Friday, September 9, 2011

We live in uncertain times (and places)

This is a smart Yglesias post*, but it overstates its case. Short version:
  1. Republicans are right, regulatory uncertainty is a damper on economic growth.

  2. But the actions of future legislators are always uncertain.

  3. As is the future more generally.

  4. So there's not much that can be done about regulatory uncertainty, short of developing reliable methods of predicting the future.
He's mostly right, I'd say. It's awfully difficult to untangle the ill-defined "regulatory uncertainty" that inhabits Republican stump speeches from plain ol' metaphysical doubt about the future. And precisely because "uncertainty" is so nebulous and so deeply ingrained in the human experience, it's an easy target for Republicans. Since Obama can't control the very flow of time itself, he'll always be vulnerable to charges that he's not protecting the economy from uncertainty.

Still, Matt's point is also very obviously overbroad. All investment environments are not made equal. Some are more stable and predictable than others. One of the thing that impacts stability and predictability is governance and public policy. And ideally, we'd opt for public policy that minimizes economic friction.

The difference between what I'm saying and what Rick Perry is saying, I think, is scale. Republicans would have you believe that all this plays out on a microscopic level: that business is afraid of specific, potentially onerous proposals put forward by the Obama administration. That argument is easily refuted: all you have to do is point to the total paucity of concrete, realistic proposals to impose any sort of sweeping regulation on most sectors of the economy. On an individual, firm-by-firm level, there's simply no reason for business to fear Democrats.

But even in lieu of a specific, identifiable regulatory threat, businesses might also be unnerved by the prospect of unpredictable shifts in the style and direction of governance. Shifts that would necessarily redraw the administrative environment. And looking at the current state of American democracy, it's rather difficult for me to think that this variety of regulatory uncertainty isn't afflicting the private sector.

The thing is, while it can certainly be remedied, macro-level regulatory uncertainty has nothing to do with Democrats or Republicans. It's a manifestation of structural weaknesses in the American political system, which reacts chaotically to external and internal pressures. Regulatory outcomes are the product of legislative, administrative, and judicial minutiae and can be dramatically altered by seemingly insignificant events. Of course there's regulatory uncertainty when the political inputs have so little effect on the statutory outputs. The solution to this problem isn't to promise to make government do less -- futile, in the long run -- it's to rebuild the system so that it's clear what government will do and when it will do it.

* "But Will," you might say, "don't you think every Yglesias post is smart?" And to that I would have no answer.

No comments:

Post a Comment