Inverse Nixon Theory

It’s been said in the past – indeed, it used to be conventional wisdom – that unlikely right-wing governments were more likely to make peace, because they enjoyed credibility and a tough reputation. More obviously, conservatives long enjoyed a reputation for “fiscal credibility”, which supposedly helped them to control inflation by giving the impression that they would either be willing to sit on the money supply, or trade-off unemployment for inflation along the Phillips curve.

Curiously, with what is commonly taken to be a swing to the Right in Germany and France, we’re seeing the opposite. One of Angela Merkel’s first acts on taking office was to announce a future rise in consumption taxes, which isn’t very much different in terms of public perception to cutting them in the meantime. Nicolas Sarkozy has since announced that he’s going to have a pause in the reduction of the national debt – read, reflate the economy somewhat. Specifically, as he’s promised to hand out a €20 billion “fiscal shock”. But nobody appears to be very worried. It’s a big contrast to five minutes ago, when modalities of the Eurosystem’s breakdown were a regular topic on AFOE..

Compare the keenness of the Schröder, Jospin, and de Villepin governments to stick to the script of the Stability Pact, come what may. (No, de Villepin wasn’t a social democrat, but Sarko certainly campaigned as if he had been.) There’s a non-trivial argument that the pact was a serious economic mistake. It would certainly be interesting if it only survived because the Left was paranoid about seeming over lefty, and especially if the continental economy’s uptick had something to do with the Right being able to let it ride.

Illiterate voters

I should know better than to visit Arts & Letters Daily when I am up to my ears in work. The wealth of reading material found there provides the ideal excuse for procrastination. “Hey, I am doing something intellectual here”. Nevertheless, after having resisted the temptation to go there for a while, I finally succumbed and discovered an interesting blog and an essay on the illiteracy of voters when it comes to basic economic principles. The blog is Cato Unbound and the essay, written by economics professor Bryan Caplan, is called Straight Talk about Economic Illiteracy (pdf, via Mercatus Center). My high school major in economics notwithstanding, please do not laugh, I consider myself to be an economic illiterate and therefore had to read the essay. It was a good call. One quote to wet your appetites as well:

Admittedly, economic illiteracy does not automatically translate into foolish policies. We could imagine that the errors of half the electorate balance out the errors of the other half. In the real world though, we shall see that such coincidences are rare. The public tends to cluster around the same errors – like blaming foreigners for all their woes. Another conceivable way to contain the damage of economic illiteracy would be for citizens to swallow their pride, ignore their own policy views, defer to specialists, and vote based on concrete results. Once again, though, this is rare in the real world. Politicians plainly spend a lot of energy trying to find out what policies voters want, and comparatively little investigating whether voters’ expectations are in error. Indeed, even when politicians brag about their “results”, they usually mean that their proposals became policies, and sidestep the difficult issue of whether those policies worked as advertised.

I do have to add one caveat concerning Bryan Caplan, at least for economic illiterates like myself. Caplan, according to wikipedia, “has been heavily influenced by Ayn Rand, Thomas Szasz, and Thomas Reid”. This influence is notable in the essay, just look for his take on the word “greed”. There may be an ‘agenda’ here. I especially like the before-I-saw-the-light style he adopts. In any case, I am mainly interested in his ideas about voter illiteracy and how he defines that illiteracy in terms of his own economic belief system. Is Caplan right, in general, in saying that voters are economically illiterate? Or is he simply using that angle as a trick to ‘convince’ true illiterates to see his light as well? This is an important, albeit naive, question, since illiterates like me are dependent on information from ‘specialists’, and Caplan ‘is’ an economics professor… To be filed under “forest and trees” and “caveat emptor”?