Sunday, September 9, 2012

The People's Choice Theory

How the ignorance of the masses is played upon by the pundits on the ballots

People cheer. Flags wave. Balloons fall. Economies groan.

A friend of mine (anonymous), on her trip to Spain, suffered from an attack by locals on her Geography skills, because as we all know, Americans are notoriously horrible with geography.

Yet, as is
not commonly known, Americans are notoriously horrible with economics.

The reasons for this are fairly simple; the economy is a complex system. Why would a factory worker in Detroit care about the supply of oil in Russia, or the opportunity cost of building trucks over cars? Why would a bartender in New York care about flooding near Thailand’s main computer hardware plants or the lack of electricity in Rural India? Why would a high school Senior at Bellaire who hasn’t even taken economics yet but gets to vote in the General Election this year care to look deeper into the complexities behind outsourcing and the production possibilities frontier?

As I quote Keynes, “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the
slaves of some defunct economist”. Knowledge of the intricacies of the world economy is restricted to the relative minority that takes the time and energy to explore it. However, this creates a devastating political tool for the pundits of our nation.

Enter the People’s Choice Theory of Economics. Because politicians want to be re-elected, they play on the ignorance of the masses and promise bad economic policies for the sole purpose of getting another handful of votes. Of course, politicians don’t care whether everyone understands their goals (understanding the method in every politician’s madness would require reading a book-per-pundit), so they make broad generalizations like “We will bring manufacturing jobs back to America!” and “We will get rid of unemployment in the next 4 years!”. That’s fine, if they could follow up on it (or if it were good economics).

Enter current events! Barack Obama and Mitt Romney both have vastly different economic plans, obviously. What isn’t so obvious is that both of them are promising policies that aren’t so good for us in the long term.


(NOTE: For a more detailed explanation of the quandary created by the differing economic policies by our two Presidential candidates, see the italicized portion at the bottom of the page.)

Essentially, Romney’s fiscal policy has the potential to cripple our ability to train more skilled workers (college, vocational school, public schools, etc.), while Obama’s promises to bring back manufacturing jobs to appease the unskilled middle-aged lower-middle-class is detrimental to our overall goal of increasing the standard of living over time.

Because of this, a basic understanding of the intricacies of the global economy goes a long way to helping us make proper choices on who to vote for. Sadly, as long as our citizens continue to agree to bad economic policies, politicians will continue offering them.



-Aadil Pappa

Lets start with Obama. In Thursday’s nomination acceptance speech, Obama promised to bring back manufacturing jobs from China and create new manufacturing jobs at home. That would be fine and dandy if it weren’t for the fact that we already have too many jobs. Does that sound crazy? Well, if you understand that those jobs are in the Service Sector, and require skilled labor, then it won’t.
“Why can’t people just take those jobs then?”
Because the unemployed need to be retrained to take jobs in accounting, coding, and other desk jobs that pay better, have more benefits and increase the standard of living higher than an assembly line job would.
Thus, outsourcing is okay, if we can safely transition to those jobs in what is called “job churn”.

Tl;Dr: If we let the making stuff jobs go away, we will have more people to do the thinking jobs that pay more.

Of course, Romney has made some bold claims too. Essentially, he intends to cut taxes and increase defense while reducing the government deficit (Bill Clinton: “It defies Arithmetic!”). The only way to do this is to cut other programs, namely education and infrastructure. Focusing on education, anyone who has been in public school in the past year knows that many Texas school districts are getting less federal funding soon. Romney may just have to cut that even more.

This brings us back to the outsourcing problem. If it takes more skills and education to do thinking jobs, then people will need to be more educated. But if we gut education and student loans, that means less people will get the opportunity to get educated, thus reducing the number of skilled workers we will have.


Tl:Dr: If we continue pumping resources into the “skin” and “muscle” of the American organism, then the “Brain” and “Heart” of the U.S. will be less healthy.

We are stuck in a quandary here; The People’s Choice Theory of Economics has royally messed up our chances of having a candidate that agrees with the basic laws of economics. Both candidates have good ideas, but they also have bad ideas. If we could take Obama’s education plan and Romney’s “job churn” scenario and put them in say, a 3rd candidate, I would vote for that guy.



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