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
Notes:
(1) https://www.amazon.com/Vision-Anointed-Self-Congratulation-Social-Policy/dp/046508995X/ref=sr_1_sc_1?s=books&ie=UTF8&qid=1489838089&sr=1-1-spell&keywords=the+vision+of+the+annoited
(2) https://www.amazon.com/Conflict-Visions-Ideological-Political-Struggles/dp/0465002056/ref=sr_1_sc_3?s=books&ie=UTF8&qid=1489838089&sr=1-3-spell&keywords=the+vision+of+the+annoited
(3) https://www.amazon.com/Intellectuals-Society-Expanded-Thomas-Sowell/dp/0465025226/ref=sr_1_1?s=books&ie=UTF8&qid=1489838205&sr=1-1&keywords=intellectuals+and+society
(4) https://economics21.org/html/entitlements-driving-washington-trillion-dollar-deficits-2235.html
(5) https://www.nytimes.com/video/opinion/100000001183275/the-umbrella-man.html
(6) https://shift.newco.co/what-do-economists-know-199bf5793ae6?gi=16ef2fa4b16a#.skb2hs99s
(7) https://fee.org/articles/impact-evaluations-are-no-substitute-for-profit-signals/
(8) http://www.econlib.org/library/Enc/bios/Hayek.html
(9) https://en.wikipedia.org/wiki/Malinvestment
‘Economic “planning” is one of many politically misleading expressions. Every economic activity under every conceivable form of society has been planned. What differs are the decision making units that do the planning - which range from children saving their allowances to buy toys to multinational corporations exploring for oil to the central planning commission of a communist state. What is politically defined as economic “planning” is the forcible superseding of other people’s plans by government officials.‘(1)
It is a known-known in political economy that politicos want the focus on their intentions not their results. Results are politically inconvenient. Intentions are politically paramount.
If one ponders and reflects for a moment about the inconvenient results of economic “planning“ regarding Greensboro, NC, results of over thirty years of economic “planning” regarding a parade of politicos of basically the same ilk, the aggregate intensions thereof, the result is a +21% poverty rate and one of the highest tax rates in the state. Sweet!
One might further consider that the inconvenient result might be an indicator that the aggregate intensions are a monumental flop.
How in the world can one manage to achieve, simultaneously, the results of mass poverty and max tax? One would have to really work at achieving such a result. One would have to deploy the world's worst policy, on a consistent and constant basis to achieve mass poverty and max tax [see Detroit, Michigan].
Moreover, the powers that be, the non-resultant, keep deploying the same policy over and over. Better yet, they gleefully introduce more of the same e.g. music hall, mega site. Gleefully introduce more of the same as if their past track record is something to crow about.
One would be hard pressed to assign a moniker to a public policy process that results in the poor becoming poorer and the taxed become more taxed. However there are terms that describe the result: cacotopia aka dystopia.
On the thirty year road to cacotopia, one would be remise to only identifying the losers i.e. the poor becoming poorer and the taxed becoming more taxed. Winners surely occurred and are occurring. One can’t spend a gazillion dollars of taxpayer money over thirty years and find the only result being the poor becoming poorer and the taxed becoming more taxed. The taxpayer money went somewhere and that somewhere is the realm of winners. In other words, the plans of the few supersede the plans of the many with the result being a particular and select few winners and many losers. Very nice indeed.
The government has nothing to give. The government is simply a mechanism which has the power to take from some to give to others. It is a way in which some people can spend other peoples' money for the benefit of a third party - and not so incidentally themselves". (2)
Notes:
(1) Thomas Sowell, Knowledge and Decisions, 1996 edition, pgs. 213 and 214.
(2) The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11.
"And then what? What's next?" comes from Thomas Sowell. Sowell tells a story of a college economics professor he had, that when a student came up with a grand scheme of how to solve an economic problem, the professor would then ask: "And then what? What's next?"
The point being that few schemers look beyond the first stage economic consequences of said scheme. What is the second, third, and nth economic consequence of the scheme? Sowell calls it "Thinking beyond stage one" which is very likely based on Frederic Bastiat's (French economist) The Seen and The Unseen (1851):
http://www.econlib.org/library/Bastiat/basEss1.html
Buchanan, Tullock, Arrow and many more public choice theory academics have pin pointed something from the above discussion: politicos sell the first stage consequence. The first stage consequence is the only important consequence to the politico due to political time horizons (next election). Hence consequences years into the future of a scheme proposed today are meaningless to the politico as they will likely be out of office, retired, or have moved through the proverbial revolving door and be a lobbyist when the other consequences appear. But to achieve reelection based on political time horizons, the first stage consequence is the only stage of consequences important to the politico.
Also, the politico associates first stage economic consequences with "doing something". That is, the politico has to appear as if he/she is doing something (the exception being the political enigma Calvin Coolidge). The politico is convinced they need to be showing the electorate they are "doing something" and that something is of no matter regarding future consequences per above as the politico merely deploys such actions based on political time horizons and they know, they themselves, will pay no direct price for failure of the scheme. Sweet!
