficiency. The idea seems to be that New Brunswick should work to become less dependent on federal transfers and equalization payments. Commendable. This means we need to make investments and attempt to improve the economy. The key planks of the budget do something entirely different. The standard “investments” in health care and the public education system are maintained (more on this later). But the real changes in the budget are increases in the personal income tax rate and the small business tax rate. Back the truck up Shawn! Increasing personal income tax tends to slow the economy down, not cause it to grow.

Across the country, small and medium enterprises are responsible for most of the economic growth. The logic seems to be we want to grow, so were going to make it harder for the key elements of economic growth to succeed. Granted NB still has one of the lowest small business tax rates in the country, but it is offset by a lot of red tape and government. It also sends a really scary signal. The Liberal government seems to be stuck in a model of government that we thankfully got rid of in the 90’s.

The truly scary thing comes from the census data. Between the two census measurement only two regions in New Brunswick grew. Moncton (ok – that’s an easy one to guess) and the other… No not Saint John. Fredericton. This one has be blamed on the PC party. Government continued to grow under the PC party’s leadership. While the province over all is shrinking, the government continues to grow – this sounds a lot like cancer. The Liberal government is continuing the trend. The only positive I can see is that the NDP isn’t running the provincial government here. We’re not talking the reasonably competent NDP of the prairies here. So I guess it could be a lot worse.But the people of New Brunswick are in extreme danger of being governed to death.

Confidence Games

This comes from the comment by Snailman – Thanks for the great comment.

Sorry it took so long to get to this, I’ve been out of town.

Consumer confidence is definitely a strong predictor of economic events. This is why you see the consumer confidence index reported in the news. We aren’t just talking about specialty news here, but your basic 6 o’clock news. An increasing portion of the public is aware of the importance of consumer confidence.

This can create a different problem. If the economics community makes the impacts of consumer confidence even more public (if we had that kind of sway over the media) the problem would likely get worse not better. Consider: a news broadcast reports that consumer confidence is falling rapidly. If all consumers know a drop in consumer confidence is likely to lead to a recession, there are two very different ways they are likely to respond. The ideal way (which I suspect Snailman had in mind) is go on spending as they were before and ignore the report. Essentially, if consumers all know the economy is under their control they can decide not to have a recession. This is a collective action problem, much like the voluntary provision of public goods. Ad campaigns in the US were quietly used to this effect in the US in 2001 and 2002 and at other times. The other way consumers might respond (which I think is more likely) is they can reduce their spending in anticipation of the hard times ahead. If you know that reductions in consumer confidence often lead to recessions, the individually optimal response is to save. If all consumers do this, we end up with a recession. In fact, if all consumers understand the economic theory (perhaps due to a public education campaign run by economists) the recession is likely to worse than otherwise. Public education on economics can be scary that way. It can be a very sharp double edged sword.

There are very few economists who could possibly generate the media attention required to effectively influence the situation. Ben Bernanke, head of the American Federal Reserve comes to mind. Alan Greenspan had the same kind of influence when he held that position. David Dodge (the Canadian equivalent) has much less power to manipulate expectations. Generally speaking, these prominent economists are very careful about what they say and how they say it for fear of unduly influencing expectations. The old line was, "If Greenspan sneezes the world economy gets a cold."

I shouldn’t leave you with sense that the “economics community” is acting in the best interest of society all the time. It isn’t. I honestly believe economics should be a required course for all university students, maybe even in high school. The problem is economics is often taught poorly. It can be incredibly dry. Thus most students don’t want to take it, or if they do they don't get the truly valuable lessons.

A final issue needs to be raised. A lot of people don’t like to hear what economists have to say. People tend to believe what they want, and not what theory (which is very flawed anyway) and evidence indicate.

There is another method of dealing changes in expectations that is already being used in virtually all developed countries, government spending. During a recession government spending tends to increase through increased transfer payments to individuals and by conscious act of government. This offsets some or all of the recessionary pressure and expectations aren’t often realized. The defence mechanism is already in place. The “economic warfare” aspect arises by forcing a government to spend on staving off a recession and not other goals.

I’d like to end on a quote from Alan Blinder. "Economists have the least influence on policy where they know the most and are most agreed; they have the most influence on policy where they know the least and disagree most vehemently."

Weapons of Economic Warefare III

Consumer confidence is one of the better predictors of economic performance over the short run. Consumer confidence is essentially the expectations held by consumers about the future. It is also one of the more difficult things to predict and control. There a few ways in which consumer confidence might be manipulated into a weapon of economic warfare. When consumer confidence falls, consumer spending typically falls as well. A dramatic fall in consumer confidence, and thus consumer spending, can cause a recession or even a depression. A great deal of modern economic policy is centred on limiting the impact of a such a drop in consumer confidence. The most common and direct approach is to increase government expenditures to offset the impact. By decreasing consumer confidence an unfriendly power may be able cause a recession in a target country. During a recession the prices of real assets tend to fall making the acquisition of fundamental resources and assets less costly for the attacking power.

Consumers’ expectations of the future are the true target here. Economics has a less than ideal understanding of how expectations are formed, but there are a few simple ideas that might be exploited to this end. Continued bad news, or uncertainty is one way in which consumers expectations of the future may be manipulated. News stories covering closing of factories and failing businesses would be one method of decreasing consumer confidence. Proximity and accessibility are two keys in an individual’s assessment of risk. Proximity basically means did it happen to someone close to you or like you. If news stories or other methods of relating the unfortunate events relating to an “every man” are circulated, this will likely have a strong negative impact on consumer confidence. Accessibility refers to how easily an event like the one being assessed can be called to mind. Recently experienced events tend to receive higher assessed likelihoods than events further in the past. Thus increasing the frequency of these stories would increase the perceived likelihood of such an event. The result would again be a loss of consumer confidence.

There is another, more devious method of attacking consumer confidence. Very little shakes a person like disappointment. Thus, consumer confidence could be attacked not by trying to convince the populace of a country the future is going to be bleak, but by convincing them things were going to go phenomenally well.. By creating unrealistic expectations you set the populace up for a disappointment. The reaction to this disappointment would be a substantial contraction in consumer confidence and spending resulting in the desired economic hardship. The advantage of this approach is that people are more likely to believe what they want to hear, and good news is what most people want to hear.

Punch line: Beware of good news. It may not be what you think it is. J