I’m biased, you’re biased. Get over it
The heated debate about low business confidence is a reminder that economics is political.
The more we learn about the brain and the universe, the clearer it becomes that humans create their own reality.
Iwish I could just say those on the Left are a pack of idiots . . . or those on the Right are a pack of idiots.
I envy people who are so sure of their political world view that it allows them to pick a side on every issue.
It would make my life so much easier.
This week, though, I really just feel like calling them all a pack of idiots.
The political heat around business confidence and the current state of the economy has been intense — by the standards of business journalism anyway.
I dread to think about the anger, bitterness and emotion flying in the current “free-speech” debate. I feel for those trying to chart a nuanced path through that one.
At least those debating business confidence have by and large kept their CAPS LOCK OFF.
But many do struggle with the notion that:
a) John Key can be right about an economic downturn — he was really just summing up the consensus view of the nation’s economists.
b) Those filling in business confidence surveys are overplaying the scale of that downturn.
As Westpac chief economist Dominick Stephens notes in his MPS preview: “For a long while, the Reserve Bank expected that the economy would accelerate over the first half of 2018 . . . The evidence has now clearly piled up in favour of a deceleration.”
The gloomier economic forecasts have proved more accurate so far this year.
Economists who had picked higher rates of growth will update their forecasts accordingly, because they are professionals who adjust opinions based on the latest available data.
Has the change in Government contributed to this slowdown? Probably.
Both major parties were offering fiscally stimulatory policies.
National was going to cut taxes in April and invest in new roads. Labour has Working for Families, which began in July and is more focused on investing in rail.
A broad consensus of economists suggest Labour’s fiscal stimulus will take longer to kick in.
That isn’t a judgement about which set of policies is better.
That judgement is political, and I’ve argued it is influencing the negativity of business in confidence surveys.
Business confidence is now at levels not seen since the 2008 GFC.
Economic data doesn’t support that level of negativity, so something else is up.
Perhaps it does reflect a worrying lack of trust in this Government.
That’s a problem because these businesses are employers and their investment decisions effect the economy more than the average consumer.
Meanwhile, the outlook for global economic growth has also faltered. We started the year with a great deal of exuberance at the World Economic Forum in Davos.
The US economy is still very strong — growing at 4.1 per cent.
That should have meant rising commodity prices and fair winds for New Zealand and Australia.
But China’s growth has faltered and the escalation of a trade war has seen commodity prices fall.
Global uncertainty also has a powerful effect on business sentiment.
That is not this Government’s fault. Reality is complex and seldom fits easily into party political divides.
When there is political heat in an issue it gets passionate. And when people argue with passion their ability to process evidence from both
sides of an argument seems to diminish.
Scientists can observe reality all the way from the event horizon — the distant boundary which the speed of light prevents us seeing past — through to the tiniest quark (43 billion-billionths of a centimetre).
I’m not aware of anything in their findings which suggests there is an empirical truth to a binary political spectrum. The universe — to put it bluntly — doesn’t give a toss.
What scientists have discovered is just how flawed human perception of reality is.
The more we learn about the brain and the universe, the clearer it becomes that humans create their own reality.
We see the world the way we evolved to see the world — primarily, with a view to successfully feeding ourselves and reproducing.
In other words: You are biased. I am biased. Everyone is biased.
Yet despite this, politicians and their party faithful cling to the belief that their opponents are biased and they are not.
That’s the game. It panders to the great popular mass of emotive, unreliable human perspective.
US President Donald Trump is a master of this kind of politics.
Personally, I hate that Trump has successfully moved political debate back in this direction.
That’s one of my biases. I have to ensure that it doesn’t colour my judgement of his economic policy, which is, after all, a different issue. Perhaps he will win his trade war. I don’t like its impact on the New Zealand economy and I think he is playing a dangerous, high-stakes game, but I don’t claim to know how it will play out.
The US economy is humming after his big tax cuts. I think he risks overheating an economy which was already nearing capacity. I think the long-term result will be costly for the US. But I could be wrong.
What I do know is that we are all stuck in this life together. And it is short and nobody gets out alive.
Spending it feeling angry because someone said something you don’t like isn’t worth it.