Now let us put the above into an action phase. At some point in the past building industrial parks was a "doing something" stratagem. Yet the stratagem was really a scheme and the second, third, and nth economic consequence of the scheme? As reported, the
Greensboro-High Point MSA (Metropolitan Statistical Area) is
#4 in the nation for comparable MSAs regarding empty industrial sites.
Where are those politicos today that proposed and initiated the schemes? Who is left with the consequences of #4 in empty industrial parks? Meaning, politicos pay no direct price for failure (other than non-reelection) while the remainder (everybody else) is left with the consequences and the price of failure. Insidious huh?
Consider the Mega Site. Consider political time horizons and "doing something" and first stage economic consequences. Consider the building of the 181st mega site available across the nation (which could likely be depicted as 181 lottery tickets, some purchased with taxpayer money, trying to win the one elusive auto assembly plant).
Now let us move to the future. Twenty years from now 180 mega sites will not have an auto assembly pant, maybe, maybe one site will have an auto assembly plant. The 181 sites, those built with public funds, showed politicos where "doing something". The politicos are gone, taxpayers twenty years from now are left to deal with empty mega sites. Therefore the taxpayer associated with the empty sites paid for the politico "doing something" which was directly associated with the particular politicos political time horizon, yet the politico paid no direct price for failure, only taxpayers paid the price. Very nice indeed!
“So it’s no surprise that governments with vast powers routinely behave stupidly: they are attempting to do the impossible while being overseen by the ill-informed.” - Don Boudreaux
-Cronyland-
Apparently Greensboro, NC does not rank highly as a place individuals or individual firms would desire as a relocation destination. Could it be that Greensboro is viewed as an economy that is not chronically and indigenously innovative? With an economy lacking in chronic and indigenous innovation the economy at large will lack dynamism and hence lack in jobs in which people feel vital. Would one want to relocate to such a non-innovative and non-vital environment? (1)
If an economy is not innovative and hence not a dynamic economy in which people feel vital, then what sort of economy is one viewing? Likely one is viewing an economy of the few and not an economy of the many. An economy based on the plans of the few and not the plans of the many. A politically directed economy where what little growth that does occur flows to the few and not the many. One might say an economy with a focus on the few at the expense of the many. (2)
An economy that is chronically and indigenously innovative that produces vitality, such economies are in the main, products of spontaneous/emergent order or what some people refer to as “bottom-up”. The economy is a product of the many. (3)
-Back to the Future-
Most economies that existed prior to the year seventeen hundred were economies of the few. Kings, queens, despots and the like were common. However, after the year seventeen hundred spontaneous/emergent order had produced an overwhelming and unstoppable force of the many. The many wanted to act as free individuals and freely pursue their individualistic needs, wants, talents and desires. The result, the ensuing growth, on a global scale was and still is astounding. (4)
Some two hundred and thirty years into the “bottom-up” revolution a small secondary group emerged known as the predator class which some refer to as the political class. A predator class in that their existence depends to one degree or another, consequent to, preying upon other people’s money:
“The government has nothing to give. The government is simply a mechanism which has the power to take from some to give to others. It is a way in which some people can spend other peoples' money for the benefit of a third party - and not so incidentally themselves" - Milton Friedman (5)
-Political Slight of Hand-
The predator class depends greatly on political slight of hand as they cloak their activities as being directed toward the many. But in essence their activities, in the main, boil down to the plans of the few superseding the plans of the many. James and Jane Goodfellow have been superseded. One ends this exercise with an economy that moves back toward the direction of kings, queens and despots, with political solutions as the only solutions, as political solutions are the predator class bread and butter:
Perhaps the greatest achievement of market economies is in economizing on the amount of knowledge needed to produce a given economic result. That is also their greatest political vulnerability. The public can get the economic benefits of such systems by judging results without understanding processes. But in their political behavior, the public must judge processes - including economic processes of which they may be ignorant or misinformed. Public misunderstandings can lead not only to misinterpretations of economic benefit as harm, but to actual harm resulting from policies designed to “correct” perceived problems. Once the process is underway, every perceived problem - whatever its reality or origin - calls for political solution, and these “solutions” tend to create a never-ending supply of new problems to be “solved”. - Thomas Sowell (6)
-Welcome to Cronyland-
Returning to Greensboro: Welcome to Cronyland where the only room available is for the plans of the few, and not so incidentally, plans that benefit the few. In Greensboro’s particular case, from coliseum to music hall and all the empty industrial parks in-between, to the use of taxpayer dollars to attempt to attract or retain firms that have grown to depend on crony handouts, the many pay and the few receive.
Cronyland is a bust for the many and a boom for the few.
