The most complex factor in the study of economics is time. Because liberal and statist economic theory does not properly account for the fourth dimension, it rarely predicts economic development accurately. The application of static thinking to a dynamic economy is equivalent to carving an ice sculpture out of warm water.
Take the example of the new pork bill Democrats are attempting to fry up in Congress. Even if this bill was an honest attempt to stimulate job growth, instead of the outright theft of taxpayer money to pay off favored constituencies, it would have minimal and short-term effects on job growth at best. This is because the engine of job growth is demand, particularly anticipated demand.
Training new employees requires a sizable investment of time and resources. Hiring comes with huge compliance costs, as well as incurring taxes and fees that workers don’t usually see on their paychecks – depending on your job and the state you live in, the total cost of employing you is probably double your hourly wage. This is an investment your employer makes in the hope of long-term reward. Marginal reductions in the cost of labor have a minor effect on the employer’s hiring decisions, because they are short-term incentives to make a long-term commitment. A foreman hiring day laborers for a short job might take on more workers, in exchange for a discount or subsidy payment, but expecting most businesses to respond to such incentives is like expecting a subsidy for wedding ring purchases to result in more marriages.
Government stimulus spending ends up doing more harm than good, because it removes money from the private sector through taxation, and when government debt reaches dizzying Obama heights, it makes corporate management nervous about the future. They understand that deficit spending jeopardizes the value of money, and they see massive tax increases lurking in its shadow. Businessmen know they’re a year away from the Democrats losing power in Congress, and they’ve got to survive three more years of Barack Obama, whose tendencies toward populist business-bashing and socialist spending make him dangerously unpredictable.
Investment is a calculated risk, based on the investor’s confidence in his ability to predict and influence future trends. In a command economy, future developments are shaped by the personality quirks of political leaders, and the demands of powerful constituencies. Political influence becomes the most valuable resource a large business can purchase… while small businessmen can only hope they aren’t crushed by regulations, mandates, and policy earthquakes rippling out from Washington. No one grows into an uncertain future, especially when the ruling party makes it clear they will confiscate the “winnings” from exceptionally successful enterprises.
The Wall Street interests that supported Obama’s candidacy were badly rattled when he turned on them. Obviously, they feel less confident in their ability to predict his actions, and their investment portfolios are likely to reflect this anxiety. Watching him perform an about-face under the pressure of crashing poll numbers, and begin courting them like Valentine’s Day sweethearts, will not calm their nerves.
In a socialist economy, their best-case scenario is modest growth and profits, since windfall success will turn them into political targets. The worst-case scenario is economic collapse brought about by Obama’s manifestly incompetent team, and his primitive wealth-destroying ideology. This vision of the future will continue to depress corporate growth, and resulting job growth, no matter what Obama says he will do today.
Political assaults on the banking and credit industries also do great harm to the economy, because they are the source of investment capital and consumer loans. Criticizing the profits of a bank is easy if you ignore the time factor – the previous risks and losses the bank had to endure. Banks and credit-card companies invest hard capital at a substantial risk of default, to earn money in the future through interest and fees. If they believe their ability to profit from this risk and expense is threatened, and they’ve been demonized to the point where they have no effective means to influence politics to their advantage, the only logical move is to reduce risk, and increase the price of the loans they feel confident in making. This hurts new businesses and low-income consumers the most, because they have the least impressive credit ratings.
Static theories of redistribution and “social justice” never account for the changes in behavior they produce. Money given or taken today produces a response tomorrow, which can be very different from the desired goal of social engineers. This is why higher tax rates never bring in anywhere near the revenue projected by greedy politicians. Redistribution schemes destroy future opportunity, for both providers and recipients.
It’s significant that socialists always talk about the catastrophes that will ensue if government takes no action, but they never want to discuss the possibilities denied to private industry when the government passes regulations or seizes wealth. No one mourns the investments that weren’t made, technologies that weren’t developed, or new markets that weren’t opened. The Left not only ignores the future, it proceeds as if we don’t have one… or as though it’s so inescapably awful that the only moral course of action is spreading the misery, so it will be easier to endure. That’s why we should never stop asking who will pay off those deficits someday, or what will happen when the government can’t borrow any more money from foreign interests, or the dwindling Social Security fund, to service its debt. The Left will never have an answer for those questions, because their economic theories are like a school of physics that assumes nothing in the universe will ever move.
Cross-posted at Hot Air.
Nice work. And it also circles around to the “fatalist” thread as well – it’s definately central. maybe fear-of-the-unknown who knows.
… would be quite ironic if in fact “Hope” T-Shirt == fatalist.
The Left not only ignores the future, it proceeds as if we don’t have one…
Remarkable insight there, shared by Pope John Paul II when he pointed to the ‘culture of death.’
It’s significant that socialists always talk about the catastrophes that will ensue if government takes no action, but they never want to discuss the possibilities denied to private industry when the government passes regulations or seizes wealth.
