"It's the Economy, Stupid"

According to CNN, the economy is the most important issue to voters. I think is absolutely false. The only people that the economy matters to is economists. At best, the economy is an abstraction that carries some vague connotations about wealth and the unemployment rate. Here is my claim, people don't care about the unemployment rate, they just care if they are employed. People don't care about average wages, they only care that they are getting richer*.

Perhaps, a decent definition of the economy is how easily are people able to produce and trade. When the news trots out statistics about the interest rate, GDP, and the wage gap those are all crude measures of something immeasurable. Any of these statistics can change wildly from month to month. They don't give a clear picture of how things are going.

The economy is like poker. You've got your cards and you have all the cards you need for a flush except one. Your last chance if for it to come up on the river. Mathematically, there is about 1 in 6 chance that the card you'll need comes up. Based on that probability, your opponent's bet, and the amount of the pot, there is a best strategy. Either fold when you get into that situation or go for it. Let's say the best strategy is to not bet, but you do anyway and win. That's great. You won that round, but playing as if you expect that card you need on the river isn't going to work out for you in the long run.

The same thing is true about the economy. Changing policy based on monthly or quarterly changes in economic statistics is a bad strategy. You may take advantage of something randomly, but as time goes on, that policy is going to cost more than it's worth and its going to make some better off by making many more worse off.

I can't help but feel like political candidates are always looking to do things now at the expense of tomorrow and for some at the expense of everyone else. Why get rid of the gas tax now? It won't do anything in the long run except have people drive farther in less efficient cars. Why increase taxes on the wealthy? It will just discourage investment.

Sigh.

*Actually, people probably do care about average wages. They would be happy to know they are above average, so a falling average wage could make some people happier.