Politicos and their ilk come up with master plans (more succinctly notional propositions), financed by the many and their associated tax dollars. The supposed master plan, which generally are far outside their field of expertise of the sponsoring politicos, are then advertised as a panacea. When that plan fails, and the known-known cascading unintended consequence mount related to the notional proposition playing out, a new master plan appears. Yes, the new plan will cause things to be different this time. Alas, same result. Then yet another master plan appears and so on it goes with an unending chain of master plan failure. And when the failure occurs, yet again, the excuse is: You can't make mistakes if
it's everybody else's fault. (7) (8) (9)
“The plans differ; the planners are all alike…” - Frédéric Bastiat
"That illustrates a general rule: If a private enterprise is a failure, it closes down - unless it can get a government subsidy to keep it going; if a government enterprise fails, it is expanded. I challenge you to find an exception." - Milton Friedman, from the essay Why Government is the Problem
“Government is the only enterprise on earth, that when it fails, it merely does the same thing over again, just bigger” - Don Luskin
Notes:
(1) Mass Flourishing, Edmond Phelps
http://www.amazon.com/Mass-Flourishing-Grassroots-Innovation-Challenge/dp/0691158983/ref=sr_1_1?s=books&ie=UTF8&qid=1419451306&sr=1-1&keywords=mass+flourishing+how+grassroots+innovation+created+jobs+challenge+and+change
(2) F.A. Hayek, The Constitution of Liberty. Chicago: University of Chicago Press
http://www.amazon.com/Constitution-Liberty-Definitive-Collected-Works/dp/0226315398/ref=sr_1_1?s=books&ie=UTF8&qid=1419451353&sr=1-1&keywords=The+Constitution+of+Liberty
(3) Mass Flourishing, Edmond Phelps
(4) Why Does 1% of History Have 99% of the Wealth? McCloskey
https://www.youtube.com/watch?v=a0nsKBx77EQ
(5) The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11
http://www.amazon.com/invisible-economics-politics-Inaugural-Singapore/dp/9971902222/ref=sr_1_7?s=books&ie=UTF8&qid=1419451445&sr=1-7&keywords=The+Invisible+Hand+in+Economics+and+Politics
(6) Knowledge and Decisions, Thomas Sowell, p. 69
http://www.amazon.com/Knowledge-Decisions-Thomas-Sowell/dp/0465037380/ref=sr_1_1?s=books&ie=UTF8&qid=1419451538&sr=1-1&keywords=Knowledge+and+Decisions
(7) This Time is Different, Eight Centuries of Financial Folly, Reinhart and Rogoff
http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640/ref=sr_1_1?s=books&ie=UTF8&qid=1419461465&sr=1-1&keywords=This+Time+is+Different%2C+Eight+Centuries+of+Financial+Folly%2C+Reinhart+and+Rogoff
(8) The Vision of the Anointed, Self-Congratulation as a Basis for Social Policy, Thomas Sowell
http://www.amazon.com/Vision-Anointed-Self-Congratulation-Social-Policy/dp/046508995X/ref=sr_1_1?s=books&ie=UTF8&qid=1419475448&sr=1-1&keywords=The+Vision+of+the+Anointed
(9) No, They Can’t, Why Government Fails but Individuals Succeed, John Stossel
http://www.amazon.com/They-Cant-Government-Fails-But-Individuals/dp/1451640943/ref=sr_1_2?s=books&ie=UTF8&qid=1419475565&sr=1-2&keywords=No%2C+They+Can%E2%80%99t%2C+Why+Government+Fails+but+Individuals+Succeed
“Of course by now you've already heard the news that Chancellor Linda Brady has announced her retirement…..” - Billy Jones
Thomas Sowell has observed on many occasions that politicos never pay a direct price for being wrong. The only price paid is non-reelection. Sowell’s observation, the mechanics thereof, are as follows:
(1) the politico puts forth a notional proposition of the way things ought to be,
(2) the politico then frames the notional proposition as fact,
(3) the non-fact fact is then argued through verbal virtuosity,
(4) the non-fact fact becomes legislation or governmental action,
(5) the legislation or government action is followed by first stage positive economic consequences followed by cascading negative unintended consequences for years into the future,
(6) the politico pays no direct price for the cascading negative unintended consequences, rather the price falls on the masses.
When past political actions by the politico begin to haunt him/her, they conveniently retire and generally the retirement is based on something along the lines of “more family time”. They retire and no direct price is paid by the politico for the legislation or government action spawned by the same politico.
It is worth pointing out that "government" is abstract and hence governments do not think, act or decide. Politicos think, act and decide. Therefore, it is in reality not "government action" it is actions by politicos through the mechanism of government. That mechanism is directed by bureaucrats. Hence the bureaucrats are an extension of the politico i.e. the mechanism.
Occasionally these bureaucrats make extreme errors. Errors that lead to immediate cascading negative unintended consequences. Like their politico counterparts, the bureaucrat conveniently retires. They conveniently retire with no direct price paid by the bureaucrat for past actions.
That is, in both the politico’s and bureaucrat’s case (the decision maker and the purveyor of the decision mechanism), retirement becomes the escape hatch and that is the end of the story with others left to pay the price.