Exactly right. Because ultimately, there is little or no logic to much of what they propose. Their proposals are based largely on emotional grounds, not logical ones.
Brilliant Doc Z. You not only disect obama’s economic plan but also in the same breath explain why keynsianism is an incorrect economic theory.
“Static theories of redistribution and “social justice” never account for the changes in behavior they produce.”
Exactly. This is exactly why only a free market/non-Keynesianism is effective.
I’ve often marveled at the total lack of an accounting for human nature in lefty policy. And anything remotely counter-intuitive, like the effects of tax rates on the economy and ultimately tax collections, they just reject reflexively. You can prove this to them with government statistics, and they just won’t believe it.
… excuse the continued indulgence, is it upgringing(=environment) and/or genetic hinderence, who knows… but in some ways it is a rejection of the special-mystery of life… like not so much miracles, but happinstance all-together – that life itself is a blessing to be embraced. And so maybe in a way material “goods” are the next-best-thing but/or anything-but admitting an Unknown quantity or need – for they fear the dark-not-befriended-nor-set-anchor. this is all bs but, not as silly as this I found, though I think it touches the idea:
- A child being tucked in whispers, “Father, there is a monster in my closet.”
“Really, how do you know?”
“Because… its come before. From There.” He pointed.
“It’s just a closet. Why did you not cry out?”
“Well… I was scared…” The boy pauses for he could not explain why.
“But I thought of how great you are and that you wouldn’t let anything happen to me. You’r my dad.”
the father… sighs, “well, just call if it returns. Son, there are Monsters everywhere in this world but you cannot defeat them all. try not to think about it and Go to sleep. I have work in the morning. we have a mortgage to pay on our new house.”
later that night the child is heard screaming. following, he sleeps with the light on so as to make the monster unseeable. he does not confront the monster, or the Dark, and fears his closet too. These things he is aware but others he is not…
he feels something else – a certain resentment – but cannot place it. it never leaves him and he never knows it, nor hears its name. a self dishonored soul.
- so silly… but somehow the chain reaction of a denial of a sense of (mental? or abode? – a child’s home is his world) security (or explaination/rationalization) results in an insecurity about what … well a “mis-placement” or maybe a block (I said denial too so somehow maybe a child “expects” something from a parent) about what their fears are or “should” be… about the tendency they have to not confront things (too far – or far “engough”), to be complacement at stopping at the “closest right” exit, to not question for fear of what-one-might-or-not-find, but for it might lead to higher ground.
Then there is the observation that they often assume the worst of the “other” group, which, is usually a reflection of dis-satisfaction they feel with their own “justifications” (for whatever the subject matter may be), or lack there of, in there group. And so they must always define themselves “apart” from that which does not fit their existing “logic”, heaven forbid they be WRONG. Then again this is also nonsense or repeated.
But for an example of a truth, imagine having an argument (in person) with a liberal about welfare blah blah and then having an (obvious?) “beneficiary” jump in and declare in whatever way how it actually has a defeating purpose etc…. and well what is unavoidable is that the “lefty” will eventually BLush – shattered into confusion (as his idol is only earthly). And thats a truth boys and girls. The truth is its all predicated on the “approval” of some “fictional” ideal or class (everyone’s an individual and vast), and those things, like others, have glass-jaws, or at east Achilles-Heals/Arch-Enemies. Their model simply cannot account for the reality before their eyes;
They have not been taught to look behind the curtain. But this can only leave a fear of the uncertain. for we must con-a-front the threat that abounds us, by nature, and uncertainty is whirls around us, and “concern” lay near the heart of life’s motor, revives it even.
They fear what drives life on this planet (and thus free-market, etc. etc.). They fear life, when in fact certainty is akin to death (hmmm.. theres “fatalist” again odd).
They fear fear (<- now thats probably true).
great article again, Doc, and loved the mechanism thingy.
I described this over 2 years ago as “The Democrat Effect” – the rational response by firms to prepare for the inevitable insult to the economy from unsurmountable regulation, litigation, and taxation to come. These policies are absolutely purposeful, hence the related term “economic terrorism.”
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[...] really liked this article that I found from Reddit: Economics In Four Dimensions. Here are two good passages to entice you: The most complex factor in the study of economics is [...]
Liberals have a fourth-dimension problem in all of their beliefs, not just economically.
In 2006, I wrote a two-part essay on how the war in Iraq was on the verge of being undone because of people who couldn’t see any further than that day’s headlines and had no concept of (or, perhaps more charitably, had allocated a lower priority to) what their decisions would mean decades from now, to say nothing of months.
Of course, that was when I enjoyed writing and I only had to compete with Bill Whittle. Now Doc Zero’s changed the game again and I want to beat myself to death with my own thick jealousy every time he writes, which is doubly cruel because he’s a much more active writer than Bill Whittle was even in his heyday.
“the only moral course of action is spreading the misery”
How perfectly you describe health care in Canada. I should know as I live in a Province only recently freed from the socialists.