20 January 2010

aftermath

Another continuing narrative seems to be emerging that the public is sending a message of some sort about how they want things conducted by public officials. I think this is, by some remarkable event for the public, insufficiently cynical about the political process. But it is also suggesting some underlying condition that the public would like to see satisfied, that is: what is it that they think the public servants they selected have done so poorly on? Supposedly the American public has become more informed and aware of its political class and from this close observation, has decided to make "better" decisions that better reflect its mood and demands. This is false. The American public is woefully misinformed about even the most basic political decisions. For example: Ask a typical American (certainly not the people who you work with and associate with who are all naturally well-informed and intelligent folk...) which takes up a bigger amount of public spending by the federal government, the Social Security system or the amount of federal foreign aid spending. Guess which one the average person responds with by an enormous margin. Then go check the actual federal budget for the last 70 years. You will find that the average American public/voter is unaware of how terribly misinformed they are on what the government spends its time and their money doing. This is a basic fact relating to the federal budget. It has nothing to do with more complicated economic theories like crowding effects relating to "economic stimulus" or the folly of protectionist sentiments which are "intended" to "help" ordinary Americans.

Most federal decisions and laws are by their nature incredibly complex and deal with an increasingly complex regulatory and legal structure that has to be altered, often in unanticipated ways, to accommodate new ideas. Even I do not have the spare time necessary to sit around and read every bill that gets passed and every regulatory change which occurs, even on issues which I have a good deal of interest, much less issues which I have more or less a passing interest. I would assume that someone like me would be safely regarded as a well-informed observer who has too much time to ponder and pontificate on these issues myself. The average person does not have this time.

Caplan's study
from a couple years ago seems to put forward the continuing trends

1) People are more pessimistic than experts about the past, current and, future state of affairs. Time called this last decade "the worst decade ever". Many people are terrified of hyperinflation (while we are still very close to having deflation) or to seeing the stock market and unemployment collapse in a true Depression era or to experiencing dramatic and unprecedented political upheaval in America. I have seen no "experts" claim any of these things, in fact in most cases, these beliefs would be regarded as absurd were they to be aired by informed experts. America has experienced in its history numerous major political shifts back and forth between individual liberties and centralism or federalism and states rights, and so on. The push and pull between liberty and strength is constantly at war in a free society. It is melodramatic to presume that these are the times that try men's souls (at least when we are not on the occasion of an actual shooting war/revolution between ourselves and a tyrannical government as opposed to the occasion of thinking that there is a rather minute probability of one). We saw all sorts of stories running comparing this past year or two to the worst of the Hoover era Depression (from all ideological angles, first from the left and then from the right). It is no wonder that people are pessimistic if that is the bullshit they are being fed by their media. The actual statistics put us somewhere around the early 80s, maybe the mid-70s at the worst of the recession. We are nowhere near Hoovervilles. To be sure these hyperventilation stories were useful cover for politicians to exploit to enact their chosen and favored policies and in some cases, Americans seem to have had a bullshit detector that went off (for example, by opposing the banking bailouts). But to suggest that Americans were somehow informed by these sniff tests opposing establishment policies is a bit overdone. People did not have any idea what was going on and seemed mostly reacting to a populist sense of rage no different than that which gripped America in the 30s by seeking to "punish" the people who "did this to us", without actually walking through the problems to see who in fact was the guilty party and who would actually suffer and be punished by following through (or not, depending on the precise policy being popularly opposed). It may have had the accident of being useful in opposing something which was ill-conceived and even more badly explained. It was not at all useful in getting us out of the mess. It was, in a word: panic.

