Posted by
Andrews on Wednesday, May 13, 2009 11:19:08 PM
I wrote in my post "
Environmentalism For The Economy?", that the way in which government views the economy is similar to the way they view evolution and environmentalism. As I wrote in "
Environmentalists Versus Evolution", the theory that we need to preserve endangered species seems to fly in the face of evolutionary theory. Rather than allowing successful mutations to eventually out-breed and out-compete less successful predecessors, the environmental movement strives to keep alive every species currently in existence, which hampers the evolution of newer, more successful variations. Similarly, by trying to keep every firm currently in business from folding, by treating every bankruptcy as a failure (a position I argued against in "
Why"Negative" Economic Indicators Are A Good Thing
"), the modern economic approach tends to slow, or prevent, the birth of newer, more efficient firms. In fact, we may already have too few bankruptcies, may be leaving too many resources tied up in failed or inefficient enterprises, and may want to argue for more rather than fewer bankruptcies.
At the time, I could not really explain this position. I thought it odd that government officials, especially those on the left, whose usual position is that our present situation is so dire that massive government intrusion is an absolute necessity, would adopt the position that the current composition of the market is the ideal, and any change would be for the worse. On the other hand, as change implies risk, and politicians and bureaucrats are, by their nature, risk averse, as any failures translate into lost votes, while missed opportunities pass unnoticed, I thought perhaps that was an explanation.
However, I now think I understand this conservationist position regarding the economy. It actually has two parts. First, politicians gain votes and money by doing things, not by inaction. Even if their inaction results in benefit to the voters and donors, no one gives money or votes for politicians who do nothing. Nor do politicians get credit for actions which other people took. So, if a politician gets out of the way, and lets firms fold so newer, better firms can arise, they don't get credit, as the new firms are seen, rightly, as the creation of their founders. On the other hand, if a politician keeps a failing firm in business, through subsidies, or tariffs or price controls or any other intervention, then both that firm and its employees will see the politician as a benefactor, and money and votes will flow his way.
Second, and related, if that politician were to later drop his protection, and that firm close, he would be blamed for the loss of those jobs. Even if ten times more jobs are created in the firms which subsequently spring up, the politician will get no credit for those, only blame for the "lost jobs". Oh, he may point to newscasts about overall job growth, but rarely does that make much of an impression. What people remember is that "the plant" shut down on his watch, and that he did nothing to stop it.
And that is why politicians end up doing such economically damaging things, because we ask them to. Because, as I said in "
What We Deserve", we think it is their job to "do something", but even more than that, because we are largely economically illiterate and fail to understand the role of the state in economics. Until we begin to understand what the state should and should not do, politicians will continue to behave in destructive ways, mostly because we continue to elect those who do.