John Kerry will focus on the mediocre performance of the economy, particularly the job market, in the first part of the Bush Administration. Bush will tout the performance of the economy over the last year or so as long as the job numbers continue to be rosy through the fall. Implicit in this discussion are two strange assumptions. The first is that the President "runs" the economy. The President hardly even runs the government. He certainly cannot direct the fortunes and failures of millions of workers, managers, investors and entrepreneurs. The second implicit assumption is that the success or failure of the President depends on his ability to "stimulate" the economy, as if the economy were an engine that simply needed a different setting for its carburetor or as if it were a lazy steer that needs prodding to speed its way on a cattle drive.
Those are what people demand of Presidents these days. Rarely do they demand "leave us alone to succeed and fail as necessary."
I once heard a story that helps explain the problem with these views of the economy. Imagine coming across a young boy who is standing at the edge of the shallow end of a swimming pool. He holds a bucket in his hands and he looks crestfallen. What's wrong, you ask. Well, he explains, I'm doing a science experiment and it's not working. What's wrong? For the last hour I've been emptying water into this pool with this bucket. But the water level hasn't changed a bit. The pool hasn't gotten any deeper. It's a big pool, you explain. A few bucketfuls of water aren't going to have much of a visible effect. The boy redoubles and retriples his efforts. A week goes by. You come back to the pool and he looks no happier than he did before. What's wrong now, you ask. I've been doing the same thing eight hours a day for a week and I still don't see any change. Is there a leak in the pool, you wonder. No, he says, no leak. I checked that out.The boy shrugs his shoulders and gets back to work. You watch as the boy goes to the deep end of the pool, scoops up a bucket of water, walks the length of the pool and empties it into the shallow end.
What would you tell that boy? It would seem fairly straightforward to explain that taking money from your left pocket and putting it into your right pocket doesn't make you any richer. So it is with water in the pool. The total amount is unchanged. But if it rained each night of the boy's efforts, he might actually come to believe that moving water from the deep end to the shallow end actually leads to making the water deeper. You might find it difficult to make your case.
Anyone want to dispute Professor Roberts here? Wealth isn't created by stealing from one and giving to another and certainly not when that wealth is partially wasted on bureaucracy in the process. It also isn't created when the naturally arising incentives and disincentives resulting from free market prices and choices are perverted by political will. What does he say Presidents can do?
A President can no more stimulate the economy in the short run than you can make a child grow a foot in a week. Genuine growth takes time. The most a President can do is to help create an environment for that growth to take place by unleashing the creativity inherent in a nation's people and those they trade with in other countries.Copyright ©: 2004, Liberty Fund, Inc.
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