Economist Thomas Sowell has observed that ninety eight percent of political propositions are notional. That is, rather than the proposition being based upon empirical evidence the proposition is based on the world view of the politico sponsors of such proposition.
Further, Sowell observes that the notional proposition is sold by the sponsoring politicos on its first stage economic consequence whereas the n’th stage economic consequence of such proposition, in the main and upon normal occasion, suffers from cascading negative economic consequences. The first stage economic consequence in many cases is positive. If one spends plenty of resources on notional proposition X, surely something positive in the very short-run will occur. Or in the words of Michael Farr regarding the “stimulus package” of The Great Recession followed by the not so great expansion: “If you throw three trillion dollars at a dead race horse even that horse will get up and do a couple laps around the track for you”.
Going one step further, Sowell observes that when n’th stage cascading negative economic consequences occur, the original sponsoring politicos pay no price for being wrong (other than non-reelection for those few still in office) as most are either dead or retired from politics. The price for being wrong falls on the taxpayers alive at the time the price comes due e.g. Social Security and Medicare which are unfunded entitlements sucking away nearly 99% of federal revenue by 2027. (1) (2) (3) (4)
But you say nay, nay! The sponsors have “economic impact studies” explaining great and wonderful things are just over the horizon if the resources will be allocated to the notional proposition. Maybe not so much. How so? Economic impact studies, where those engaged in econometrics enjoy humoring themselves, are notorious for confirmation bias. Moreover, the economic impact study fails an important test of economics: Compared to what? One would have to prepare an economic impact study regarding every alternate possibility (every opportunity cost) to see if those alternatives created greater or lesser results than the economic impact study cited by the sponsors. (5) (6) (7)
Which brings one to F.A. Hayek and “mal-investment”. Albeit mal-investment is many times associated with central banking authorities and artificial interest rates related to credit, one can argue mal-investment is a political creation as well. As hard as it is for politicos to understand, spontaneous/emergent order is the market place. Hence free people in a free market making decisions based on their particular time and particular circumstance, the summation thereof, creates the market and what one sees being demanded and supplied. Central planning, creating a supply of what the few demand (theaters and mega-sites) does not match what the many demand through the emergent order of the market place. Hence resources are diverted to a supply that creates sub-standard results and hence mal-investment. (8) (9)
If one looks at the economic results of Greensboro and Guilford County 1990 to present, one sees an economic laggard. If one looks at the last twenty five years one might conclude a series of politico lead mal-investment has occurred, the accumulation thereof, creating abysmal economic results.
Maybe, just maybe, political answers to economic questions and the plans of the few vs. the plans of the many really do cause n’th stage negative cascading economic consequences. But why change course? Why not a theater and mega-site? “Government is the only enterprise on earth that when it fails it merely does the same thing over again, just bigger”. -Don Luskin, TrendMacro
Saturday, March 18, 2017
On Theater of Theater and Theater of Mega-sites
Labels: confirmation bias, Don Luskin, economic impact studies, Greensboro Performing Arts Center, mal-investment, Megasite, Michael Farr, notional propositions, Thomas Sowell
BS Economics, cum laude, Private and Public Sectors, 1979, West Virginia University, Morgantown, WV. Undergraduate Minor in General Insurance. Chartered Life Underwriter (CLU), Huebner School of Economics, American College, 1992, Bryn Mawr, PA. Life Underwriter Training Fellow (LUTCF), 1986, National Association of Life Underwriters, Washington D.C.. Currently enrolled and completed one half of Chartered Property and Casualty Underwriter (CPCU) from the American College. 38 years insurance industry experience.