2) People are more skeptical of markets. This was true even before "markets" became a broad and abused media term which included setting favorable interest rates for a political class (ie, increasing homeownership among the poor), providing subsidies and tax credits to favored corporations and industries, using protectionist sentiments to put up trade barriers and onerous or pointless regulations to stifle competition, providing bailouts and paid interest on excess reserves to favored banks over general monetary (not fiscal) stimulus, and so on. Once "free markets" includes such a broad distortion as to include "corporatism" or "fascism", as it is often known to economists, it's pretty easy to demonize. Everyone hates special interests (other than their own). Much political capital was expended informing us that the problem with health care was a "market failure". This is false. It's pretty hard to have a market failure when there was never a market as we understand the term. There is no price transparency, barriers to entry are significant, there are considerable third party agency issues, information asymmetry is an enormous problem between buyer and seller (and its often very hard to tell who buyer or seller are within the health care industry). To put this more simply, Americans, when asked, are usually pretty happy with their health care insurance as they currently have it. This is understood to be a key reason why reform has been so difficult. It would probably help if someone bothered to explain to them how much their personal health insurance as provided by their employer actually costs them. We are told that we need reform because those evil insurance companies will drop our coverage when we get sick or deny us care that we want or keep us from seeing the doctors we want and so on. But perhaps we should start by asking them how much they're really charging us for this supposedly useless product and to ask also how, if at all, we might find a competing product that might be more to our liking (as an example, union members with those Cadillac plans which cost more than 23k per year probably only make around twice that amount in a year. It is extremely difficult to imagine that in a typical year, even aggregated over lifetime expenditures, they would ever spend 23k on health costs for their entire family, therefore, I'd rather have received 23k more in income. That 23k is a cost, much of which is hidden from the employee). This is one of the most basic decisions a consumer must make, to exercise choice over what to buy, and it doesn't really exist at all for consumers over insurance. To say nothing of the ultimate health care that insurance is intended to finance. To suggest that Americans have become "informed" on this issue and that this is why they oppose the corrupt bargains contained in order to make some putatively necessary changes to their manner of health care delivery and financing in this country is to tell a very complicated joke that makes me laugh uproariously. People, quite simply, have no idea what a market for health care would look like here because most of them have never seen one. Even worse, public polling reliably shows that many policies which we were told are unpopular or have been dismissed as untenable in the final bill are precisely the things that people want. They want a public option. They want medicare expansions or open enrollment. Neither of these bears much resemblance to a market solution naturally, and I of course have my own opinions that do for what reforms I would want. But likewise for people to suspect that somehow this tepid set of reforms is woefully unpopular because it goes too far and too fast is incredibly stupid. That is, in fact, the popular opinion of the present bill. Some months ago, with all the polling going on, in discussions with people on what was in the bill, it appears that many somehow assumed that the reform was a package that introduced something like a Canadian or single-payer model. And yet it was still popular. That tells me that most people were terribly misinformed and projected either their hope or fear upon the Obama agenda. In both cases, it was, unsurprisingly, a statement against markets.

3) Conspiracy theories are rampant. Meanwhile, experts usually see supply and demand, or at worst, corporatist influence over supply and demand. Remember those evil oil company profits in 2008? What was the supposed explanation for the high price rises? Speculators and scary foreign policy events engineered by a government cabal.

4) People are opposed to open immigration or trade policy. NAFTA is extremely unpopular. The pilot program to allow Mexican truckers to carry goods from Mexico on their trucks, nixed, we have to pay extra to take the goods off of those trucks to let Americans haul them. Those poor suffering Haitians, probably get left in Haiti. Tariffs on trucks and sugar, massively distorted the automobile market (leaving thousands unemployed as GM/Chrysler collapse) and make sugar so expensive that we have to make it out of corn. The evil Chinese shouldn't keeping their currency so cheap so they can flood our Wal-Marts with cheap, affordable goods for the poor and middle class whose jobs they supposedly stole but instead need to spend more of their own money and buy American goods (wait, that's what they're actually doing in both cases, only they're often buying Japanese or Korean since America doesn't seem to be paying attention, perhaps we should check the actual trade deficit figures next time if we're the New York Times publishing articles about how evil China's monetary policies are).

I might agree that people are peeking around the curtain to see what is going on and don't seem to like what they see. I submit that part of the problem is that they don't often understand what is actually going on when they look at it and that is understandably frustrating. But another part is that they have misinformation biases that are extremely powerful such that they will assume many things are going on when they are, in fact, not. Largely because they have little time to check these things for themselves. This does not leave us with a great decision making capacity on these important matters in terms of public policies. It does lend itself to a fight between leaving more such matters to experts, like the supposed technocracy of the Obama administration, and leaving more matters to the public and its social institutions, such as the market. Except that the alternatives in our actual politics are not between technocracy and some version of classical liberalism. This is, in and of itself, yet another example of voter ignorance and irrationality. A choice supposedly exists when there are "options". This is false.

When more people start to figure that out, maybe we'll get somewhere. When people see someone who was elected by blaming the establishment and calling for change as a change from the agenda of someone who blamed the establishment and calling for change, I say people are still stuck on stupid.
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