The Politics of Economics

Because I have never taken a course in it, but have become more interested in it, I have recently begun reading through a book on economics. I picked it up at the library because I had a desire to learn more about economics. I knew nothing of the author and picked the book because it was praised for being easy to understand and readable. Not until I began reading the book did I discover that the very first chapter in the book is entitled "Politics versus Economics".

I confess that it is for political reasons that my interest in economics has been piqued over the course of the past few years, so I was thrilled to be greeted with this 19 page chapter. Although I haven't finished reading the book yet, in fact I have only finished two chapters, I would recommend this first chapter to anyone remotely interested in economics and politics.

The following are some portions that I found quite poignant. All quotes are from the book "Applied Economics: Thinking Beyond Stage One" by Thomas Sowell, but all emphasis are mine. (You can read the first 6 pages of it online for free by clicking here.)

It has been said of many laws and policies that “the devil is in the details.” But, if most voters are not likely to look into those details, many devilish results can be expected from legislation and policies that look good at first glance, when packaged with inspiring rhetoric. – p2

No political message has proven to be more welcome, in countries around the world, in both democratic and undemocratic nations, and among peoples of every race and culture, than the message that your problems are not your fault, but the fault of others – and it is they who must change, not you. Moreover, it is they who must pay the consequences if they do not change, not you. Not only particular political candidates, but, in some countries, whole revolutionary movements, have risen to power on the wings of that message. – p4

In short, “do something” policies are often a result of not thinking beyond stage one – and of politicians who respond to voter short-sightedness, even if the politicians themselves know better. – p8

Sometimes the temptation to “do something” reflects more than just a cynical calculation of political advantages. Often there is a belief that government intervention is necessary, even if the specific form of that intervention may have to be determined in a trial-and-error process. … Government experimentation is different from private experimentation which, for better or worse, affects only those who engage in it, and who have every incentive to stop it when it becomes clear that the experiment is not working. But government experiments with the rules under which millions of other people must operate, and the prospect that the basic rules of the economy are likely to continue changing without notice at any time, is not a prospect that encourages long-term investment by business or even short-term spending by consumers. People tend to hang on to their money when they don’t know what is likely to happen next. – pp 9-10

In response to various economic problems in 2007, Professor N. Gregory Mankiw of Harvard, a former chairmen of the Council of Economic Advisers, wrote: “The question on the minds of many in Congress and in the White House is this: What should they be doing now to keep the country on track? The right answer: absolutely nothing. - p12

I am not sure if the following statistic quoted in this 2007 article in the National Review is still true or not, but I would venture to guess that it is:

“After the departure of Senator Phil Gramm and House Majority Leader Dick Armey, Congress has been an economics-free zone. There is not one economist among the 535 members of Congress.”

Is it any wonder that our government can't figure out what course to take when it comes to economic and fiscal policy?