Friday, April 25, 2008

Definitional uncertainty

Via Mark Thoma, an article titled How Robust is the Current Economic Expansion?, in which the authors study the 2001-07 expansion by looking at several key indicators, and conclude that, with one exception, every one is lower than the average for post-war expansions. The indicators are: GDP, consumption, non-residential fixed investment, net worth, wages and salaries, employment, and corporate profits. Any guesses as to which one of these did better than the average? Yes, that's right, corporate profits, always the best performer during an expansion, did exceptionally well during the Oughts - the average, normally 7.4%, was 10.3% (as a contrast, wages & salaries usually goes up 3.8%; now, 1.9%).

The authors draw the conclusion that the much-ballyhooed (at least by Republicans) tax cuts did not lead to prosperity, and that continuing or expanding them without fiscal discipline would be harmful. "If major tax cuts are deficit-financed, the negative effects of higher long-term deficits are likely to cancel out or outweigh any positive economic effects that might otherwise result from the tax cuts."
We've had a bit of a dust-up over at Carrie's Nation over a post she wrote concerning the H-1B visa issue. I won't go through the back-and-forth, but there is a fellow (I assume it's a fellow, but I can't be certain; this is the Internet) who insists (over the strenuous objections of Carrie, Red Oak, and me) that globalization has helped technical workers, that the tech workplace is healthy for American workers, and that better jobs in the U.S. have been the result. Unfortunately, it appears that discussion has come to an end, even though I found it interesting.
It is becoming obvious that, no matter which candidate the Democrats nominate, the war in Iraq will be a major source of contention in the general election. Both Democrats have pledged to start bringing troops home, Sen. McCain has not made any such pledge and has talked of having some kind of military presence there for as long as 100 years.

More importantly, the two camps can't even agree as to whether we've made any significant progress, even if we limit consideration to the time since George Bush's troop surge. Sectarian violence may be down only because of de facto segregation, and al-Sadr is still running around. The extent to which Iran is influencing events is uncertain. After their performance in Basra, the Iraqi troops still do not seem to be particularly ready to take over the job of policing their own country.

But Bush/McCain insist we're winning.
I was accepted to a couple of law schools, had good grades and test scores. I took a different career path, and haven't really missed the law. But I did take a course in Business Law, and have followed the profession somewhat. One thing that surprises people who don't have some background in it is the extent to which law insists on precise definitions, which you know if you've ever read credit terms or those prescription inserts.

But we've all read and chuckled over those stories about some case being brought because some law was improperly specified. Because the law included "horse" in 1869, the fellow who decides to raise zebras downtown can't be thrown out, even though the intent of the law was clearly to ban all odd-toed ungulates.

In each of the matters I cited above, ones that appear to be matters of fact, but generate enormous controversy, a large part of the problem is definitional. What does it mean to have an improving economy? What does it mean to have a thriving technology climate? What does it mean to have success in foreign affairs? More broadly, how do we define America as a nation?

The point is that, if we don't define things precisely, and communicate that understanding to others, we have no chance of having a constructive discussion. Some people, for instance, believe that an economic structure exists for the purpose of providing incentives for moving upwards; others believe that the strength of an economy depends on how well it provides for all citizens. The former will see increasing inequality as a positive thing. The more rich people there are, the more incentive there is for poor people to work hard and move themselves into that class. The latter see the very fact of increasing inequality as building barriers that prevent that movement.

The policy implications are clear. As long as the two groups define the purpose of an economy so differently, they will never be able to reconcile issues. The first group will favor a flat tax, or massive tax breaks for wealth-creating activities. The second will favor a more progressive system of taxation, hoping to even the playing field.

In the first example above, some people honestly believe that high corporate profits and consequent returns to stockholders are the mark of good economic results, so the conclusions of the study I cited will seem wrong to them. For others, who think that one or more of the other measures are the better mark of national progress, they will seize upon those results to claim something has gone severely wrong.

In the second example, the fellow who defines success as whatever is happening right now to the people around him believes that there are no problems with expanding H-1B visas. For those of us taking the longer view, who believe that success involves the well-being of our future selves, and our children, and our grandchildren, we see real potential difficulties down the road.

The third example hinges on the definition of "success" as it's applied to the conflict in Iraq. I'm not sure what the Bush/McCain view of success is there, it seems to keep moving. But, if I had a better idea of their definition, I could more properly evaluate their arguments.

And that's the essential point. If we had to define our terms upfront, we could save a lot of time and determine where and whether we have room to negotiate. If you tell me that your definition of success in Iraq is long-term, stable democracy that radiates out across the Middle East, with free-flowing oil bringing profits to the happy Iraqis, and statues of George W. Bush and Dick Cheney in every town square, then I can evaluate your specific recommendations in light of that definition. If your definition is simply to get the heck out and let the Iraqis work it out on their own, that's a very different discussion. But it all comes back to your definition of "success."

There was a time in America when the definition of "nation" was discussed openly. This was relatively early in our history, and we were still working out the relationship of the federal government to the individual states. Right now, we have the same discussion, what is America?

But we're not having it openly; instead, we're using proxy issues to determine what this country is and should become. If you believe that we are purely a land of opportunity, that we provide the freedom to go as far and as high as you can, then you believe that Bill Gates and Warren Buffett are the epitomes of the strong American. If you can't be them, then that's a result of personal weakness. America is a meritocracy, and, if you fail, it's the result of personal weakness.

On the other hand, if you tend to see America as a land of fairness, then you believe that the American who has been offshored out of health insurance, living in constant fear that what little he or she has could disappear in a heartbeat, is the prototypical national figure. America is a land of structural barriers in which the privileged game the system to keep themselves at the top.

When an interviewer like Charlie Rose asks a guest, "Is America in decline?," the answer depends totally on the definitions of "America" and "decline." And that would be a far more interesting conversation, whether in an interview or a debate.

It's my sense that a growing number of people answer a question like this on a totally experiential basis. Like our correspondent in my second example above, people look at their immediate circumstances and decide, "no, America can't be in decline, because I'm doing fine." There seems to be less recognition that there are other places and times that need to be rolled into an answer to that question. Perhaps the rise of individualized media has had something to do with that; if you're never forced to look outside of your self-created world, you can't possibly define "America" as anything other than your own experience of America.

1 comment:

Citizen Carrie said...

Just yesterday, while I was re-reading Ron Hira's Outsourcing America, I ran across this section.

"George W. Bush's Secretary of Labor, Elaine Chao, when asked about weak job creation, dismissed the job numbers as of minimal importance by saying, 'The stock market is, after all, the final arbiter'"

(From a February 19, 2004 AP article by Tom Raum, "Bush Economic Team Under Fire, Hands New Ammo to Democrats".)

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