Bryan Caplan  

How a Rational Politician Treats Irrational Voters

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I officially nominate Greg Mankiw for an Emperor Has No Clothes Award.  The Award (it's real!) normally goes to critics of religion.  But politics is the premiere religion of the modern world - and where else can you find impious candor like this?
The expression "create or save," which has been used regularly by the President and his economic team, is an act of political genius. You can measure how many jobs are created between two points in time. But there is no way to measure how many jobs are saved. Even if things get much, much worse, the President can say that there would have been 4 million fewer jobs without the stimulus.

An actual answer to the question "What metric?" could have taken the form: "If the unemployment rate on [insert date] is below [insert threshold], I will judge the plan to be a success." Given the uncertainties inherent in the economy, however, no sensible politician would hold himself to such a measurable standard.
Yes, yes!  Let me add, though, that when politicians are spending a trillion dollars, any sensible voter would insist upon a measurable standard.  "Create or save" is simultaneously absolute nonsense and an act of "political genius" because political genius is nothing other than the masterful manipulation of voter irrationality.

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COMMENTS (14 to date)
John Galt writes:

I have been wondering how you calculate a saved job, it seems like that would be the same as calculating how many cookies I may have eaten...

Dan Weber writes:

when politicians are spending a trillion dollars, any sensible voter would insist upon a measurable standard.

Maybe a voter would insist on it, but why would any rational policy-maker agree to be judged by it?

I think a stimulus is probably the right thing to do, but I fully realize we can't know, and even post-facto we won't be able to tell.

I primarily work in computer security. Lots of my "success" is measured in things that didn't happen. And if someone tries to codify what success means ("I never get attacked") I walk away, because I'm not going to lie.

The same goes for cutting the payroll tax. I think it's probably a good idea as part of a stimulus package, but we can't really measure how many jobs it creates (or "saves"). Does that mean we shouldn't do it?

Ironman writes:

Dan Weber wrote:

Maybe a voter would insist on it, but why would any rational policy-maker agree to be judged by it?

I think a stimulus is probably the right thing to do, but I fully realize we can't know, and even post-facto we won't be able to tell.

To answer your question with a question: Who says we need their permission to judge the outcomes of what they do by the standards we set?

As to your comment, there is a remarkably simple way to determine whether or not the spending from the "stimulus" bill is effective. It is simply defeatist to suggest otherwise.

Kelly writes:

So let's say rational voters insist on metrics, and our politicians agree to them. Fast forward to evaluating the results according to the metrics. Now what? Hold the politicians accountable based on the metrics? Bwahahahahaha.

Larry Peoples, Sr. writes:

Just like old hookers - Democrat politicians measure everything by girth. The bigger things are the better they feel inside.

Gavin Andresen writes:

It seems to me we should judge the success of the stimulus by the administration's own projections. There's a very nice graph in "The Job Impact of the American Recovery and Reinvestment Plan" of projected unemployment with and without the stimulus.

If unemployment goes above 9% (the level they predict WITHOUT a stimulus), then, by their own macro-economic models, won't they have to argue that the stimulus made things worse?

The Snob writes:


No, they'll ask us to borrow the credit card so they can order another round. C.f. GM.

Jesse Ofner writes:

As a rational voter (I think) I would base my evaluation of this bill on: 1) Do I have a job that pays me that money that I am worth. If that answer is yes, than to me the stimulus is doing fine. If the answer is no, then the question is do I have the opportunity to find a new job, or find the training I need to get a new job. My personal answer is that yes, I have a job that pays me close to what I am worth. However, the truth is that many Americans are both underemployed (not counted in unemployment numbers) or jobless, with little income to get new training. Will this stimulus help those people? I don't know. One criticism of this bill is that that while there will be the creation of work, or at least saved work, it is doubtful that it will create jobs. Also, the capital being required to create one job is way too much (by one account it's 250,000 fiscal dollars per job)

Our economy is more information based than ever before, and will filling potholes help the hundreds of thousands of information and service based jobs that have been eliminated?

The biggest problem to addressing the success measure of the stimulus, are also the other factors that are going to play a part such as the stimuli of other countries economies, the price volatility of commodities. If the cost of gas rises in the near term back to a level of around, and I'm randomly saying something like $2.50, then the break on the payroll tax will be illuminated. If consumers can't spend that money on goods and services other than energy, then a large part of the stimulus has been wiped out. Albeit, if that wasn't there and prices rose, the situation would only be exacerbated.

A Moore writes:

I think that problem is that everyone wants to see results right now and when a problem (the economy) is as bad as it is today, I truly don't believe that a quick fix exists. I am a college student and far from being fiscally stable, but I look at the U.S. like a room that needs to be renovated. It can't look good while your making it over. Things have to be ripped up and torn down to replace it. It has to get worse before it gets better.
I agree that a stimilus package is exactly what we need and overall I support the new stimulus package. But there are a few areas of it that I disagree with. The creation of jobs is one area that I believe is not represented well within the stimulus. I think that some of the jobs mentioned in the package are very needed but the sting of the affects might hurt worse than our current condition. For example, creating 3,000 miles of elctrical lines is not a job that I think will have a lasting effect on the economy. My question is what happens after the job is done if the economy is still not remedied?
I think that this package was rushed and that is the reason for some of its short comings but I would much rather have this spending than less spending for jobs and more tax cuts.

Garrett Schmitt writes:

I'll venture an official estimate of jobs "saved". At least, there's an official estimate of labor turnover.

Jobs "saved" could be, say, the difference between the expected sum of separations over a period given no action minus the sum of separations actually viewed in the economy.

The expected sum is complete speculation, unfortunately. However, there is an official measure of separations (4,730,000 preliminary in December '08).

I have no idea if anyone in the Administration had this BLS program in mind when the "created or saved" line came into use, but I think the availability of plausibly relevant data saves them from charges of absolute nonsense.

There's just the nonsense of establishing causation in a complex environment without a control group.

Dan Weber writes:

Politicians are witch doctors.

Witch doctors campaigned on their ability to stop the storms. When there were no storms, they were heroes. When the storms came, they were killed and a new witch doctor selected.

They had nothing to do with the storms. Yet, it was the metric the public judged them on, and it was the metric they agreed to be judged on.

(PS: I'm not an anthropologist.)

Ironman writes:

Great idea, Gavin! Make sure you have a copy in case theirs disappears into a memory hole!

Charlie writes:

I've been thinking for a long time about what would be a good standard, but there aren't really good answers. Ideally, we would predict future GDP, employment, and prices over the next couple of the years without stimulus, and then compare that to reality, which seems implicit in what they are saying "create or save." The Romer estimates and the CBO estimates, both predict severe contractions even with the stimulus (though things are even worse without).

But if things are much better is that bc policy worked much better? If things are much worse is that bc policy is much worse? Even if the economy improves greatly, can we really separate the stimulus effect from the monetary effect? Or with however the banking system will be resolved?

There is no good objective measure. Our priors aren't falsifable, are they? On either side, are they?

Scott writes:

Rational voter? That has to be an oxymoron.

Voting is an illusion of control over the beast.

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