Human Nature and Economics

Economic policy doesn’t have much to do with ideology.

At least, not in the way it has become popular habit to pretend.

There are (who can keep track? 30 or so?) different presidential candidates announced so far, and with more than a year to go before the primaries are over (to say nothing of the actual election), plenty of time left for more brilliant minds to enter the field.

US Economy, Fiscal Cliff and Taxes + Grover Norquist

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As always, conflicting views on America’s economic future are manifesting into remarkably creative, contradictory, and above-all complex policy prescriptions coming from each candidate, promising to right wrongs and guarantee good health for the markets in exchange for votes.

All the taglines and electoral catchphrases meant to stand-in for economic platforms traditionally distract the citizenry from an unfortunate truth: the trouble with fiscal policy-making isn’t math, it is human nature.

Out of necessity, America has no shortage of financial professionals anchored to an ever-growing tax code, desperately trying to make sense of the litany of laws and loopholes at the same time as politicians try to simplify things (without removing their favorite bits of course). As a result, there is a massive choir of voices heralding every change, from the minute to the massive, that is proposed or adopted into the tax code. The trouble isn’t that no one can make sense of the math—it is that they can’t predict with complete confidence how public behavior will change as a result.

That is the real conflict between partisans and their supporters when they debate fiscal policy: they have completely different sets of numbers built into their plans, because they are counting on different behavioral outcomes based on their proposals.

Everyone pitching an approach to taxation, spending programs, oversight, regulation, and every other kind of economic initiative has, broadly, the same goals: get more people working, being more productive, and keeping the country moving toward greater wealth and prosperity. These intentions get lost behind the veil of assumptions different leaders and analysts make about what combination of incentives and penalties will be most effective in herding the masses toward their economic goals.

This is where ideology really comes into play—not in judgements about right and wrong, liberal and conservative, but in determining whether threats or rewards are better at motivating and controlling people; in gauging whether the government can cajole people directly, or if it must trickle its influence down through private businesses by means of targeted policies. The space between general goals and beliefs about how people fundamentally behave is where all the best laid plans turn into vitriol, confusion, and competitions over whose numbers—both hypothetical—trend closer toward reality.

America’s legislators are looking at the country’s economy less like an equation to be solved and more like a glass of water: some see it as half empty, other half full. Both are correct, but their different ways of framing the situation lead to confusing, conflicting proposals that all need time and space to play out and be measured—and of course, none of these necessary factors are allowed when competing policy has any hope of displacing the status quo.

The months-long process of weeding out candidates should make for some spirited debate over minimum wages, tax breaks, income inequality, and all sorts of other highly visible elements of the economy. Less likely is a clear view behind such rhetoric at the assumptions about human nature and behavior that underlie the programs being championed.


E.T. Wilson Headshot 300x

Edgar Wilson is an Oregon native with a passion for cooking, trivia, and politics. He studied conflict resolution and international relations at Amherst College, and has split his time between New England and the Pacific Northwest ever since. He has worked in industries ranging from international marketing to broadcast journalism, currently serving as a marketing consultant and blogger. He can be reached via email here or on Twitter @EdgarTwilson.